- First, Social Democracy for the 21st Century has a good discussion of the magnitude of the stimulus in perspective. It was a nice chunk of cash at a good time, when the financial crisis was making itself felt in the real economy. He makes really the essential point about state and local spending - that this was really just the federal government making sure things weren't as bad as they could have been. We can be glad for that at least - we can note that we're better off with Obama and that stimulus package than McCain and whatever he would have done (since a lot seems to be put in the frame of campaigns now again). But that's about it.
- Second, Unlearningecon has a good take-down of sticky wages. Some people do get really up in arms about this. I just get amazed anyone ever makes such a big deal of it. The really significant application of sticky wages in modern macroeconomics is as an explanation for why the short run aggregate supply curve is upward sloping. The frictions of the real world do a good job explaining why we don't live in the world of crude quantity theorists. But that's not how people think and talk about "sticky wages" more casually. In more casual discussion, sticky wages become a sort of naturally emerging wage floor. My response is - meh. That's possible, I guess. But it seems like a weird explanation. As I've noted many times - you can get a lot of unemployment in a clearing labor market. It just doesn't make sense, either. We seem to have much better ways of thinking about the cause of unemployment. On the margin, maybe a de facto wage floor contributes some to unemployment, but I think the real point of sticky wages is misunderstood.
Procrastinating on February 5, 2016
13 hours ago