Tuesday, April 15, 2008 at 10:43 am
Nobody knows anything about macroeconomics
Arnold Kling writes:
My daughter who is a freshman left a message that she wants me to explain macro to her. I can do that, in the sense that I can teach what is in her textbook. In reality, however, macro is a muddle that no one can explain. The undergraduate textbook, a graduate textbook, and macroeconomics as practiced by policymakers (what Mankiw calls the "engineering approach") have nothing in common with one another.
Every macroeconomic pronouncement should be accompanied by a disclaimer that says, "This is just my opinion. We don't really know."
When I started writing about the economy for Fortune, in the mid-1990s, I got the sense that most everybody--in government, in academia, etc.--knew this about macroeconomics. Fine-tuning the economy was impossible to do well, the thinking went, so the Fed should just stick to keeping inflation low and Congress and the White House should focus on long-term economic incentives (or just stay out of the way).
Now, with the economy in trouble, lots of people suddenly feel like something has to be done. And maybe something does have to be done. But there's nothing remotely approaching a "scientific" consensus on what that something ought to be. It's just people making half-informed (or less than half-informed) guesses. Isn't that reassuring?
2 Comments to “Nobody knows anything about macroeconomics”
Leave a Reply
You must be logged in to post a comment.
About Curious Capitalist
RSS Feed
 |
Daily Email
Recent Posts
The Curious Capitalist - TIME.com Archives
Blogroll
- Adam Lashinsky
- Amit Varma
- Barry Ritholtz
- Brad DeLong
- Calculated Risk
- Econbrowser
- Econlog
- Ezra Klein
- Felix Salmon
- Floyd Norris
- Going Private
- Greg Mankiw
- Herb Greenberg
- James Pethokoukis
- John Gapper
- Marginal Revolution
- Mark Thoma
- Matt McAlister
- Megan McArdle
- Michael Mandel
- Mike Moffatt
- Nicholas Carr
- Paul Kedrosky
- Roger Parloff
More TIME Blogs
Top Stories
- Why Obama Wants Hillary for His 'Team of Rivals'
- Is Mark Cuban Guilty of Insider Trading?
- In Zimbabwe, Mugabe Clings On, But His Power Is Waning
- BlackBerry Storm: The Novelty Wears Off Fast
- John Boehner Talks About the GOP's Plight in Congress
- As Somali Pirates Get Bolder, Policing Them Gets Tougher
- Stressed Out Hong Kong: Now, More Stressed Out
- Ford Might Be the Winner if the Auto Bailout Fails
- Why the Democrats - and Obama - Forgave Lieberman
- 'Saved by Zero': The Toyota Ad That Won't Stop
Top Photoessays and Slideshows
- Photos: The Brazen Pirates of Somalia
- The Politics of Water in Central Asia
- Pictures of the Week
- Mass Suicide at Jonestown: 30 Years Later
- Fade to Black
- Bao Xishun, the World's Tallest Man
- Planet Earth: An Illustrated History
- Prince Charles Turns 60
- Barack Obama: The Best TIME Photographs
- Somalia's Face of Modern Piracy
Tuesday, April 15, 2008 at 11:36 am
Half-informed seems wildly optimistic.
However, fear not..More TAD policies contained herein...
The TAD Mortgage Solution Plan
Whenever a mortgage goes into default, the asset would be transferred to The TAD Agency, with no reimbursement to the lender or the borrower. The TAD Agency would rent out the home to borrowers at market rates and would sell home once they moved out. This would discourage companies from making stupid loans since they are guaranteed 0 return if they do. People already shouldn't be taking out stupid loans, but at least this way they arent homeless. No one can complain that we are creating a moral hazard this way. The TAD Agency would be prohibited from any other economic activity other than disbursing dividends and salary to Mr. TAD.
The TAD Tort Reform Plan
The current process of damages plus punitive continues - however, all punitive damages are awarded 50/50 between the state and the federal government, with a 1% slice for lawyers and a 1% slice to Mr. TAD for patent rights on the idea for 17 years. This eliminates conservative complaints that individuals win the lottery and that overly aggressive lawyers push marginal cases just for settlement while still maintaining financial incentives to do the right thing to companies.
Wednesday, April 16, 2008 at 4:18 am
I like The TAD Tort Reform Plan, but The TAD Mortgage Solution Plan is similar to the way I actually bought my house. The previous owner was unable to meet the mortgage payments and was about to be foreclosed, so some other company acquired the mortgage and rented the house back to them, thus allowing the family to remain in the same house. But they decided to move the next year anyway, so we bought their house and the company received the proceeds to cover the cost of the mortgage plus a fixed profit - the previous owners got anything over that. So the previous owner was able to remain in the house and didn't lose all their equity, that company made a nice 1-year return, the bank didn't have to deal with a foreclosure and auction, and we got a house at a nice price. A win-win-win-win situation!