Sayonara
10 September 2010It used to be claimed that the reason that so many Japanese lived to great age was distinctive diet and filial respect.
I'm not sure of the extent to which what the Japanese eat can account for the fact that, now, over 230,000 Japanese reported to be a hundred or more years old have gone missing, but filial attitudes seem to have played a rôle of some sort.
Completely off-topic, I invented a joke and no one is laughing. I'll spring it on you and hope you'll enlighten me as to where I've gone wrong:
Q: How many neo-Keynesians does it take to change a lightbulb?
A: Print more money.
The cheap answer is, of course, that we've already been confronted with the joke.
Now, since I'm actually an economist, I have to be a bit more serious about the matter.
While the sort of Keynesianism that gets labelled as in most American beginning and intermediate college courses is indeed Neo-Keynesianism, I don't think that Neo-Keynesianism actually has very many adherents, even as a share of thse who identify as Keynesians of some sort. I think that New Keynesianism is far more popular. (And it's perhaps worth noting that Samuelson, one of the core Neo-Keynesians, ultimately conceded a lot to the Post-Keynesians.) And what's being pushed by wonks and journalists with hand-waving invocations of Keynes is really just a muddle.
(Neo-Keynesian models continue to be taught to undergraduates because they are much easier to present than alternative models. For my part, I think that a more satisfactory approach would be to offer macroëconomics courses that present less material, and count for fewer hours, but in which the material were better founded. The insistence on teaching distinct macroëconomics courses to undergraduates is largely a carry-over from an era in which Neo-Keynesianism was hegemonic in America. Not only were the courses separate, but macroëconomics was often taught before microëconomics, in ostensible demonstration of Keynes's claim that macroëconomic theory need not be founded on microëconomic considerations.)
I'm not aware of a Keynesianism of any sort which regards expansion of the money supply as a panacea. (Meanwhile, there are many serious economists whom I would not label , with or without any prefices, who advocate expansion of the money supply under some circumstances, and a subset of these would even go so far as to adovcate such an expansion to bring about an over-all increase in prices.) It might be more apt to associate Keynesianism with expanded rôle for the State, at least in Hard Times:
The problem here, though, is that the victims and other opponents are going to feel too aggrieved to laugh; and, if you wait too long, the programmes will have failed and proponents will regard discussion as in poor taste, unless it is to argue that the programmes did the best that might be done without even more spending.
Well, perhaps I used the neo label a bit hastily. But I have found it interesting that not even half of the first stimulus has been spent while new-Keynesians seem to be screaming for more. Honestly, I'm perplexed. There is little to no evidence that the half of the first stimulus that has been spent has done anything at all. Empirically, what little change we've seen could be attributed to a number of factors that have nothing to do with money supply.
In other words, it hasn't worked very well for Japan, either.
I realize that this entire episode will later be written by historians, and perhaps by the next Keynes or the next Hayek in some form. But I find it more than ironic - perhaps bordering on ridiculous - that both would've been entirely frightened by why we have yet to see; evidence of inflation. Frankly, it is scaring the hell out of me. And it led to the invention of this joke.
To wit: The Government was implicit in causing the housing bubble by encouraging lenders to loan money to people who were likely unable to make the payments. The housing bubble finally bursts which causes - along with other factors - a deep recession. That same Government prints a lot of money and floods the market. There are no visible signs of inflation, nor any visible signs of recovery.
And there are some that claim the answer is to print more money?
Color me confused.
Well, you're still equating an increase in state spending with money; whereäs either can be effected without the other (and, at least in the short run, spending can be increased by unmonetized borrowing), &c. What is clear is that many of the New Keynesians believed in an increase in state spending.
As to calling for more spending, part of that stems from a perfectly sincere belief of some in their models; if the fix doesn't work, they are truly persuaded that the underlying problem was deeper than they thought. Others, however, use such calls to insulate themselves from evident failure, by insisting on increases ultimately beyond political possibility.
Disentangling New Keynesians from wonks, polticians, and bureaucrats may be difficulty and only imperfectly possible, but it's important not to treat them all as just one big wad. There are New Keynesians who would be quite willing to acknowledge the culpability of the state in the housing bubble. The conclusion of some of these would be that the state got us into this mess, but that it also happens to be the means by which we can best be extracted.
As to those who indeed believe in more money:
Bear in mind that the money supply is far larger than the monetary base, as a consequence of fractional reserve banking. In times of recession, with projects collapsing (or not being replaced by new projects as they come to an end), in the absence of money, the money supply typically contracts. The Fed's printing increases the base, but that may not be sufficient to off-set things that happen down-stream. (The Fed does other things, such as adjusting reserve requirements and the Discount Rate, which affect the down-stream process as such.)
There is also here an issue of the average frequency with which money changes hands, which frequency is unfortunately call . By some accounts, velocity is technologically determined and otherwise stable in the face of stable prices; by other accounts, it is significantly affected by income. In either case, prices or income or both must move up or down with velocity (whether as cause or as effect).
From the perspective of those who believe that money would be helpful, the lack of inflation strongly suggests that the monetary base is not being increased sufficiently to offset forces acting to contract the money supply or to reduce monetary velocity.
Another thing to recognize is the difference between advocacy and desire. When Bernanke promises to fire-up the printing press, this may be simply an attempt to shore-up confidence on the part of those who invest faith in such things; Bernanke himself might be far less sanguine about what the press itself can otherwise do.
Remind me never to tell a joke in a room of economists.
If you don't tell jokes, then you won't charm any hot babes in that room — and, yes, there is the occasional hot-babe economist, though not nearly as many as self-evaluations might indicate.