Daily Archives: February 6, 2017

Hawtrey and the “Treasury View”

Uneasy Money

Mention the name Ralph Hawtrey to most economists, even, I daresay to most monetary economists, and you are unlikely to get much more than a blank stare. Some might recognize the name because of it is associated with Keynes, but few are likely to be able to cite any particular achievement or contribution for which he is remembered or worth remembering. Actually, your best chance of eliciting a response about Hawtrey might be to pose your query to an acolyte of Austrian Business Cycle theory, for whom Hawtrey frequently serves as a foil, because of his belief that central banks ought to implement a policy of price-level (actually wage-level) stabilization to dampen the business cycle, Murray Rothbard having described him as “one of the evil genius of the 1920s” (right up there, no doubt, with the likes of Lenin, Trotsky, Stalin and Mussolini). But if, despite the odds, you found…

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Scott Sumner, Meet Robert Lucas

Uneasy Money

I just saw Scott Sumner’s latest post. It’s about the zero fiscal multiplier. Scott makes a good and important point, which is that, under almost any conditions, fiscal policy cannot be effective if monetary policy is aiming at a policy objective that is inconsistent with that fiscal policy. Here’s how Scott puts it in his typical understated fashion.

From today’s news:

The marked improvement in the labor market since the U.S. central bank began its third round of quantitative easing, or QE3, has added an edge to calls by some policy hawks to dial down the stimulus. The roughly 50 percent jump in monthly job creation since the program began has even won renewed support from centrists, raising at least some chance the Fed could ratchet back its buying as early as next month.

I hope I don’t have to do any more of these.  The fiscal multiplier theory…

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Cohabitation after the French presidential and parliamentary elections

The run-off in the next French presidential election in May is likely to be between an independent who was formerly a socialist party economy minister and the National Front candidate. Over 80% of French vote for other parties so these parties are likely to still do well in the parliamentary election that will occur in June.

This leads to what was supposed to have been solved by making the presidential and parliamentary terms the same 5 years which is cohabitation.

The French system is a semi-presidential system. The president is directly elected but the Prime Minister must have the confidence of the National Assembly.

When the prime minister comes from the same party as the president, the French president reigns supreme and chooses his own Prime Minister from within his party. The French Constitution naturally is silent on the ability of the president to dismiss the prime minister.

There were several periods where the president and prime minister were from different parties. This was known as cohabitation. They occurred with the Mitterrand-Chirac Period (1986-1988), Mitterrand-Balladur Period (1993-1995) and Chirac-Jospin Period (1997-2002).

Each of these periods, the president largely confined himself to foreign affairs and defence with the Prime Minister running the internal affairs of the country. The Prime Minister or other ministers must countersign almost all of the official acts of the French president.

When a French president who was cohabitating with a political opponent refused to sign official decrees and other documents, the Prime Minister can always pass an act of Parliament.

It is important for the National Front candidate to note that in times of cohabitation, many argue that the French system becomes a Parliamentary system with the president having few powers.

It is the Prime Minister, not the President, who under Article 21 of the constitution “directs the action of government,” under Article 20 “shall determine and conduct the policy of the Nation, ” and also “ensures the execution of laws,” and “proposes constitutional amendments to the president.”  The Prime Minister’s government can legislate through decrees, ordinances, and regulations, and, under Article 38 of the constitution, may ask the National Assembly to delegate power to issue decrees in areas normally under the legislature’s jurisdiction.

Short of dissolving parliament and calling for new elections, the president is left with little power to influence public policy. The main independent power of the French president is to dissolve parliament at his own initiative. There is no requirement for the Prime Minister to countersign.


The National Front has two seats in the outgoing French National Assembly. In the 2-round system of French Parliamentary elections, there is a run-off between the candidates who receive more than 12.5% of the vote on a first past the post basis.

That system will apply again in the forthcoming Parliamentary elections in July making it very difficult for the National Front to break through  to a parliamentary majority even with a presidential win.

Candidates who advance to the second round have the option of withdrawing and 3rd placed candidates often do for tactical reasons. The parties of the mainstream left have a long-standing agreement whereby they do not stand against one another in the second round. The less-well-placed automatically withdraws.

The National Front ran for president over the years as a way of raising its profile. Winning the presidency is of no moment unless there is success also in the parliamentary elections.

A newly elected National Front presidential cannot dismiss the socialist prime minister. The National Front may boast its current two seats to be a minor coalition partner after the parliamentary elections.

What is the use of central banks? Lessons from history

Mostly Economics

As this blog keeps saying, econ history is not just back in discussions but leading to some very interesting debates and conferences. It is just that the profession somehow has to start even teaching at rigorously.

Norges Bank recently held a conference titled — Of the uses of central banks: Lessons from history.

Conf.program has papers from all who’s who of econ and monetary history.

I just read this paper by Andy Haldane (of BoE) and  Jan Qvigstad of Norges Bank. They go specifically into history of BoE and Norges Bank and then extend it to central banking in general. They show how central banks have actually evolved  overtime and roles have changed/modified with time.

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Role of an Economist in Economic Development..(Student vs Saviour)

Mostly Economics

Peter Boettke and Christopher J. Coyne of GMU have this nice paper on the topic. It also has some advice for current and wannabe econ advisers for government on development issues.

They review the history of dev econ in brief and show why there is no holy grail for development. The factors for development have varied from  investment to innovation to human capital and now to instis. The authors show why all these ideas have failed broadly. I am skipping all this..

On instis, they say development eco does not include (read model) the role of informal, indigenous institutions. They point to the concept of metis:

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Ninth Circuit Rejects Motion For Immediate Reinstatement Of Executive Order But Schedules Expedited Argument For Monday


200px-US-CourtOfAppeals-9thCircuit-Seal.svgdepartment-of-justice-logo1 The United States Court of Appeals for the Ninth Circuit has declined a demand for an immediate reinstatement of the Executive Order on immigration but has scheduled expedited arguments and filings in the case for Monday.  The decision is not surprising in such a case.  Courts need to hear from the other side in the dispute, particularly when the Washington Attorney General prevailed in the trial court.  Moreover, a temporary restraining order is very difficult to reverse on an interlocutory appeal.  Normally, appellate courts will wait for a final decision and opinion from the lower court before agreeing to review the controversy.  Of course, nothing is “normal” about this controversy in terms of procedure or policy.  With a major executive order stayed, the Ninth Circuit is clearly moving with dispatch but deliberation.  The Justice Department team was not helped by President Trump’s tweets casting aspersations on Judge James Robart of Federal District…

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Malala versus Ayaan Hirsi Ali: why is one beloved and the other reviled?

Why Evolution Is True

Among atheists vilified by other atheists, a list that of course include Sam Harris, we find an unlikely candidate: Ayaan Hirsi Ali. She is in fact on the list of “The 5 Most Awful Atheists” compiled by the bottom-feeding site Alternet. (The others are Bill Maher, Penn Jillette, S. E. Cupp, and of course Sam.) While I might be persuaded to add Cupp based on her politics (she’s an atheist who “aspires to faith” and has said she’d never vote for an atheist President), I’m sure there are many atheists far more awful than these five, and several of them—including Hirsi Ali—should be on the list of “Most admired atheists.”

I was thinking about why Hirsi Ali is so reviled by atheists and yet Malala Yousafzai (henceforth called “Malala,” as she’s widely known) is not only a hero, but also won the Nobel Prize. And yet they have some notable similarities:…

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Setting fire to the safety net

Flip Chart Fairy Tales

Is inequality getting worse, better or staying pretty much the same? It’s one of those questions that comes up over and over again.

Jeremy Corbyn couldn’t have picked a worse time to claim that inequality is getting worse, just before an ONS report appeared which showed that it was at a 30 year low.


Chart via Resolution Foundation.

As ever, though, it’s a bit more complicated than that. If you look purely at hourly pay, the rates people are paid for the work they do, then Jeremy Corbyn is right. The UK is the most unequal country in the EU and more unequal than it was a decade ago. The European Foundation for the Improvement of Living and Working Conditions (Eurofound) commented:

The UK is remarkable for its polarisation: it accounts for a very significant portion (nearly half) of the top 1% of wage earners in the EU, and yet it…

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