America's political landscape is infested with many zombie ideas - beliefs about policy that have been repeatedly refuted with evidence and analysis but refuse to die. The most prominent zombie is the insistence that low taxes on rich people are the key to prosperity.
Economists don't usually make good speculators, because they think too much.
The planet will continue to cook.
One way in which Americans have always been exceptional has been in our support for education. First we took the lead in universal primary education; then the “high school movement” made us the first nation to embrace widespread secondary education.
Europe is often held up as a cautionary tale, a demonstration that if you try to make the economy less brutal, to take better care of your fellow citizens when they're down on their luck, you end up killing economic progress. But what European experience actually demonstrates is the opposite: social justice and progress can go hand in hand.
The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.
These days, however, the main problem comes from the right - from conservatives who, unlike most economists, really do think that the free market is always right - to such an extent that they refuse to believe even the most overwhelming scientific evidence if it seems to suggest a justification for government action.
Debt is one person's liability, but another person's asset.
I think so long as fossil fuels are cheap, people will use them and it will postpone a movement towards new technologies.
You really have to go searching desperately to find any contemporary examples of good, old-fashioned runaway inflation.
If Europe’s example is any guide, here are the two secrets of coping with expensive oil: own fuel-efficient cars, and don’t drive them too much.
The real danger with debt is what happens if lots of people decide, or are forced, to pay it off at the same time.
The Obama campaign seems dangerously close to becoming a cult of personality.
Sometimes economists in official positions give bad advice; sometimes they give very, very bad advice; and sometimes they work at the OECD.
So, very early reports are that Obamacare exchanges are, as expected, having some technical glitches on the first day - maybe even a bit worse than expected, because it appears that volume has been much bigger than predicted. Here’s what you need to know: this is good, not bad, news for the program... Lots of people logging on and signing up on the very first day... is an early indication that it’s going to be fine, that plenty of people will sign up for the first year of health reform.
What the Depression teaches us is that when the economy is so depressed that even a zero interest rate isn't low enough, you have to put conventional notions of prudence and sound policy aside.
Close the weak banks and impose serious capital requirements on the strong ones...You see, it may sound hard-hearted, but you cannot keep unsound financial institutions operating simply because they provide jobs.
Are you, or is someone you know, a gadget freak? If so, you doubtless know that Wednesday was iPhone 5 day, the day Apple unveiled its latest way for people to avoid actually speaking to or even looking at whoever they're with.
Democracy or breakdown in Syria would change the whole Middle East overnight.
Where's that toxic rhetoric coming from? Let's not make a false pretense of balance: it's coming, overwhelmingly, from the right. It's hard to imagine a Democratic member of Congress urging constituents to be "armed and dangerous" without being ostracized; but Representative Michele Bachmann, who did just that, is a rising star in the G.O.P.
The public has no idea that the deficit has been falling like a stone.
I know that when I look at today’s Mexicans and Central Americans, they seem to me fundamentally the same as my grandparents seeking a better life in America. On the other side, however, open immigration can’t coexist with a strong social safety net; if you’re going to assure health care and a decent income to everyone, you can’t make that offer global. So Democrats have mixed feelings about immigration; in fact, it’s an agonizing issue.
To the extent that sacrifices need to be made, shouldn't the people who've made out like bandits this past generation be first in line? The problem with getting out of the slump is that we need to spend more. It's not that somebody needs to spend less. We have idle workers who have the skills and the willingness to work. We have idle factories. Dealing with this is not about saying somebody needs to suffer. It's saying that we need to be prepared to open the taps.
I've always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly - that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum.
Some years down the pike, we're going to get the real solution, which is going to be a combination of death panels and sales taxes. It's going to be that we're actually going to take Medicare under control, and we're going to have to get some additional revenue, probably from a VAT. But it's not going to happen now.
So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.
Wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.
If you had to explain America's economic success with one word, that word would be "education".... Until now, the results of educational neglect have been gradual - a slow-motion erosion of America's relative position. But things are about to get much worse, as the economic crisis ... deals a severe blow to education across the board.... We need to wake up and realize that one of the keys to our nation's historic success is now a wasting asset. Education made America great; neglect of education can reverse the process.
Whenever you see some business person quoted complaining about how he or she can't find workers with the necessary skills, ask what wage they're offering. Almost always it turns out what said business person really wants is highly (and expensively) educated workers at a manual-labor wage. No wonder they come up short.
We should try to create the society each of us would want if we didn't know in advance who we'd be.
Every once in a while I feel despair over the fate of the planet. If you’ve been following climate science, you know what I mean: the sense that we’re hurtling toward catastrophe but nobody wants to hear about it or do anything to avert it.
The federal government is basically an insurance company with an army.
I've always believed in expansionary monetary policy and if necessary fiscal policy when the economy is depressed.
we should reject the attempt to divert the national conversation away from soaring inequality toward the alleged moral failings of those Americans being left behind. Traditional values aren't as crucial as social conservatives would have you believe and, in any case, the social changes taking place in America's working class are overwhelmingly the consequence of sharply rising inequality, not its cause.
People who are complaining about the Fed are people who've been predicting runaway inflation for five and six years, and it hasn't happened.
The important thing to understand is that the case for pollution control isn't based on some kind of aesthetic distaste for industrial society. Pollution does real, measurable damage, especially to human health.
What happened after 9/11 - and I think even people on the right know this, whether they admit it or not - was deeply shameful. The atrocity should have been a unifying event, but instead it became a wedge issue. Fake heroes like Bernie Kerik, Rudy Giuliani, and, yes, George W. Bush raced to cash in on the horror. And then the attack was used to justify an unrelated war the neocons wanted to fight, for all the wrong reasons....The memory of 9/11 has been irrevocably poisoned; it has become an occasion for shame. And in its heart, the nation knows it.
We're living in a Dark Age of macroeconomics. Remember, what defined the Dark Ages wasn’t the fact that they were primitive — the Bronze Age was primitive, too. What made the Dark Ages dark was the fact that so much knowledge had been lost, that so much known to the Greeks and Romans had been forgotten by the barbarian kingdoms that followed.
In short, it's a great economy if you're a high-level corporate executive or someone who owns a lot of stock. For most other Americans, economic growth is a spectator sport.
Default is not in our stars, but in ourselves.
Wealthy individuals bought themselves a radical right party, believing - correctly - that it would cut their taxes and remove regulations, but failed to realize that eventually the craziness would take on a life of its own, and that the monster they created would turn on its creators as well as the little people.
We know that advanced economies with stable governments that borrow in their own currency are capable of running up very high levels of debt without crisis.
For decades the G.O.P. has won elections by appealing to social and racial divisions, only to turn after each victory to deregulation and tax cuts for the wealthy a process that reached its epitome when George W. Bush won re-election by posing as America's defender against gay married terrorists, then announced that he had a mandate to privatize Social Security.
[D]ebt increases that didn't arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments.
Unsustainable situations usually go on longer than most economists think possible. But they always end, and when they do, it's often painful.
Our grandfathers lived in a world of largely self-sufficient, inward-looking national economies - but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.
There is no economic policy. That's really important to say. The general modus operandi of the Bushies is that they don't make policies to deal with problems. They use problems to justify things they wanted to do anyway. So there is no policy to deal with the lack of jobs. There really isn't even a policy to deal with terrorism. It's all about how can we spin what's happening out there to do what we want to do.
In our country, learned ignorance is on the rise.
The United States in particular and the West in general should be feeling a little embarrassed about all that lecturing we did to the Third World.
Republican candidates had to appeal to their base, which is by and large elderly white people arguing with empty chairs.
If you want a simple model for predicting the unemployment rate in the United States over the next few years, here it is: It will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.
There's nothing magic about spending on tanks and bombs rather than roads and bridges.
...instead it seems that business - like weight loss - is a subject wherein hope and fear inspire limitless gullibility.
Can we break the machine that is imposing right-wing radicalism on the United States? The scariest part is that the media is part of that machine.
[T]he next time you hear serious-sounding people explaining the need for fiscal austerity, try to parse their argument. Almost surely, you'll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we're bad and the confidence fairy will reward us if we're good. And real-world policy - policy that will blight the lives of millions of working families - is being built on that foundation.
And when the chickens that didn't hatch come home to roost, we will rue the day when, misled by sloppy accounting and rosy scenarios, we gave away the national nest egg.
A message to progressives: By all means, hang Senator Joe Lieberman in effigy.
If you want to understand opposition to climate action, follow the money.
I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.
In fact, I'd say that the sources of the economy's expansion from 2003 to 2007 were, in order, the housing bubble, the war, and - very much in third place - tax cuts.
[I]f one asks what substantive contributions [F. A. Hayek] made to our understanding of how the world works, one is left at something of a loss. Were it not for his politics, he would be virtually forgotten.
In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price-determined by supply and demand, the same as the price of apples or coal. And it is for that reason, rather than the practical details, that the broader political movement of which the demand for a living wage is the leading edge is ultimately doomed to failure: For the amorality of the market economy is part of its essence, and cannot be legislated away.
Seven habits that help produce the anything-but-efficient markets that rule the world. 1. Think short term. 2. Be greedy. 3. Believe in the greater fool 4. Run with the herd. 5. Overgeneralize 6. Be trendy 7. Play with other people's money
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. ... There was a Twilight Zone episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don't need it, we need it in order to get some fiscal stimulus.
[I]f you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes.
Under the gold standard America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933.
Rising inequality isn’t about who has the knowledge; it’s about who has the power.
Governments do not necessarily act in the national interest, especially when making detailed microeconomic interventions. Instead, they are influenced by interest group pressures. The kinds of interventions that new trade theory suggests can raise national income will typically raise the welfare of small, fortunate groups by large amounts, while imposing costs on larger, more diffuse groups.
Surely I'm not the only person to ask the obvious question: How different, really, is Mr. Madoff's tale from the story of the investment industry as a whole?
As I've often said, you can shop online and find whatever you're looking for, but bookstores are where you find what you weren't looking for.
Outrageous fiscal mendacity is neither historically normal nor bipartisan. It’s a modern Republican thing.
If you are a good economist, a virtuous economist, you are reborn as a physicist. But if you are an evil, wicked economist, you are reborn as a sociologist.
We have a lot of evidence on what happens when you raise the minimum wage. And the evidence is overwhelmingly positive: Hiking the minimum wage has little or no adverse effect on employment while significantly increasing workers' earnings.
The French, unfortunately, actually believe what they say, and that has been very destructive.
It’s not about the budget; it’s about the power...So will the attack on unions succeed? I don’t know. But anyone who cares about retaining government of the people by the people should hope that it doesn’t.
Obama is very much an establishment sort of guy. The whole image of him as a transcendent figure was based on style rather than substance. If you actually looked at what he said, not how he said it, he said very establishment things. He's a moderate, cautious, ameliorative guy. He tends to gravitate toward Beltway conventional wisdom.
The great thing about fiscal policy is that it has a direct impact and doesn't require you to bind the hands of future policymakers.
But where will the Fed find another bubble?
The science fiction world has a lot of people doing seriously imaginative thinking.
If the price of everything is going down, that's going to include wages as well. People will have an incentive to sit on their cash and not spend it.
Many people ... prefer to describe themselves as progressives rather than liberals. To some extent that's a response to the decades-long propaganda campaign conducted by movement conservatives, which has been quite successful in making Americans disdain the word liberal but much less successful in reducing support for liberal policies.
I admit it: I had fun watching right-wingers go wild as health reform finally became law.
The raw fact is that every successful example of economic development this past century every case of a poor nation that worked its way up to a more or less decent, or at least dramatically better, standard of living has taken place via globalization, that is, by producing for the world market rather than trying for self-sufficiency.
Middle-class societies don't emerge automatically as an economy matures, they have to be CREATED through political action.
There's one thing that the Fed has been really good at cracking down on, and that's inflation.
Economics is not a morality play.
Coming up with a good idea, with an insight into the way the world works that is really new and that you really believe in, is a deeply satisfying experience.
I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society.
Bad ideas flourish because they are in the interest of powerful groups.
The problem isn't that people don't understand how good things are. It's that they know, from personal experience, that things really aren't that good.
If you can create even the illusion of high profitability for a few years, then when the thing collapses you can walk out of the wreckage a very rich man.
Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets.
I don't want a job in the administration; I think I'm more effective carping from the sidelines.
Simple doesn't mean stupid. Thinking that it does, does.
If you're doing your job right, some substantial group of people [is] going to be mad at you.
Most people, I suspect, still have in their minds an image of America as the great land of college education, unique in the extent to which higher learning is offered to the population at large. That image used to correspond to reality. But these days young Americans are considerably less likely than young people in many other countries to graduate from college. In fact, we have a college graduation rate that's slightly below the average across all advanced economies.
There are no atheists in foxholes and there are no libertarians in financial crises.
The party of ideas has become the party of Beavis and Butthead.
I believe in a relatively equal society, supported by institutions that limit extremes of wealth and poverty. I believe in democracy, civil liberties, and the rule of law. That makes me a liberal, and I’m proud of it.
A snarky but accurate description of monetary policy over the past five years is that the Federal Reserve successfully replaced the technology bubble with a housing bubble
Congress has always had a soft spot for "experts" who tell members what they want to hear, whether it's supply-side economists declaring that tax cuts increase revenue or climate-change skeptics insisting that global warming is a myth.
as an economics professor I am by nature inclined to the view that the truth isn't out there, it's in here - that usually you learn a lot more by thinking really hard about the data than you do by sniffing around for supposedly inside information.
The key reason executives are paid so much now is that they appoint the members of the corporate board that determines their compensation and control many of the perks that board members count on. So it's not the invisible hand of the market that leads to those monumental executive incomes; it's the invisible handshake in the boardroom.
[The US] budget is dominated by the retirement programs, Social Security and Medicare - loosely speaking, the post-cold-war federal government is a big pension fund that also happens to have an army.
Consumer spending is now plunging at serious-recession rate ... even if the rescue now in train succeeds in unfreezing credit markets, the real economy has immense downward momentum. In addition to financial rescues, we need major stimulus programs.
What Republicans have actually put on the table is almost nothing. All of the rest is just big talk. So how is the president supposed to negotiate with people who say, 'Here's my demands. By the way, I can't give you any specifics. Just make me happy'?
The fact is that the two years or so after 9/11 were a terrible time in America – a time of political exploitation and intimidation, culminating in the deliberate misleading of the nation into the invasion of Iraq. It’s probably worth pointing out that I’m not saying anything now that I wasn’t saying in real time back then, when Bush had a sky-high approval rating and any criticism was denounced as treason. And there’s nothing I’ve done in my life of which I’m more proud.
The problem with digital books is that you can always find what you are looking for but you need to go to a bookstore to find what you weren't looking for.
What our economy needs is direct job creation by the government and mortgage-debt relief for stressed consumers. What it very much does not need is a transfer of billions of dollars to corporations that have no intention of hiring anyone except more lobbyists.
For most Americans, economic growth is a spectator sport.
When stock prices are rising, it's called ''momentum investing''; when they are falling, it's called ''panic.''
Social Security is a social insurance program - it is not designed to be the same thing as a 401(k).
When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
The growth of the Internet will slow drastically, as the flaw in 'Metcalfe's law'–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.
There has been plenty to criticize about President Obama’s handling of the economy. Yet the overriding story of the past few years is not Mr. Obama’s mistakes but the scorched-earth opposition of Republicans, who have done everything they can to get in his way - and who now, having blocked the president’s policies, hope to win the White House by claiming that his policies have failed.
Now, it’s true that some of the protesters are oddly dressed or have silly-sounding slogans, which is inevitable given the open character of the events. But so what? I, at least, am a lot more offended by the sight of exquisitely tailored plutocrats, who owe their continued wealth to government guarantees, whining that President Obama has said mean things about them than I am by the sight of ragtag young people denouncing consumerism.
Something terrible has happened to the soul of the Republican Party. We've gone from bad economic doctrine. We've even gone beyond selfishness and special interests. At this point we're talking about a state of mind that takes positive glee in inflicting further suffering upon the already miserable.
However, the fact that an economist offers a theoretical analysis does not and should not automatically command respect. What is needed is some assurance that the analysis is actually relevant.
On the political as on the economic front it's important not to fall into the "not as bad as" trap. High unemployment isn't O.K. just because it hasn't hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.
The habit of disguising ideology as expertise has created a deficit of legitimacy.
...academic credentials are neither a necessary nor a sufficient condition for having your ideas taken seriously. If a famous professor repeatedly says stupid things, then tries to claim he never said them, there's no rule against calling him a mendacious idiot - and no special qualifications required to make that pronouncement other than doing your own homework.Conversely, if someone without formal credentials consistently makes trenchant, insightful observations, he or she has earned the right to be taken seriously, regardless of background.
The raw fact is that every successful example of economic development this past century ... has taken place via globalization.
What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.
The goal in the end is not to win elections. The goal is to change society.
Not all private equity people are evil. Only some.
