An Open Letter to Paul Krugman | David K. Levine
31 Oct 2014 3 Comments
in budget deficits, business cycles, comparative institutional analysis, economics of religion, fiscal policy, global financial crisis (GFC), great recession, macroeconomics
Some graphs on the great deviation on both sides of the Atlantic
31 Oct 2014 Leave a comment
in economic growth, Euro crisis, fiscal policy, global financial crisis (GFC), great depression, macroeconomics Tags: Eurosclerosis, GFC, Great Geviation, great recession
Figure 1: Actual and potential GDP in the US
Sources: Congressional Budget Office, Bureau of Economic Analysis
Figure 2: Actual and potential GDP in the Eurozone
Sources: IMF World Economic Outlook Databases, Bloomberg
HT: Larry Summers
Friday graph: why Ireland is broke
31 Oct 2014 5 Comments
in fiscal policy, global financial crisis (GFC), macroeconomics, monetary economics Tags: GFC, Ireland
I am planning to blog on why the Irish economic crisis of recent years was caused exclusively by government, and in particular, government responses that made an ordinary recession into a depression
This is a graph courtesy of the Institute of Public Affairs in Melbourne, an impressive Australian thinktank.
It comes from the Irish government’s own 140 page ‘National Recovery Plan‘ published last week.
It is amazing reading.
- From 2000 to 2009 average public sector salaries increased 59%
- In 2004, 34% of income earners were exempt from tax. In 2010, 45% were exempt
- In 2007 property taxes generated 6.7 billion euros. In 2010 that figure will be 1.6 billion
- In 2009 interest on government debt was 8% of tax revenues. In 2014 it will be 20%.
Naysayers try to tell you that the Celtic Tiger was a myth and that free-market policies brought the Irish economy down.
The truth is exactly the opposite. Liberalisation caused the Irish economy to surge until a return to big government crushed it. Membership of the eurozone, poor banking regulation and the government guarantee of…
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A Perspective on Ireland’s Economy
19 Oct 2014 Leave a comment
in business cycles, fiscal policy, global financial crisis (GFC), macroeconomics, Public Choice Tags: GFC, Ireland
Dot point 4 is the key. The bank guarantee caused the depression.
Philip Lane is Professor of International Macroeconomics at Trinity College Dublin. He is also a managing editor of the journal Economic Policy, the founder of The Irish Economy blog, and a research fellow of the Centre for Economic Policy Research. His research interests include financial globalisation, the macroeconomics of exchange rates and capital flows, macroeconomic policy design, European Monetary Union, and the Irish economy.
Last week he visited New Zealand as a guest of the Treasury, the Reserve Bank, and Victoria University. During his visit he presented this guest lecture on the troubled Irish economy, drawing on his recent report to the Irish Parliament’s finance committee on ‘Macroeconomic Policy and Effective Fiscal and Economic Governance’.
Some highlights from his talk (also reported here by Brian Fallow in the New Zealand Herald) were:
- Ireland’s is a real depression: 15% fall in GDP 2007-2010
- The Celtic Tiger 1994-2001 was no…
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Paul Krugman (1998) on the fiscal politics of the minimum wage/living wage movement
19 Oct 2014 Leave a comment
Earl A. Thompson on fiscal and monetary policy in the Great Recession
09 Oct 2014 Leave a comment
in budget deficits, business cycles, economic growth, fiscal policy, great recession, macroeconomics, monetary economics Tags: crowding out, Earl A. Thomson, fiscal policy, great depression, great recession, permanent income hypothesis, Ricardian equivalence
Krugman explains why a broken window is a fiscal stimulus
27 Sep 2014 Leave a comment
HT: Robert P. Murphy
The broken window fallacy explained
27 Sep 2014 Leave a comment
in fiscal policy, macroeconomics Tags: broken window fallacy, crowding out, externalities, fiscal policy
Hayek Explains Why He Did Not Challenge Keynes’ General Theory
03 Sep 2014 Leave a comment
in Austrian economics, business cycles, F.A. Hayek, fiscal policy, great depression, macroeconomics Tags: FA Hayek, General Theory, Keynes
Stephen Williamson on Marginal Taxation
03 Aug 2014 Leave a comment
in applied welfare economics, fiscal policy, income redistribution, politics - New Zealand, politics - USA, Public Choice Tags: envy, Stephen Williamson, taxation and entrepreneurship, taxation and human capital, taxation and investment, taxation and labour supply, top 1%
He says a lot. I’ll try to address piece by piece.
Next, some people have shown interest in this paper by Diamond and Saez. A key result that seemed to get these people excited is the calculation of a top optimal marginal tax rate (including all taxes) of 73%, relative to the current rate of 42.5%. There are two key assumptions that Diamond and Saez make to come up with the 73% optimal rate. First, we should not care about the welfare (at the margin) of the rich people. This argument is based solely on the notion that marginal utility of income is low for the top income-earners. Second, Diamond and Saez use a “behavioral elasticity” of tax revenue with respect to the tax rate of 0.25. To see how this matters, if you use their formula and an elasticity of one, you get an optimal top tax rate…
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The
Utopia, you are standing in it! 
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