As expected, Hollande defeated Sarkozy in France. This will change the status quo relationship between Germany and France, and may shake up the entire EU. People are not voting for austerity. I do not want to try and analyze the situation as yet since there may be other shake ups. But I am looking foreward to going to Germany to teach a course on public policy this summer. Hearing the views of people there and reading European press provides insights hard to get here. Especially is one gets his news from TV news. (I watched the first thirty minutes of the Today Show this morning, and the coverage of the European elections was minimal.)
I expected Paul Krugman's op-ed column this morning to argue that the elections show that the people do not want austerity and that it is time to promote growth through deficit spending.l I was not disappointed.
Showing posts with label Paul Krugman. Show all posts
Showing posts with label Paul Krugman. Show all posts
Monday, May 7, 2012
Monday, April 30, 2012
Professor Krugman on Chairman (Professor) Bernanke
I don't agree with Paul Krugman often; although when he focuses on economics rather than politics, the odds of agreement increase. The New York Times published an excerpt from Krugman's new book concerning Ben Bernanke. As an aside--Bernanke was chair at Princeton when Krugman moved to Princeton. Krugman argues that Chairman Bernanke should listen to Professor Bernanke. Bernanke's scholarly work centered on the Great Depression, and he is considered one of the leading experts on the causes and consequences of the Great Depression. He also wrote about Japan's economic woes that began in the 90s, and urged the Bank of Japan to be more aggressive. He suggested several things that the Bank of Japan could have done but didn't. Krugman notes that Bernanke's Fed has also not done some of these earlier recommendation.
I am less confident on the Fed's ability to do more than it has than Krugman, but he may be correct that the Fed has been too timid. It is curious that Bernanke has not attempted policies he recommended while an academic. Krugman offers a couple of reasons why Bernanke may be more cautious in his article. One is that he is adapting to political pressures. While it is true the Fed is supposed to be independent of political considerations, Fed officials also know that Congress can change the rules. Another is that the Fed bureaucracy got to Bernanke when he was newly on the Board.
I think a third possibility exists. It is one thing to write academic papers and make recommendations. It is another to implement untried policies in the real world where unintended and unknow consequences may follow. A former professor of mine left academia and became an economist for a business. I saw him a couple of years later, and he commented that it often was daunting. As he put it, "It's tougher when real dollars at stake and not hypothetical dollars represented by a diagram on a blackboard."
Krugman's article can be found here.
I am less confident on the Fed's ability to do more than it has than Krugman, but he may be correct that the Fed has been too timid. It is curious that Bernanke has not attempted policies he recommended while an academic. Krugman offers a couple of reasons why Bernanke may be more cautious in his article. One is that he is adapting to political pressures. While it is true the Fed is supposed to be independent of political considerations, Fed officials also know that Congress can change the rules. Another is that the Fed bureaucracy got to Bernanke when he was newly on the Board.
I think a third possibility exists. It is one thing to write academic papers and make recommendations. It is another to implement untried policies in the real world where unintended and unknow consequences may follow. A former professor of mine left academia and became an economist for a business. I saw him a couple of years later, and he commented that it often was daunting. As he put it, "It's tougher when real dollars at stake and not hypothetical dollars represented by a diagram on a blackboard."
Krugman's article can be found here.
Monday, October 11, 2010
Krugman on Stimulus--Again
Krugman's op-ed piece in the Times today argues that the claim that the Obama administration tried a massive stimulus plan and it didn't work is wrong. In fact, the stimulus plan was not large enough and much of the plan was not federal government spending. Instead, it was tax cuts and grants to states to make up for the lost revenues states faced. Much of what he says is true. In posts I did at the time of the stimulus, I argued that much in the stimulus bill was not stimulus. Instead, it was spending on programs that Democrats wanted but didn't put in the regular budget.
Krugman also argues that when people think of Obama as pushing big government, they don't have any massive new programs to point to. Here, it is clear that no matter how smart Krugman is, he doesn't get some basic ideas that people have. Krugman notes that the health care bill hasn't really kicked in yet so there is no new bureaucracy in place yet. True, but people anticipate there will be. People see that the focus of the administration had not been jobs but programs long held dear by Democrats in Congress, especially health care. The stimulus bill, as already pointed out, also included many things that may or may not be good, but could not be considered stimulus spending. People see that, for all the rhetoric from the administration, the focus of the administration was on programs long sought after by Democrats and not economic recovery. Krugman misses the point because he shared the same desire for the programs pursued by the president.
Krugman also argues that when people think of Obama as pushing big government, they don't have any massive new programs to point to. Here, it is clear that no matter how smart Krugman is, he doesn't get some basic ideas that people have. Krugman notes that the health care bill hasn't really kicked in yet so there is no new bureaucracy in place yet. True, but people anticipate there will be. People see that the focus of the administration had not been jobs but programs long held dear by Democrats in Congress, especially health care. The stimulus bill, as already pointed out, also included many things that may or may not be good, but could not be considered stimulus spending. People see that, for all the rhetoric from the administration, the focus of the administration was on programs long sought after by Democrats and not economic recovery. Krugman misses the point because he shared the same desire for the programs pursued by the president.
Tuesday, September 21, 2010
In Krugman v. Rajan, I Side with Rajan
Paul Krugman has a book review on three books about the causes of the financial crisis and/or ways to get the economy going again. One of the books is by Rajan, Fault Lines, a book I commented on favorably in an earlier post. As might be expected, Krugman is critical of Rajan whereas I was not. Rajan has a response to Krugman also. Rajan's criticisms of Krugman's review I think are exactly right.
Krugman discusses four causes of the housing bubble that economists and others have identified. The first is the low interest rate policy of the Fed through most the the 2000s. Second, the "global savings glut." Third, financial innovations, and finally government programs.
Rajan cited government policy and the low interest rates in particular. Krugman rejects both, and argues instead for financial markets and a "Minsky moment."
Krugman's arguments that Fed policy and government policies were not responsible are specious, as Rajan shows. Krugman says the Fed couldn't be responsible because there were housing bubbles in Europe also and the European Central Bank was not pursuing low interest rates like the Fed. But, as Rajan notes, the Fed pushed the interest rate to 1% and the European Central Bank to 2%, so both were low by historic standards. Krugman aruges that Fannie and Freddie were not responsible for subprime mortgages, but they were part of the overall government emphasis, regardless of political party, to extend homeownership.
This review by Krugman is further evidence that Krugman has ceased to be an economist and is a political columnist instead. The evidence he cites to back his claims or refute other claims would not be accepted by most teachers if offered by their students. Krugman is so obsessed with showing that Republicans are at fault for all the ills and Democrats are not, that he seems to be identifying and interpreting evidence through biased eyes. As Rajan notes, government officals of both the Clinton and the Bush administrations were involved in policies that help bring about the bubbles and the crisis.
Krugman discusses four causes of the housing bubble that economists and others have identified. The first is the low interest rate policy of the Fed through most the the 2000s. Second, the "global savings glut." Third, financial innovations, and finally government programs.
Rajan cited government policy and the low interest rates in particular. Krugman rejects both, and argues instead for financial markets and a "Minsky moment."
Krugman's arguments that Fed policy and government policies were not responsible are specious, as Rajan shows. Krugman says the Fed couldn't be responsible because there were housing bubbles in Europe also and the European Central Bank was not pursuing low interest rates like the Fed. But, as Rajan notes, the Fed pushed the interest rate to 1% and the European Central Bank to 2%, so both were low by historic standards. Krugman aruges that Fannie and Freddie were not responsible for subprime mortgages, but they were part of the overall government emphasis, regardless of political party, to extend homeownership.
This review by Krugman is further evidence that Krugman has ceased to be an economist and is a political columnist instead. The evidence he cites to back his claims or refute other claims would not be accepted by most teachers if offered by their students. Krugman is so obsessed with showing that Republicans are at fault for all the ills and Democrats are not, that he seems to be identifying and interpreting evidence through biased eyes. As Rajan notes, government officals of both the Clinton and the Bush administrations were involved in policies that help bring about the bubbles and the crisis.
Subscribe to:
Posts (Atom)
