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

GDP and American (Non-)Exceptionalism: Again Some More

Any knowledgeable economist will tell you that GDP (or GDP/capita) is a profoundly imperfect and non-inclusive measure of national well-being.In particular, GDP doesn’t count any work isn’t paid for with money — painting your mom’s house, volunteering for the Rotary Club or your church (David Brooks, are you listening?), caring for your kids and your […]

No: Saving Does Not Increase the Supply of Loanable Funds

Or: It’s The Velocity, Stupid.I got quite a bit of blowback on my recent post suggesting that economists don’t understand accounting. In response I give you Exhibit A: the almost-ubiquitous notion that more saving increases the supply of “loanable funds” — hence that more saving causes or at least allows more investment. (The absolute classic […]

David Frum Savages Charles Murray — And Rightly So

David Frum was excommunicated from the Righties Club a few years back because he insisted on occasionally saying sane and accurate things. He continues that aberrational behavior today in his review of AEI uber-zealot Charles Murray’s new book, Coming Apart: The State of White America, 1960-2010 (which I will not link to here — no […]

A Surfeit of Dearth Revisited: The Global Shortage of Safe Assets

David Beckworth: global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets Really? The U.S. could have just deficit-spent more, crediting people’s/businesses’ checking accounts and thereby increasing the global stock of the world’s safest asset: U.S. dollars. It could (by U.S. law is required […]

What Will Be the New Economic Paradigm?

Matt Yglesias has a great post over at Moneybox (paragraph breaks added): The need for regime change. … The Depression discredited the gold standard and a whole set of related notions. The Great Inflation discredited ideas about the Phillips Curve … We had, until recently, the Great Moderation Consensus that … the Federal Reserve has […]

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 … […]