- Arnold Kling makes a really good point I had honestly never thought of before. One of the reasons we have less to worry about when it comes to a debt crisis then, say Greece, is that we have the option of inflating away our debt. Relying too heavily on this is obviously bad news, but some moderate debt erosion isn't that much to worry about - it played an imortant role after WWII, for example. However, the CBO issue brief tthat Kling cites points out that our biggest long-term debt issue, the entitlement programs, only get bigger as inflation increases. The traditional "inflating away the debt argument" doesn't take this dynamic into account.
- Regular F&OST commenter Xenophon highly recommends the most recent EconTalk, where Russ Roberts interviews Robert Service about Trotsky. I haven't gotten a chance to listen to this yet, but Service is always excellent so I'm sure Xenophon is right. Another great Robert Service interview is this one, where he and Christopher Hitchens are both interviewed by the Hoover Institution about Trotsky. Hitchens has an interesting line at the beginning of this interview - Service and Hitchens are asked "was Leon Trotsky a good guy or a bad guy?". Hitchens answers "he was one of the few figures in the Communist movement about whom it would be worth asking that question". To bring this full circle, this is Hitchens on EconTalk talking about George Orwell, but of course also having the opportunity to mention Trotsky as well.
- Xenophon also reminds me of a recent article in National Affairs by Greg Mankiw on the challenge of knowing the impact of the stimulus. He makes a lot of the same points that I regularly do about the challenges of macroeconometrics.
- L. Randall Wray has an interesting post "reaching out" to Austrians and libertarians. It's a little harsh (harsher than my extended olive branches? I think so, but perhaps not), but an interesting review of Modern Monetary Theory (a review I am still desperately in need of, even though I'm a closer cousin to MMT than a lot of my regular readers). I found his point #4 to be especially well put:
"The problem with a monetary economy (you can call it capitalism if you like) is that from inception imposition of taxes creates unemployment (those looking for money to pay taxes). We scale this up to our modern almost fully monetized economy (you need money just to eat, watch TV, play on cell phones, etc) and we get everyone looking for money (and not just to pay taxes). It is sheer folly to then force the private sector to solve the unemployment problem created by the government’s tax. The private sector alone will never (never has) provide full employment. ELR/JG is a logical and empirical necessity to support the private sector. It is a complement not a substitute for private sector employment."This is a great explanation (with an MMT spin) of why the business cycle is such a prominent feature of modern capitalism. It's largely about money demand.
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Yes, but business cycles existed prior to "modern capitalism."
ReplyDeleteWhy the "but"?
ReplyDeleteDid anyone say they didn't?
More strictly speaking, economic downturns existed prior to modern capitalism. I'm not sure about the extent to which they could be considered "business cycles". To some extent, probably.
Well, "economists" spent a heck of a lot of time before the 19th century denying the existence of business cycles ... so there is some evidence for their existence there.
ReplyDeleteRight, again - no one is denying the existence of business cycles back then to my knowledge.
ReplyDeleteBesides - a lot of the concern back then was with "general gluts" - which as I said might be better described as a "downturn" rather than a "cycle".
But again - no one's challenging you.
I guess I am wondering why you think they are a prominent feature now? That implies they weren't in the past.
ReplyDeleteOh, well the division of labor, the importance of manufacturing inventories, the increase in wage labor, the expansion of the monetary economy, the increase in financial intermediators (which leads to the divorce of the savings decision from the investment decision), make the business cycle a more prominent, more regular feature now than it used to be. It is a hallmark of modern capitalism.
ReplyDeleteNone of this is to say that it wasn't a part of the pre-modern-capitalism landscape, which you seem to be suggesting that I'm saying.
Modern economics largely emerged in the late 18th and early 19th century to explain two things: economic growth, and economic fluctuations. Both occured prior to the late 18th century, but both were less prominent.
Yeah, I'm kind of skeptical of that narrative. I have fair amount of classical history under my belt and I would say that "business cycles" were a common feature of the classical world. Then again, I've never read anything directly on the subject. One thing I've figured out is that economists just don't seem to be that interested in those sorts of questions.
ReplyDeleteAnyway, I've just bought Finley's classic work on the subject; I've been meaning to read it for a while.
Another book I just bought:
ReplyDeleteEdward Cohen, _Athenian Economy and Society_
Book sellers must love your blog.
I'd recommend Service's biography of Stalin. I haven't read the biography of Trotsky yet, but it is on the list.
ReplyDelete