Relevant and even prescient commentary on news, politics and the economy.

Barro on Keynes Barro and Grossman

Robert Waldmann Robert Barro wrote an op-ed in The Wall Street Journal. The substance of the op-ed is to report an estimate of the Fiscal multiplier 0.8 which is less than one. Thus, according to Barro, a stimulus will partially crowd out of investment, consumption or net exports and not just reduced leisure. Paul Krugman […]

de Long is Too Kind to von Hayek

Robert Waldmann DeLong criticizes the introduction to the second edition of “The Road to Serfdom” On Hayek you prove that Hayek claimed that the UK was on the road to serfdom, you don’t prove that he claimed that it had gone beyond the point of no return on that road, that a U-turn before arrival […]

Welfare Reform "Not a Disaster" ?

Robert Waldmann Pieter Beinart serves up some conventional wisdom in the Washington Post. Unfortunately he is totally wrong, because he hasn’t checked the facts in the past 7 years. Beinart wrote “Older liberals remember …. They also remember the welfare reform debate of the mid-1990s, when prominent liberals predicted disaster, and disaster didn’t happen.”Oh didn’t […]

What’s in the Water in Chicago ?

Robert Waldmann Gary Becker writes (via Lane Kenworthy who is strangely polite in response) As Posner and others have indicated, there appears to have been a huge conversion of economists toward Keynesian deficit spenders, but the evidence that produced such a “conversion” is not apparent (although maybe most economists were closet Keynesians all along). This […]

The Big Bad Asset Bank

Robert Waldmann Is proposing toxic sludge inc with a cooler name, while commenting on Krugman. Krugman writes Bad bank bafflement The idea of setting up a “bad bank” or “aggregator bank” to take over the financial system’s troubled assets seems to be gaining steam. So let me go on record as saying that I don’t […]

Bonaventura Anselm and Kaus

Robert Waldmann What can we learn from really bad arguments ? I think it is useful to examine plainly invalid arguments, because the error in thought which they grossly manifest might contaminate less obviously idiotic contributions to the discussion. A few arguments are so dumb that they have remained fixed in my mind. Most of […]

Optimal Fiscal Policy with a Liquidity Trap and Gridlock

Robert Waldmann I’m still thinking about Krugman’s excellent little model which gives the very clear result that optimal macro policy implies that unemployment is always at the natural rate and so, if the nominal interest rate is zero, the optimal fiscal stimulus should drive unemployment all of the way to the natural rate. Krugman’s model […]

How to Enron a CDS

Robert Waldmann is back to his CDS obsession. Imagine I’m a banker and I have this problem that they tell me I have to mark assets to market. I don’t like that because it makes my stated profits vary and my bonus depends on accounting profits and I don’t like the risk. How can I […]