tag:blogger.com,1999:blog-6837159629100463303.post6996060916053216899..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: The Keynesian monetaristsJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-6837159629100463303.post-64503150892123146582015-09-01T15:12:34.816-07:002015-09-01T15:12:34.816-07:00Way late getting back to this question -- but in a...Way late getting back to this question -- but in a sense, yes. That's why it is a weird methodology ... because you don't have a multiplier m in the case of "not K".Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-79468302271235950562015-07-02T18:49:19.672-07:002015-07-02T18:49:19.672-07:00Thanks, Jason.Thanks, Jason.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-55615249603709713222015-07-02T15:53:26.855-07:002015-07-02T15:53:26.855-07:00Hi Robert,
Thank you for weighing in.
Yes defini...Hi Robert,<br /><br />Thank you for weighing in.<br /><br />Yes definitely, the source of those dividends was the government's risk-bearing capacity. That is probably the best way to put it.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-39369193526790487282015-07-02T15:50:30.550-07:002015-07-02T15:50:30.550-07:00Hi Ken,
Sorry for the delay in getting back to yo...Hi Ken,<br /><br />Sorry for the delay in getting back to you -- I had to think about it a bit. In the framework I've put together, futures markets are not necessarily reliable. Given "fundamentals" -- i.e. some kind of objective state of the world (in oil futures markets, the actual quantity of oil being extracted ostensibly exists and could in principle be measured), markets have a tendency to represent that allocation information fairly well (too much oil, lower prices; too little, higher prices). In that case, I'd say the information in the oil allocation demanded approximately matches the information in the allocation supplied.<br /><br />By information, I mean the number of bits required to describe a given allocation -- in the simple case of distributing 0 or 1 cars to 10 people, you need 10 bits and a given distribution can be mapped to a binary number like 1010011101. For oil, imagine it as barrels of oil distributed over geographic locations on Earth. In information equilibrium, the supply information is equal to the demand information: I(D) = I(S).<br /><br />However, in general I(D) represents an upper bound for I(S): I(D) ≥ I(S). Sometimes information is lost. When we don't saturate that upper bound, we have what Fielitz and Borchardt called non-ideal information transfer. In economics, this means that the price falls below its (information) equilibrium price: p < p*, independent of the fundamentals. The reason? I don't know for sure, but it seems to follow from coordinated human actions (especially panics).<br /><br />An NGDP futures market would be subject to occasional bouts of non-ideal information transfer where the price of a futures contract would drop precipitously -- independent of the fundamentals -- triggering the central bank following the futures market to erroneously pump money into the economy.<br /><br />That is to say it has the potential to make the macroeconomy more unstable, not less.<br /><br />Now this is really just some theory I'm working on that hasn't even gone through peer-review; lots of people think prediction markets are useful -- notably <a href="https://en.wikipedia.org/wiki/SciCast" rel="nofollow">IARPA</a>.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-28561555305332437552015-06-30T11:00:23.602-07:002015-06-30T11:00:23.602-07:00For budget allocation they usually do; for Keynesi...For budget allocation they usually do; for Keynesian macro effects, they have different multipliers. For example a tax cut usually goes to someone who has a job (and more of the total amount goes to people who make more money) while government spending can potentially employ someone who otherwise would have been unemployed. The latter person has a larger marginal propensity to consume than the former, hence the multiplier is larger.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-78000886347775755482015-06-30T10:56:28.918-07:002015-06-30T10:56:28.918-07:00Hi Scott,
I may have mis-read your take on Matt Y...Hi Scott,<br /><br />I may have mis-read your take on Matt Yglesias's post; I thought you showed it to support an argument that it was possible the dividend payments were contractionary -- hence had a non-zero multiplier.<br /><br />(Also, I was using the word "large" in the sense of not close to zero out of habit from physics -- a multiplier of 0.3 would be "large".)Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-16177071256318778982015-06-29T13:38:09.357-07:002015-06-29T13:38:09.357-07:00Jason, I do not believe there would be any multip...Jason, I do not believe there would be any multiplier effect from these dividend payments.Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-89221511796000546762015-06-29T13:37:45.831-07:002015-06-29T13:37:45.831-07:00Jason, I do not believe there would be any multip...Jason, I do not believe there would be any multiplier effect from these dividend payments.Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-83573986232211050662015-06-29T09:56:06.790-07:002015-06-29T09:56:06.790-07:00Why don't tax cuts count as government spendin...Why don't tax cuts count as government spending, at least in the short term? It seems to me that for the government to give, say, $100 per day to families in homeless shelters counts as government spending. Similarly, if it gave $500 to tax filers who earn between $20,000 and $50,000 per year, that would also be government spending. But if it simply reduced their taxes by $500 that would not come to the same thing?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-84561186855967892362015-06-29T01:20:14.647-07:002015-06-29T01:20:14.647-07:00Thanks Jason, I really appreciate your carefully r...Thanks Jason, I really appreciate your carefully reasoned approach.<br /><br />I continue to find the argument between Keynesians and Monetarists tiresome. I believe the market monetarists have developed a better monetary policy, which Keynesians should support, even if they don't buy some of the monetarist ideas. Further, I think prediction-market-driven NGDP targeting would create a practical framework that could enable us to forecast when fiscal stimulus is needed, and maybe even how much. The monetarists should recognize that advantage, and embrace the possibility that the market could determine that fiscal stimulus would be needed for the Fed to hit its NGDP level target, even if they imagine that would never happen in practice.<br /><br />I would be delighted if you could apply your framework to the following question: is prediction-market-driven NGDP level targeting a better monetary policy than current policy, and if so, how much better? It's a difficult question to get a firm grip on, because you have to define "better" (perhaps in terms of hitting the dual mandate, perhaps focusing on periods where a low Wiksellian real rate plus low inflation winds us up in a liquidity trap a lot of the time). And then you have to define "current policy", which is really hard when it seems arbitrary sometimes, but perhaps we could define it as providing as much AD as possible while trying to make sure inflation never goes over 2% for long, while taking into account "long and variable lags" and the limitations of interest rate targeting (i.e., ZLB).<br /><br />What I would love to see is solid analysis of this policy comparison. I feel we have such a huge opportunity to improve monetary policy. What will it take to make this happen? If you are up for it, let me know. I am open to supporting a serious effort here.<br /><br /> -Ken<br /><br />Kenneth Duda<br />Menlo Park, CA<br />kjd@duda.org<br />Kenneth Dudahttps://www.blogger.com/profile/10593455504357461005noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-52758382639363350932015-06-28T15:53:37.670-07:002015-06-28T15:53:37.670-07:00more terminology paleo Keynesian vs new Keynesian....more terminology paleo Keynesian vs new Keynesian. Also In new Keynesian models a balanced budget increase in G and T (T= taxes minus transfers = TA-TR) is expansionary. The difference is that in the most popular new Keynesian model, tax cuts do not stimulate, so the effect of a tax financed increase in G and a deficit financed increase in G are the same. <br /><br />Krugman's post is a useful illustration <br />http://krugman.blogs.nytimes.com/2008/12/29/optimal-fiscal-policy-in-a-liquidity-trap-ultra-wonkish/?_r=0<br />note he doesn't mention taxes at all -- the timing of taxation is irrelevant in the model and the present value of tax revenues must be equal to the present value of G.<br /><br />There is no basis in old or new Keynesian theory to treat the budget deficit (or the cyclically adjusted budget deficit) as the one indicator of the stance of fiscal policy. This is an almost universal practice, but it makes no sense at all.<br /><br />A rigidly micro founded standard new Keynesian should look only at G -- government consumption plus investment. A paleo Keynesian should look at G-cT where c is the marginal propensity to consume and is less than 1. In fact Keynesians of both types (and those who are ambivalent) generally look at adjusted G-T.<br /><br />This makes no sense. <br /><br />Krugman often looks at G and GDP. This data analysis is entirely consistent with his theoretical post (see the link above and note the date -- looking at G and ignoring T was his favored approach in 2008 before the data were collected)Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-8823205523768013772015-06-28T15:43:22.173-07:002015-06-28T15:43:22.173-07:00on notation: in standard macro notation G refers t...on notation: in standard macro notation G refers to government consumption plus investment, that is government purchases of goods and services. Taxes TA and transfers TR aren't included. Your question is should Fannie Freddie dividends be counted like a tax.<br /><br />My view is that the Fannie/Freddie dividends are wealth created by a government program which is kept by the government and not a tax. Without the US government there would be no Fannie nor Freddie (first because they were originally a government agency before Johnson split them and privatized them and second because they would be bankrupt without the rescue). Their profits are produced by the Federal Government then kept -- they are not a tax.<br /><br />I guess the question is what counterfactual are we considering ? Without government intervention Fannie and Freddie would be bankrupt so<br />Under laissez faire, Fannie and Freddie would no longer exist. No one would get their profits. Also the housing industry would be much smaller. The (Bush administration's) rescue (including the dividends going to the Federal Government) made GDP much larger.<br /><br />If the profits were given to the public, the whole operation would be even more expansionary.<br /><br />2008 was extraordinary. However, the idea that the state can create wealth by bearing risk also applies in normal times. It is the basis of John Quiggin's argument against privatization (therefore in favor of partial socialism). lt also has the enthusiastic support of Miles Kimball (google: kimball sovereign wealth fund).<br /><br />I can't find good key words to google my thoughts on the topic. Here is one typical post<br />http://angrybearblog.com/2011/05/how-to-solve-many-problems.htmlRoberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-18015139521911873952015-06-28T13:19:59.665-07:002015-06-28T13:19:59.665-07:00I see now your seignorage/created value argument.....I see now your seignorage/created value argument...it is interesting, I guess it depends on the timing, if the government grew money on farms and let the local townspeople use it as currency for a while before coming into town to collect it, it seems like an empirical question what would be the effect...i'm not willing at the moment to consider the ricardian equivalence vs underwater homes...LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-86400088239910450152015-06-28T12:47:03.133-07:002015-06-28T12:47:03.133-07:00So are you saying that monetarists are trying to s...So are you saying that monetarists are trying to show that P(m ~ 1 | not K) is large?Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-25436408796800612612015-06-28T12:16:15.646-07:002015-06-28T12:16:15.646-07:00Great fun Jason. I love this back and forth.Great fun Jason. I love this back and forth.Tom Brownhttp://www.google.comnoreply@blogger.com