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

Why Economists Don’t Understand Accounting, or Business

I just searched Harvard, U Chicago, and a few other top econ departments’ course offerings and major requirements. The string “account” barely appears. Chicago says quite explicitly: Courses such as accounting, investments, and entrepreneurship will not be considered for economics elective credit. Much less requirements! No wonder so many economists: • Have such profound misunderstandings […]

How Accounting "Constrains" Economics

There’s been a running discussion of this on various blogs (sorry if I missed linking some!), inflated simultaneously by Krugman and by magisterial and mysterious commenter JKH’s “paradigm riff,” here. That discussion has brought me to the following conclusions. Assuming you have a coherent and accurately representative System of National Accounts*: • Accounting, and accounting […]

Full-Reserve Banking, the "Right" to Earn Interest, and "Financial Repression"

Nick Rowe replies to Richard Williamson re: full-reserve banking (emphasis mine): The key reading here (even though it appears to be about a different subject) is Milton Friedman’s “The optimum quantity of money”.Foregone nominal interest payments is a tax on holding currency…. 100% required reserves mean you impose the same tax on chequing accounts … […]

Full-Reserve Banking and Loanable Funds

Richard Williamson asks a sensible and straightforward question: If, as Modern Monetary Theorists propose, banks’ reserve levels put no significant constraints on their lending, why don’t we have 100%-reserve banking — and presumably no runs on banks as a result?First an explanation — I hope simple, clear, and generally accurate (if simplified): Say you start […]

Social Security: The Elevator Pitch

• Since Social Security started it has always brought in more money than was spent. It contributes a surplus to the total federal budget. That’s true today and will continue for quite some time.• The extra revenue needed to make SS solid far beyond the foreseeable future (75 years) is tiny: 0.6% of GDP.• A […]

Why This Time Is Different

A while back I pointed to (and demonstrated with not very pretty pictures) Randall Wray’s rather stunning observation: every depression in American history was preceded by a large decline in nominal federal debt. And I puzzled about why this wasn’t true of our latest little…event:   We saw a decline leading up to 2000, but […]

Machines Replacing Humans: They Shoot Horses, Don’t They?

Eric Brynjolfsson and Andrew McAffee have a new Kindle instant book out, Race Against the Machine, that very nicely describes the issues related to technological unemployment. It’s well-written, content-packed, cogently argued, usefully hyperlinked, and well worth the $3.99 they’re asking.But I think there’s one crucial topic they don’t address, highlighted by the following.They deliver a […]

Does Government Debt Impose a Burden on Future Generations/Periods/People? #12,143

I think (after a lot of effort) that I’ve internalized Nick Rowe’s modeling of this question (follow links from here) pretty well conceptually. His answer is Yes. There have been thousands of posts and comments across the blogosphere since Nick took Krugman to task on the issue a couple of weeks ago, and Nick has […]