The Greatest Speech Ever – Robert F Kennedy Announcing The Death Of Martin Luther King
05 Apr 2016 Leave a comment
Brazil seems eager to relive the ‘good ole days’
16 Oct 2015 Leave a comment
In December 1985, Thomas Sargent spent some time in Brazil, giving speeches and talking to policymakers. Back home in January 1986, he published in the WSJ an Open Letter to the Brazilian Finance Minister:
…When you have exhausted all of your opportunities to borrow, you will have to make one or more of these unpleasant adjustments: raise taxes, lower government expenditures, or default on some of you debt…
Inflation is very useful to you because it raises an “inflation tax” of substantial proportions…Reducing your inflation tax by borrowing more in your domestic market is counterproductive…So my first piece of advice is that you had better retain the inflation tax and make heavy use of it, until other adjustments have been made in your finances…
The economics behind Sargent´s Letter:
In order to be solvent, the government must be ready to back up the existing amount of debt with either future seignorage…
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Cat in a box
16 Oct 2015 Leave a comment
Why do inmates tattoo their faces?
30 Sep 2015 Leave a comment
Ad-hoc-ery in Macroeconomics
15 Sep 2015 Leave a comment
Ray Fair recently posted a very interesting commentary on the macroeconomics dust-up between Lucas/Sargent and Solow as described by Paul Romer and commented upon by many others. His position is interesting: he represents the Old Guard of macroeconomics who works with what are variously called Structural Econometric Models or Cowles Commission models.
I am one of the few academics who has continued to work with CC models. They were rejected for basically three reasons: they do not assume rational expectations (RE), they are not identified, and the theory behind them is ad hoc. This sounds serious, but I think it is in fact not.
The whole post is worth reading, but I find it useful because it highlights (perhaps not purposefully) very different ways of conceiving of the relationship between theory and data. One might view the CC tradition as an attempt to start with data and then use theory…
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Financial knowledge dispersion and banking regulation
29 Aug 2015 Leave a comment
I have never hidden my admiration for Hayek’s work, in particular over the last few weeks. The name of this blog is itself derived from Hayek’s concept of spontaneous order. I view Mises as having laid the foundations of a lot of Hayek’s and modern Public Choice theory thinking (see Buchanan’s admission that Mises “had come closer to saying what I was trying to say than anybody else”). He was to me a more comprehensive theorist than Hayek, and made us understand through his methodological individualism method that human action was at the heart of economic behaviour. But Hayek’s brilliant contribution is to have built on Mises’ business cycle, market process and entrepreneurship insights to develop a coherent and deep philosophical, legal, political and economic paradigm. While some would argue that he didn’t push his logic far enough (see here or here), it remains that reading the whole body…
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Utopia, you are standing in it! 
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