Does inflation stimulate the economy? | Robert E. Lucas
19 Oct 2016 Leave a comment
in fiscal policy, macroeconomics, monetary economics, Robert E. Lucas Tags: fiscal stimulus
Milton Friedman – Congressional House Economic Task Force (1993)
15 Oct 2016 Leave a comment
in economic history, fiscal policy, great depression, history of economic thought, macroeconomics, Milton Friedman, monetarism, monetary economics Tags: fiscal stimulus
More reasons to expel Scotland from the United Kingdom
13 Oct 2016 Leave a comment
in constitutional political economy, fiscal policy
Tom Sargent on Macroeconomic Theory and the Crisis
12 Jun 2016 Leave a comment
in business cycles, currency unions, economics, Euro crisis, fiscal policy, global financial crisis (GFC), great recession, macroeconomics, monetary economics Tags: Tom Sargent
US tax rates before and after government transfers
11 Jun 2016 Leave a comment
in fiscal policy, politics - USA, public economics
why no protests against #UBI bureaucratic job losses but #TPPANoWay protests aplenty about jobs?
08 Jun 2016 Leave a comment
in fiscal policy, labour economics, politics - Australia, politics - New Zealand, politics - USA, poverty and inequality, public economics Tags: expressive voting, growth of government, rational rationality, size of government, social insurance, universal basic income
The universal basic income is a rare bird for the left. It is the only time the usual suspects on the left are happy to cut government bureaucracy.
Furthermore, the left makes no inquiries as to how these redundant bureaucrats who administered the welfare state will find jobs. The market is left to work its magic for once. How convenient.
When a tariff cut is proposed, a trade deal signed, or job reduction in a bureaucracy suggested perhaps as the result of a privatisation, left-wing activists chain themselves to factory gates or government offices in solidarity. The social upheaval from the job losses among existing workers and their dim prospects of reemployment are paramount in their minds.
Why in the case of a universal basic income is the left so relaxed about job losses. Indeed, it celebrates as an advantage of a universal basic income that “Most of the bureaucracy of the welfare system [is] swept away” .
The universal basic income is the only time the left welcomes a reduction in bureaucracy and the role in the state. This switch from welfare payments to a universal basic income does not make those on the benefit any better off. Normally they are worse off under a universal basic income.
None of the the less well groups which of the concern of the left gain from a universal basic income. Despite this, they sell the jobs of their comrades in the public sector down the river.
I cannot believe the explanation is job losses are OK as long as they are the result of left-wing policies. Unless the labour market is liberalised, its ability to find new jobs for workers, for example, made redundant in the public sector after the introduction of a universal basic income is not any under greater than under a right-wing policy that costs jobs.
General government net financial liabilities as % Portuguese, Italian, Greek, Spanish and Irish GDPs
03 Jun 2016 Leave a comment
in budget deficits, business cycles, economic growth, economic history, Euro crisis, financial economics, fiscal policy, global financial crisis (GFC), macroeconomics Tags: Greece, Ireland, Italy, Portugal, public debt management, sovereign debt crises, sovereign defaults, Spain
I had borrowed a lot of money from scratch after 2007. Greece borrowed a lot of money of its own accord from 2010. Italy always owed a lot of money. Spanish do not know all that much money considering their dire financial circumstances.
Source: OECD Economic Outlook June 2016 Data extracted on 01 Jun 2016 12:57 UTC (GMT) from OECD.Stat
What Was the Industrial Revolution? – Robert E. Lucas
18 May 2016 Leave a comment
in economic growth, economic history, fiscal policy, Robert E. Lucas Tags: industrial revolution
What 3 skills do public policy analysts need?
27 Apr 2016 Leave a comment
in applied price theory, business cycles, economics of bureaucracy, economics of regulation, fiscal policy, macroeconomics, monetary economics Tags: anti-market bias, antiforeign bias, expressive voting, lags on monetary policy, makework bias, rational rationality, tax incidence, The fatal conceit, The pretense to knowledge
I used to argue that the quality of public policy making would double if public policy analysts remembered the first 6 weeks of microeconomics 101 but on reflection more than that is required.
Could we economists today ever show such self-restraint about our own expert recommendations? https://t.co/2UE12JuIgn—
William Easterly (@bill_easterly) November 24, 2015
I picked up my initial insight out when working as a graduate economist in the Australian Department of Finance. That was a few years ago.
I am now concluded that policy analysts also need to know the basics of the economics of tax incidence. Who pays the tax depends on the elasticities of supply and demand rather than who writes the check to the taxman.
The number of times that I have read media and public policy analysis saying who pays the tax is the writer of the cheque to the taxman is beyond counting.
There is also what to do about unemployment and inflation. Do not just do something, sit there might be good advice on most occasions. As Tim Kehoe and Gonzalo Fernandez de Cordoba explain in the context of first do no harm:
Looking at the historical evidence, Kehoe and Prescott conclude that bad government policies are responsible for causing great depressions.
In particular, they hypothesize that, while different sorts of shocks can lead to ordinary business cycle downturns, overreaction by the government can prolong and deepen the downturn, turning it into a depression.
@BernieSanders nothing is free in Denmark
24 Apr 2016 Leave a comment
in applied welfare economics, fiscal policy, politics - USA, public economics Tags: 2016 presidential election, Denmark, growth of government, size of government, social insurance, taxation and labour supply, welfare state
Did the rise of welfare state cause more inequality in wealth?
18 Apr 2016 Leave a comment
in fiscal policy, labour economics, labour supply, macroeconomics, poverty and inequality, public economics Tags: growth of government, income inequality, measurement error, Ricardian theory of budget deficits, Social Security, top 1%, wealth inequality
Markus Poschke and Barış Kaymak have just put out a paper arguing that increased social spending is a major driver of wealth inequality:
Another important and often overlooked third factor is the rise in the generosity of government transfers since 1960, mostly due to the expansion of public pensions (social security) and the introduction of public health insurance for the elderly (Medicare).
Combined spending on these two programs accounted for almost 9% of US GDP in 2010, up from less than 3% in 1960…
These government programmes tend to curb the need to rely on personal savings for retirement, especially among low and middle-income households, and might thus explain why their share in total wealth has declined.
This makes a good to good degree of sense. I have previously argued that using the arguments of Edward Prescott that it is not wise for people on ordinary income to save for their retirement when they can go down to the local Social Security office and claim an old age pension.
51% of nonretirees doubt they will receive Social Security… on.gallup.com/1NcwzEa #GallupDaily http://t.co/ZhKnHYtr1X—
(@GallupNews) August 13, 2015
It is even less wise to save that for retirement if those savings reduce your eligibility for an old age pension. Far better just to invest in a nicer house and pass it on to your children. Poschke and Kaymak note that measures of private wealth inequality miss these claims to old age pensions:
… statistics on wealth inequality that do not capture households’ claims on the public sector are incomplete and overstate top wealth shares.
This is not a new argument. Back when the Ricardian theories of budget deficits came to prominence and before that in debates on theories of the public debt, the more Keynesian sides of those arguments did argue that people were irrational for not including their old age pension entitlements under social security schemes in their calculations of their wealth.
Some of their taxes were paying for their future old age pension and were another form of wealth rather than a tax. As such, taxpayers should regard this part of their taxes as investments and not cutting back their labour supply in response as they do to other taxes.
How much of the rise in wealth inequality is due to this failure to measure Social Security wealth as represented by old age pension entitlements? Their estimate is about 25%:
…technological factors play a dominant role not only for changes in income inequality, as is well known, but also for wealth inequality. As high-earning households save part of their additional income, their share of wealth also rises.
This channel accounts for about half of the total increase in wealth inequality. Tax cuts and the expansion of transfers each account for about half of the remainder…
While tax cuts encourage saving, larger transfers reduce saving incentives for retirement, in particular for low and middle income groups. This implies that these groups’ share of private wealth declines.
Note though that this is partly due to the fact that measures of private wealth inequality, like those compiled by Saez and Zucman, do not include claims to future government transfers, like social security, which constitute wealth for their owners.
@garethmorgannz gives optimal tax theory a pass once again @JordNZ
17 Apr 2016 Leave a comment
in applied price theory, entrepreneurship, fiscal policy, macroeconomics, politics - New Zealand, public economics Tags: company tax, Gareth Morgan, rational irrationality, taxation and entrepreneurship, taxation and investment, taxation and labour supply, taxation of capital income
The Morgan Foundation gave optimal tax theory a pass in yesterday’s publication about taxes on land and capital. Gareth Morgan is keen on a comprehensive capital tax.
Source: Taxing Wealth & Property – What Works? A Morgan Foundation Report.
This failure to refer to optimal tax theory is despite the Foundation’s strong commitment to evidence-based policy. Any discussion of tax policy that is evidence-based must refer optimal tax theory.
Source: Morgan Foundation, Public Policy Education.
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Utopia, you are standing in it! 
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