It seems that everyone wants to know the future course of interest rates. For a variety of reasons, it is less predictable than in “normal” times. But a quick look at a few numbers places the recent history of Fed policies in stark relief, possibly presaging what is to come. Consider the following quantitative measure that we call the Fed Accommodation Index. In our view, it approximates the degree to which the Fed’s monetary policy has been “accommodative” over the …
The Urgency for an Enlightenment 2.0
April 30, 2021When you automate an industry you modernize it; when you automate a life you primitivize it. (Eric Hoffer) It is well known that rationality and science emerged during the Age of Enlightenment. Many indeed attribute human progress over the past few centuries to reason and discovery. Despite a Romantic reaction against some of the worst excesses of the Industrial Revolution, there is little doubt that human reason, empiricism, and science ultimately became the dominant world view. The “defeat” of Romanticism …
A Debt Jubilee Is Unavoidable
April 11, 2021I am truly sorry not to be teaching my macroeconomics principles class this semester. Debt is invariably an under-remarked topic in such classes, never mind a debt jubilee (or debt forgiveness). Yet everything recently happening both in the markets and politics offers a “real-time” tutorial. So, here I will try to explain why, in my view, a debt jubilee is unavoidable – sooner or later. “Debt” may be an abstract and confusing concept to many. Largely it is because we …
Continued Growth Is Not Good for the Environment
March 31, 2021“Earth provides enough to satisfy every man’s needs, but not every man’s greed.” (Mahatma Gandhi) You might be thinking that this one is a complete no-brainer. How could growth be good for the environment? The larger the economy is, the more material waste and pollution is produced, right? True, but as we will see, it is not the whole story. Other factors intervene that many believe make the argument plausible. In arguing that continued growth is not good for the …
Path Dependence and the Folly of Incrementalism
February 28, 2021“History matters” (Robert Jensen) I am currently teaching a seminar entitled “Rethinking Progress.” One recurring topic in our discussions is the modern world’s present rate of technological advance in the absence of commensurate progress in the social sphere. My students sense an ominous imbalance and probable environmental overshoot. I want them to see the folly of incrementalism as a solution, yet do not want them to see me as preaching revolution. I therefore believe an understanding of path dependence to …
The 1.9 Trillion-Dollar Question
February 14, 2021The truth is that approval of the Biden Administration’s proposed stimulus package is inconceivable without major revision. We know that. But let us for the moment ignore the partisan political challenges that make passage impossible. Pretend, in other words, that Congress is unified and ready to rubber stamp whatever plan Biden advances. The 1.9 trillion-dollar question then becomes whether the size of his present proposal is too large – or not large enough. The political arguments on each side are …
Paradox of Thrift No Longer
January 7, 2021I want to try to bring together a few points about which I’ve posted previously. My motivation is to address an important article last week in the New York Times (January 1st) by Neil Irwin and Weiyi Cai. Perhaps its early for such a declaration, but the phenomenon they reveal might require a rethinking of Keynes’s celebrated “paradox of thrift.” The authors point out that much of the recent stock market boom can be attributed to an inordinate increase in …
Could We Have Too Much Fiscal Policy?
December 3, 2020President-elect Biden’s formation of his economic “team” has been dominating the headlines. Unduly, I aver, because there are far more pressing issues than which Wall Street or otherwise pro-business cronies Biden ends up selecting. Most notably, of course, is the matter of another desperately needed stimulus package. Against all odds, it appears that moderate Senate Democrats and Republicans are working together on a compromise bill. Just yesterday the group, led by Senators Collins (R-Maine) and Warner (D-Virginia), proposed a $900 …
Inflation? Really?
November 25, 2020Last week my interest was aroused by an article written by Martin Wolf in the Financial Times (November 18th) in which he discusses a recent book by Charles Goodhart and Manoj Pradhan. In the article he provides a number of reasons why we might expect higher – possibly much higher – inflation in the coming years. And an article in today’s Wall Street Journal by David Harrison similarly suggests that, following successful introduction of a Covid-19 vaccine, widespread and pent-up …
Free Market Capitalism is a Pernicious Oxymoron
November 15, 2020Reading Neil Irwin’s article this morning in the New York Times really raised my hackles. It is one of those faux-centrist pieces that tries both to applaud and to censure capitalism for its response to the global pandemic. One statement in particular gets my goat. Here he is discussing the “advance purchase agreement” between Pfizer and the Federal government over Covid-19 vaccine research: But it [the above agreement] speaks to a deeper reality the pandemic has revealed — both what is amazing about …
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