Asymptosis: Always Approaching

Asymptosis: always approaching

  • Does Reduced Consumption, and Increased “Saving,” Result in “Capital” Formation?

    Matthew Yglesias riffs off my recent post, “Saving” ≠ “Saving Resources,” and there’s been quite a bit of commentary there, plus on Asymptosis and Angry Bear (plus a bit of twitter talk that I can’t figure out how to link to easily and usefully). There are a dozen things I want to discuss on the topic, but…

  • “Saving” ≠ “Saving Resources”*

    Many economists — mostly the freshwater/neoclassical/supply-side/conservative types, but also many on the left — hold in their heads a very peculiar model of how economies work. It’s a model of a barter/real-goods economy in which money only plays the role of convenience. In this model, if you don’t eat some portion of the corn you…

  • The Great Moderation Just Moderated the Risks of the Rich

    Following up on my earlier post, about people swimming in a stream of economic change over which they have no control: As I often do, I was re-reading some old Steve Randy Waldman posts, and came across one that made the same point quite elegantly: “Stabilizing prices is immoral“. (If you want to understand how economies…

  • Swimming in the Stream: How Economic Forces Force Household Indebtedness

    Update 4/7: Josh brings home the very same point, but regarding sovereign debt, in a new post. If you’re a fish merrily swimming in a stream, is it your fault if a flood — say from a large release from the dam upstream — causes you to be washed out through the sluicegates? Or if…

  • Bernanke (Mis)Explains the Effect of the Tech and Housing Bubbles

    Discussing the failure of modern macro to incorporate the financial system into its models, Ben asks, why did the bursting of the housing bubble spank the economy so much harder than the dot bomb crash? He sez (courtesy Brad DeLong, emphasis mine): …the decline in wealth associated with the tech bubble bursting [in 2001] and…

  • Full-Reserve Banking Goes Mainstream

    Imagine that all bank deposits — the dollars in your checking account — were 100% backed, one-for-one, by your bank’s reserve holdings at the Fed (the modern, fiat-money-world equivalent of gold reserves). Runs on bank deposits would be impossible, because the outfit that issues reserves and currency can’t run out of reserves and currency —…

  • Scott Sumner Does Not Understand that S ≠ I

    Update April 4: Steve Waldman kindly links to this post, and I’m rather abashed that he does because it’s wrong as written. As pointed out by Ramanan. (Though the spirit is right.) I should have said: Private Domestic Nonfinancial (i.e. households and businesses, a.k.a. the “real” economy in which people produce, sell, and buy goods…

  • Does Saving “Fund” Investment?

    If this blog has any tiny claim to any important influence, it might be that anonymous and magisterial commenter JKH used the comments section here to first bruit his insight (both tautological and profound) that S = I + (S – I). He revisited that construct and concept again recently, and I’ll leave it to…

  • Leading Economists Vote on Raising the Minimum Wage

    I’m delighted to see the U Chicago IGM Forum ask a really useful, non-softball question. The panelists are evenly split on whether an increase to $9 would make it “noticeably harder for low-skilled workers to find employment.” A 4:1 majority thinks that weighing the costs and benefits, “this would be a desirable policy.” I note how…

  • Risk is Mispriced Because Money Managers Face no Risk

    Here’s what risk looks like: Having to tell your six-year-old son that you don’t have a birthday present for him because you didn’t have any money left after buying food for the week. Telling your daughter she has to attend the semi-shitty local community college instead of the awesome out-of-state school where she was accepted…

  • Reveal Your Preferences! Show Your Support for Accounting-Based Economic Modeling

    If there’s one thing that distinguishes modeling by mainstream and neoclassical economists — and that is arguably their Achilles Heel — it’s their failure to come at the problem from a fundamental accounting, and monetary, standpoint. (That failure is understandable given the curricula in economics departments.) I know that many of my readers share with…

  • Why do Republicans Hate Market-Incentive Based Solutions?

    Contrary to what you might think, this new survey says that 69% of Republicans think that climate change is a “somewhat” or “very” serious threat. Table 3. Perception that climate change is a threat among Democrats (N=377), Republicans (N=306), Independents (N=389), and overall U.S. population (N=1089) in January 2013. Columns may not add to 100…

  • Wow: Cooperation. Should Obama Get Credit?

    We saw it on the “fiscal cliff”: enough House Republicans voted for the deal, along with most Democrats, to get something passed. Republicans backed down on the debt ceiling. On immigration, we’re also seeing the two parties working together to craft a solution. This feels like a possible sea change. Should Obama get credit? He’s…

  • Republican Governors: Take from the Poor, Give to the Rich, and Suck the Federal Teat

    These local stories in Louisiana, Kansas, Nebraska, and North Carolina speak quite eloquently for themselves. Gov. Bobby Jindal is proposing to eliminate Louisiana’s income and corporate taxes and pay for those cuts with increased sales taxes http://www.nola.com/politics/index.ssf/2013/01/gov_bobby_jindal_calls_for_eli.html Gov. Dave Heineman made a bold proposal … end the income tax for working Nebraskans and corporations. It…

  • Do Businesses Borrow to Invest in Productive Assets? Does the Business-Interest Tax Deduction Encourage That?

    J.W. Mason at The Slack Wire gives us a telling and trenchant analysis of that question: Short answer: They used to, but not any more. The correlation in the U.S. between fixed-capital investment and a) debt levels and b) change in debt levels has been vanishingly small since the late eighties. …in the 1960s and 70s,…

  • Jim Manzi Disappoints on the Devastation of Lead and Crime

    And Kevin Drum disappoints in his own defense. Regular readers will know that (at least sometimes) I like to seek out and highlight the very best, most cogent and convincing arguments countering my beliefs, trying to figure out what might be wrong with those beliefs, and hoping to understand what’s really going with the subject…

  • Question for Krugman: Can the Rich Provide All the Demand?

    I’ve long been troubled by a Paul Krugman comment from 2008: There’s no obvious reason why consumer demand can’t be sustained by the spending of the upper class — $200 dinners and luxury hotels create jobs, the same way that fast food dinners and Motel 6s do. And I find in his concluding comment from…

  • Platinum Currency: What’s The Fed’s End Game?

    Steve Randy Waldman as usual gets practical about Treasury issuing platinum coins. JKH in comments there does typically likewise. Suppose the Department of the Treasury says: “We have a statutory obligation to pay all amounts that have been authorized by Congress — both expenditure and debt obligations. Since the borrowing limit has been reached and Congress…

  • The Human and Economic Devastation of Leaded Gas: How the Visible Hand Saved the Day

    With all the well-deserved attention going to Kevin Drum’s excellent Mother Jones article on crime rates and lead in gasoline (more here), I thought it worth revisiting my post on the subject from a year and a half ago, which was itself prompted by Angry Bear’s own inimitable Robert Waldmann. Government Gets the Lead Out,…

  • Does Unemployment Insurance Explain (and Cause) High Unemployment?

    Casey Mulligan would very much like you to believe it does. “cutting unemployment insurance would increase employment, as it would end payments for people who fail to find work and would reduce the cushion provided after layoffs.” Here’s one pretty well-done data point (several, actually) suggesting that he’s wrong: In theory, greater employment protection should dampen…

  • Republican Strategy: “When you’re playing with house money, it makes sense to go all in on every hand.”

    David Atkins succinctly nails the situation we face: No matter what Obama does, Republicans won’t care and won’t fold …This is what makes the poker analogy so often used to criticize the President’s negotiating tactics such a weak metaphor. Obama is often said to be the worst poker player in history, consistently bluffing then folding. But…