Tag Archives: Paul Krugman

White Paper, Great Economists and (really) Bad Science

In Denmark, where I come from, academic economists are often used in the media. Whenever there is a political debate on an economic issue or policy proposal, TV and newspapers call out for economists to get their views and analyses. The norm is that journalists try to cover most views on a given issue, and that the economists in question try to be as balanced as possible. Ideally, the economists act as a sort of independent “expert witnesses”. Of course, personal opinions will to some extent color what a given economist will focus on, but one line is never crossed: An academic economist never endorses a given politician or party … Continue reading

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Countdown for Krugman

I recently wrote that I thought Paul Krugman wrote slightly too many blog posts, and that too many spent time commenting on them, and commenting on others’ comments and so on and on—a “Krugman multiplier“. Now an explanation for Krugman’s exceptional blog productivity is beginning to offer itself. The New York Times, who hosts Krugman’s blog, have introduced a counter on their web edition such that you can only read ten articles per month. So, only ten Paul Krugman blog posts per month if that’s your only reason for visiting NYT. A rough guesstimate tells me that this amounts to around only ten to twenty percent of his output. The … Continue reading

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US Output Gap: Still negative

John Taylor recently showed how the United States is currently much farther away from returning to “potential output” compared with the recession of the early 1980s, where above-average output growth during the recovery secured a return to the potential output path. Apart from the obvious implications for the evaluation of the current US recovery, this has led to a deeper discussion about the dangers of extrapolating “potential” output from past values (e.g., maybe the 2007 value was just too high?). James Bullard of St. Louis Fed argues (pdf of speech) that the financial crisis lead to a very persistent negative wealth shock that has pushed potential output down. Hence, the … Continue reading

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The Krugman Multiplier is too big

Paul Krugman is a very active blogger. Almost every time he writes a post on his New York Times blog, there are several comments made around the economic blogosphere. And sometimes Krugman will respond to a few of the comments made, and then it sets off further comments, and so on. It is a Krugman Blog Multiplier. I posit that it needs no formal empirical evidence to establish that it is way above 1. Way above. In this New Year’s post I’ll show a recent example, and argue why this multiplier is too high, and why one should not always “exploit” large multipliers. Probably one of the issues on which … Continue reading

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At the Fed: What did come next?

September 22 the Federal Reserve initiated “Operation Twist” where they announced that they would start restructuring its debt by buying up long bonds with the proceedings from short bond sales, with the aim of lowering the long-term yields. As I mentioned in my post on that occasion, the Fed and Ben Bernanke had then exhausted the three main ways of conducting unconventional monetary policy as defined by Bernanke himself in a paper from 2004: I. Shaping Interest-Rate Expectations; II. Altering the Composition of the Central Bank’s Balance Sheet;  III. Expanding the Size of the Central Bank’s Balance Sheet. In case nothing new would happen to the American economy, the obvious … Continue reading

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Krugman on “Republican Science”: Can we please make a trade barrier against that?

This is an endorsement. Paul Krugman’s recent Op-Ed in the New York Times describes in horrifying detail how some parts of America, and potential Republican Presidential candidates are turning their back against science. The piece, Republicans Against Science, is really scary. Read it and weep. The Wall Street Journal editorial by a Stephen Moore that Krugman mentions, can be found here. It is also a horrifying read. It basically says that economics is stupid, and common sense is better. Weep some more. It is scary right now for me, as my country have an election campaign where main issues are economic. And since American tendencies inevitably are imported in Europe … Continue reading

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Can the US Go Bankrupt? Yes, of course it can

A few days ago, the rating agency Standard & Poor’s changed its rating of US government bonds from the usual (highest possible) AAA to a similar one, but with a “negative outlook warning”. This caused havoc around the blogosphere and in policy circles. Some claimed that this was an untimely private, and politically motivated, action serving to undermine public spending programmes in the US. In any case, the market didn’t take much notice, as the interest on government bonds moved little. “Poor Standards” as Paul Krugman called it. He may be right. After all, S&P did funny ratings in the past (remember house-backed securities pre 2007?). And, by the way, … Continue reading

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The Taylor Plot: A European View

January this year, John Taylor posted a scatterplot on his blog. He plotted quarterly US unemployment against fixed investment as a fraction of GDP for 1990q1-2010q3, and found a very strong negative correlation (jpg ). In contrast, the relationship between government spending and unemployment tended to be positive, albeit not so strong. On the latter finding he notes that “the correlation is not due to any reverse causation from high unemployment to more government purchases”. Overall, he therefore concludes that “Encouraging the creation and expansion of businesses should be the focus on government efforts to reduce unemployment” and further: “The recent compromise agreement to prevent the increase in tax rates … Continue reading

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