What has Japan’s “lost decade” to teach us? Even a year ago, this seemed an absurd question. The general consensus of informed opinion was that the US, the UK and other heavily indebted western economies could not suffer as Japan had done. Now the question is changing to whether these countries will manage as well as Japan did. Welcome to the world of balance-sheet deflation. Read more
By Benn Steil
“Many of the most successful economics blogs promote communication within political groupings, not across them. On the web you best build an audience by organising a claque and stroking its prejudices. Extend elaborate courtesy to people you agree with and boorish contempt to those who do not get it. Celebrate exasperation and incivility as marks of intellectual authenticity – an attitude easier to tolerate in teenagers under hormonal stress than in professors at world-class universities” (Clive Crook, FT February 8, 2009).
Two days before Clive’s column appeared, I experienced firsthand the econoblog treatment he describes. On February 6, the FT published an op-ed by me (“Keynes and the triumph of hope over economics”) criticising the tendency of economists to invoke Keynes, rather than logic and evidence, in support of any and all forms of new deficit spending, which are now massed together under the cozy umbrella of “stimulus” – a term that closes discussion by simply assuming the merits it claims. Read more
By Ricardo J Caballero
In all likelihood, political constraints severely limited the ambition and effectiveness of the US financial stability package. Economists need to unite behind relaxing these constraints. Talking lightly about nationalisation, as is increasingly taking place, does exactly the opposite.
There are two types of arguments for nationalisation. One argument is a gut reaction that enough-is-enough and we must stop transferring resources to Wall Street’s “crooks and oligarchs.” This reaction only adds fuel to the fire and exacerbates self-destructive mob-mentality behaviour. Read more