Richard A. Posner

My lefty critics don't believe me when I say I support the stimulus. But I do, and I advocated it in my book A Failure of Capitalism, completed before the stimulus was enacted. I am a Keynesian, and I have sharply criticized conservative economists who oppose Keynesian deficit spending. I simply do not believe that it is possible to attribute the improvement in the economy to the actual spending of stimulus money through the end of the second quarter, because I… More »

Christina Romer, in her speech that I have been blogging critically about, said that the government had by the end of the second quarter of this year (June 30) "spent" more than $100 billion in stimulus money. The official stimulus web site, recovery.gov, has $61 billion, and one of my critics says "about $60 billion." Other critics say that the official figure is too low, because it omits "tax reductions," which one critic calls "tax rebates." These critics say… More »

My two blog entries (August 18 and 19) about Christina Romer's August 6 speech on the stimulus package have drawn an unusual amount of commentary, including criticisms (some by seemingly reputable economists) that are at once obtuse and vitriolic.Some of the criticisms by economists are downright goofy (I have said before, and will say once again, that business-cycle economics is a very weak field), such as that, in treating output, conventionally enough, as the… More »

The macroeconomist J. Bradford DeLong (about whom I blogged on June 10) has written an angry criticism of my criticism ("Honesty about the Stimulus," posted yesterday) of Christina Romer's defense of the $787 stimulus package that Congress enacted in February. (He accuses me of writing "dishonestly" and to have committed "at least seven major ethical lapses.") Although Professor DeLong makes one pretty good point (see paragraph numbered 2 below), his criticism on… More »

On August 6, Christina Romer, the chairman of the President's Council of Economic Advisers, gave a talk entitled "So, Is It Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark." The reference of course is to the $787 billion stimulus that Congress, at the urging of the Administration, enacted last February. Romer answers the question in her title: "Absolutely." And despite the reference to "five months" in the subtitle, her… More »

The criticisms of the economics of business cycles made in the letter to the Queen are, I discover, echoes of criticisms made earlier. On May 13, Knowledge@Wharton, the online journal of the Wharton business school at the University of Pennsylvania, published an article entitled "Why Economists Failed to Predict the Financial Crisis," and like the letter to the Queen the article criticizes economists for having committed themselves to a model of human behavior that… More »

It is remarkable how economists have been able to deflect blame for the economic crisis that erupted last September with the sudden collapse of the international banking industry and that continues to afflict the world's economies. Last November, Queen Elizabeth visited the London School of Economics and asked the faculty why "nobody [had] noticed [before September 2008] that the credit crunch was on its way?" Acting in the unhurried English fashion, on June 27 the… More »

Three op-eds this morning--two in the New York Times and one in the Wall Street Journal--offer worthwhile commentary on the economic situation. In "G.D.P. R.I.P." (Times), Eric Zencey points out that Gross Domestic Product (or, what is similar, Gross National Product) is not a good measure of economic welfare. One reason is that it doesn't include nonmarket output, such as household production. If a woman who has been a full-time housewife (a "household producer,"… More »

I have been remiss in responding to comments, many very interesting, that I have received in the past six weeks. I hope that readers of this blog will read the comments as well. Although comments cannot be posted without my approval, I have approved all but a couple that were either irrelevant or unintelligible. There are too many comments for me to be able to respond to each one individually, but I will note some points that deserve emphasis, and respond to a… More »

On July 28, Richard Thaler, an economist whom I had criticized in an op-ed about the proposed Consumer Financial Protection Agency ("Treating Financial Consumers as Consenting Adults," Wall Street Journal, July 23, 2009, p. A15--and see also my blog entry of July 7 about the proposed agency), responded to my criticism; his response can be read at www.pbs.org/newshour/businessdesk/2009/07/thaler-responds-to-posner-on-c.html. The response is temperate, but… More »

A theme of my blog, as of my book "A Failure of Capitalism: The crisis of '08 and the Descent into Depression," which gives its name to the blog, is the failure of economists to anticipate or even imagine the possibility of the financial collapse of last September, or to agree on how to deal with the collapse. Government officials (many of them economists), business economists, economic journalists, and academic economists alike were, with rare exceptions, taken by… More »

On Sunday's talk shows, Lawrence Summers and Timothy Geithner, the President's top economic advisers, sensibly refused to rule out tax increases not limited to persons with incomes above $250,000. Yesterday, the President's press secretary stated without equivocation that the President would not agree to any increase in taxes paid by persons with incomes below that level.The United States has a huge and soaring national debt, as a result of the Bush… More »

Economists' joke: A recession is when your neighbor loses his job; a depression is when you lose your job. The point of the joke is that neither "recession" nor "depression" is well defined and so the line between them is indistinct to the point of vanishing. (Economists like to joke about depressions and recessions because they are untouched by them, especially if they have tenure.) More »

Economists' joke: A recession is when your neighbor loses his job; a depression is when you lose your job. The point of the joke is that neither "recession" nor "depression" is well defined and so the line between them is indistinct to the point of vanishing. (Economists like to joke about depressions and recessions because they are untouched by them, especially if they have tenure.) Until sometime after World War II, all substantial economic downturns, of which… More »

My misgivings concerning the government's competence in macroeconomic policy have been reinforced by a pair of recent articles: an article in the Economist on July 9 reporting on a study by three Federal Reserve Board economists, and an article in today's Washington Post by Renae Merle, on modifying mortgages. Calculated Risk, the superb finance/economics blog, which specializes in real estate issues, has also reported on the Fed study. And the Wall Street Journal,… More »

In a striking turn in the unedifying history of business-cycle economics, John Maynard Keynes's masterpiece, The General Theory of Employment, Interest and Money (1936), was ignored by liberal and conservative macroeconomists alike until the collapse of the banking industry last September, and the ensuing economic depression, revealed that Keynes's book provided a better guide to our economic crisis than Milton Friedman's monetarism, Real Business Cycle theory, or… More »

Richard Posner suggests it might not be as easy as the Federal Reserve thinks. More »

Federal Reserve chairman Bernanke testified last Tuesday (July 21) that there is no inflation danger even though the Fed is keeping short-term interest rates very low and the banks are awash with excess reserves (lendable cash), to the tune of some $800 billion, which if used for loans rather than left sitting in the banks' accounts in federal reserve banks would increase the amount of money in circulation by a considerable amount. Bernanke explained that if signs… More »

I mentioned in my last blog entry three recent articles in the Economist magazine that criticize macroeconomists and finance theorists for their inadequate performance in regard to the current financial and economic crisis. The articles rely heavily on criticisms from within economics itself, notably from Joseph Stiglitz, Paul Krugman, and Bradford DeLong. But here is what is notable about those criticisms: the economist critics do not themselves have a firm grasp… More »

Three articles in the July 16 issue of The Economist magazine criticize the economics profession for its failure to anticipate the financial crisis of last September, and the ensuing economic crisis, and for its inability to agree on what should be done to speed recovery. These articles, which can be found at http://www.economist.com/opinion/displayStory.cfm?story_id=14031376&source=hptextfeature. http://www.economist.com/displaystory.cfm?story_id=14030288,… More »