Arnold Kling

Clive Crook writes,Thanks, Robert, especially for that last clarification. I have to admit that I haven't been giving much thought to the scenario in which a deficit-financed stimulus has no effect (under Ricardian equivalence) on aggregate demand and yet still has a big multiplier. I will have to think about that one...I have always thought about Barro's Ricardian equivalence as treating any government deficit as if it were financed by taxes. That is, when people… More »

Megan mentioned the latest data on productivity and costs. Two quick notes about this: More »

When I hear a comment like "we should nationalize the banks," I assume that the speaker is the sort who thinks that such a policy will take bank management out of the hands of greedy, mistake-prone people and put banks in the hands of wise, benevolent public servants. Instead, I think of a government takeover of banks as something that changes the rules and incentive structures under which bank managers operate. With rules and traditions in place, as in the FDIC… More »

Many economists think that an economic recovery requires the renewal of lending by banks. Instead, I think that we need to step over the corpses in the financial sector. A revival of business investment will come from profits, not from lending.My analysis harkens back to the thinking of Hyman Minsky, a heterodox Keynesian economist with a small but devoted following in the financial community. More »

Two economists on opposite sides of the stimulus debate recently expressed their opinions in terms of algebra. The opponent, Kevin Murphy of the University of Chicago, laid out the basic framework at a panel where he was the second speaker. The proponent, Brad DeLong of Berkeley, reacted by reprinting Murphy's framework and using it to articulate his disagreement with Murphy.My goal here is to translate their thoughts into English and then add my comments. More »

In his interview with Conor Clarke, Michael Lewis says, That market is huge as a result. But if people actually had to have the capital, like a real insurer, to back up the contracts they're riding, the market would shrink by -- who knows? Who knows what would be left of it? He applies that logic to credit default swaps, but not to mortgage securities. Instead, he praises mortgage securities. I think that both credit default swaps and mortgage securities are… More »