tag:blogger.com,1999:blog-6837159629100463303.post1811655080995894927..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: Scott Sumner doesn't understand other macro modelsJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-6837159629100463303.post-41808887942420875412015-11-19T20:25:29.575-08:002015-11-19T20:25:29.575-08:00John, I appreciate your vote of confidence. I'...John, I appreciate your vote of confidence. I'm not making any guarantees, but I'll see what I can come up with. (c:<br /><br />I'll think about your suggestion too.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-32592014618942808452015-11-19T18:29:07.972-08:002015-11-19T18:29:07.972-08:00Tom,
I would love to have one of those t-shirts....Tom, <br /><br />I would love to have one of those t-shirts. Perhaps there should be something about the non-concrete-steppes people somewhere on the shirt too.John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-57773154310009293172015-11-19T18:24:48.634-08:002015-11-19T18:24:48.634-08:00"Justifying? Appeal to motive is a low, low, ..."Justifying? Appeal to motive is a low, low, form of argumentation. If you trust your team with the fiscal treasury, then you tend to view monetary policy as impotent and unnecessary. Vice versa. Let’s keep it clean."<br /><br />You fail to understand the use of 'justify' in context. I'll leave you to figure exactly why you're wildly, horribly wrong in your reading of my comment by paying attention to context clues.<br /><br />"In some ways, the ZLB increases the degrees of freedom for a central bank"<br /><br />I don't even know what you are trying to mean with this. I'll assume you're suggesting that the zero lower bound makes monetary policy more effective. The data clearly disagrees with you there. Look at the monetary base to price level ratio or the velocity of the monetary base, you'll find that monetary expansion has resulted in a much less than normal effect on inflation since the US hit the zero lower bound.<br /><br />"This word zero, you keep using this word. I do not think you know what it means."<br /><br />I use the word "zero" in conjunction with the words "lower" and "bound." I do not think you know what zero lower bound means, maybe you should read what Jason has written about it. Perhaps I should just start saying liquidity trap, then people would understand that the problem is that the interest rate on short term safe assets (e.g., 3-month treasury bills) is about equal to the interest rate that the central bank pays on reserves, not that the central bank's policy instrument is set exactly equal to zero.<br /><br />"Seriously, the problem is a pathological fetish for reifying interest rates. Interest rates are only prices. Consider that the Fed has a monopoly on the numeraire. That’s the only thing that matters. The Fed frets and toys with the interest rate. Know that rate setting is but a trivial and obscure sandbox play compared with the dreadful awesomeness of the Fed’s base money monopoly."<br /><br />This is irrelevant to my argument about the zero lower bound. It's not that rates can't be cut further, it's that increases in the monetary base at the zero lower bound (in a liquidity trap) are irrelevant. The Fed can increase the monetary base all it wants in a liquidity trap (think QE), but that increase shouldn't do much at all.<br /><br />"We tend talk of Fed policy and nominal GDP as if they were separate, like energy and mass were once separate."<br /><br />That's because they are separate things. In fact, (at least in non-liquidity trap conditions) it seems that nominal GDP is just a function of the monetary base and the nominal interest rate, but when money and bonds are perfect substitutes, monetary policy becomes exceptionally ineffective. Refer to the data and models of money demand (e.g., Money in the utility function or cash-in-advance) for evidence.<br /><br />"interest rates are bad indicators of policy stance"<br /><br />I agree. I suggest you wait until I actually suggest otherwise before you say anything. I suppose it's alright to assume that I fit directly into the 'New Keynesian party line' simply because I disagree with Nick Rowe and Scott Sumner on something, isn't it?<br /><br />"Oh, it’s scientific, Jerry."<br /><br />I suppose that, in saying this, you are trying to justify (look, there's that word used in a way that roughly means 'defend by means of argument' in this context) assuming the facts and modeling to conform to those assumptions. I don't quite think you understand the gravity of engaging in this type of "science."John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-61673220580775874132015-11-19T14:15:40.749-08:002015-11-19T14:15:40.749-08:00John,
Justifying? Appeal to motive is a low, low,...John,<br />Justifying? Appeal to motive is a low, low, form of argumentation. If you trust your team with the fiscal treasury, then you tend to view monetary policy as impotent and unnecessary. Vice versa. Let’s keep it clean.<br />ZLB? In some ways, the ZLB increases the degrees of freedom for a central bank – buy gold, say, at $10,000 an ounce, until NGDP wakes up (the Fed does carry gold on its balance sheet, you know). <br /><br />Try hitting gold’s safe asset yield. Now that you’re thinking, has anybody ever really hit absolute zero? This word zero, you keep using this word. I do not think you know what it means.<br /><br />Seriously, the problem is a pathological fetish for reifying interest rates. Interest rates are only prices. Consider that the Fed has a monopoly on the numeraire. That’s the only thing that matters. The Fed frets and toys with the interest rate. Know that rate setting is but a trivial and obscure sandbox play compared with the dreadful awesomeness of the Fed’s base money monopoly.<br /><br />Assumed a model? No – somebody gives us a hypothetical identity, based on gedankenexperiment (say E=MC2), which explains the world nicely, given certain assumptions (interest rates are bad indicators of policy stance). <br /><br />We tend talk of Fed policy and nominal GDP as if they were separate, like energy and mass were once separate. Assume rates are moot, just as the speed of light is constant, and they become equivalent: the monetary base becomes NGDP. Oh, it’s scientific, Jerry.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-68045581803878705302015-11-19T13:31:18.606-08:002015-11-19T13:31:18.606-08:00Jason,
Phlogiston could equal fire, so what? If t...Jason,<br />Phlogiston could equal fire, so what? If the entire world was debating the current state of phlogiston, and speculating huge resources over the future of phlogiston, and listening to the Delphic priests of phlogiston; then I would welcome someone coming along and saying “It’s Fire.” He would be as Prometheus to the world.<br /><br />Theory or definition? This is what you worry about? Consider perhaps that a foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do. He may as well concern himself with his shadow on the wall (that’s you, when you open a piece with “Scott Sumner”.)<br /><br />Bernanke? Yglesias? Good, then. More, please.<br /><br />Failure to hit inflation targets signifies central bank impotence? Wow. You have an institution that has 100% control over every unit of currency – the Fed is a monopoly, look it up – and yet you say that it cannot control the supply of said unit. I’d lightly suggest to you (so as to not disrupt this fragile state of reality) that this is incorrect. Indeed, the Fed could create any nominal price it wishes. <br /><br />Jason, central banks control the supply of the numeraire, against which everything is valued in nominal terms. That’s the central bank’s entire porpoise. Consider that: simply because you cannot see vast powers does not mean that they do not exist. They simply are not revealed to you. Or, more likely, your perception is simply the reflection of that power: vast power defines reality "by definition".<br /> <br />So you’re a bit stuck. Does the Fed control the numeraire, or does it not? <br /><br />On one hand, seven guys at the central bank could decide to buy every asset in existence, and hand out numeraire in exchange. On the other, if you’ve mobilized hundreds of thousands of voters, your team just possibly might get some sort of fiscal deficit. Which hand is more powerful, again?<br /><br />I think that what Scott brushes up against in RBC is that there is nothing R about it: it’s all nominal in his world (if he had the boldness to say) and, charitably, I think that this is a very good and useful notion.<br /><br />Krugman is a talented sophist, with little mini-me Smith grinning along. Epistemically closed, wrapped in tautology, and stinks after a few days. That’s why he is given space inside the NYT. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-78962733401951621272015-11-19T11:54:23.192-08:002015-11-19T11:54:23.192-08:00I've searched for quoted snippets of phrases u...I've searched for quoted snippets of phrases under his "Uncategorizable" ... just to confirm who I think that is, but I've never found them. I assume they must have been deleted by Noah. However, I think the background image <a href="http://www.morganwarstler.com/" rel="nofollow">here</a> serves as confirmation of my suspicions... Lol... I assume he picked that based on Noah's post.<br />Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-49731894675350050392015-11-19T11:36:02.324-08:002015-11-19T11:36:02.324-08:00OK, I understand. Thanks!OK, I understand. Thanks!Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-38851903835083752492015-11-19T11:14:33.175-08:002015-11-19T11:14:33.175-08:00OK, I'm thinking literal concrete steps leadin...OK, I'm thinking literal concrete steps leading everywhere... as far as the eye can see. Jason with a fur hat atop a horse front and center. A yurt made of concrete blocks in the background. What am I missing? Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-69907379613782897462015-11-19T10:46:43.833-08:002015-11-19T10:46:43.833-08:00Without that specific solution, you can't say ...Without that specific solution, you can't say what the RBC counterfactual is.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-72861179344438029502015-11-19T10:45:59.366-08:002015-11-19T10:45:59.366-08:00This comment has been removed by the author.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-10698761880250277102015-11-19T10:44:07.696-08:002015-11-19T10:44:07.696-08:00That is to say RBC has specific inflation response...That is to say RBC has specific inflation responses to productivity shocks and supply shocks. You can't say RGDP = X and NGDP = Y without working the model out.<br /><br />The solution with NGDP on trend is either nothing happens or some specific combination of supply and productivity shocks.<br /><br />Another way to say it is that Scott's RBC model isn't calibrated.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-15101723539194787152015-11-19T10:38:00.456-08:002015-11-19T10:38:00.456-08:00Bill, I think Jason is a proud "denizen of th...Bill, I think Jason is a proud "denizen of the concrete steppes"... maybe we should have some T-shirts made or something. I have a bit of an artistic flair that's getting kind of rusty, so I'd sign up for the graphic design on that... ...in keeping with the theme, I'm thinking literality (new word?) is the key.<br /><br />I recall a Mad Magazine article from when I was a kid that showed how kids imagined newspaper headlines in their heads... my favorite was "Guerrillas Attack on <a href="https://lh3.googleusercontent.com/proxy/Ex_U61NyAinUijrV_EBJrIuO01IzUSUOo__QUKXOFkO2rMy3j5HFnqWud5dRyYKYoagtP0U8rkLCdgVc-BJBUvuJlMXg43pkZrCir3HVNogqLQ21eqy3ZzFL6AxQ64V_JKyjuDdfIultrST_BSQnmRmoJscgfKNGoGLcpV3C8BhYN1MIHDzz6PjIDTzj5uY=w506-h339" rel="nofollow">Plain of Jars</a>" ... and the bubble above the kid's head literally showed an army of angry gorillas, armed with primitive clubs, running (as if attacking) across a plain of glass jars (like the kind you use for jam). So I'm thinking something like that.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-35017761289555572782015-11-19T10:29:32.504-08:002015-11-19T10:29:32.504-08:00W-dot is wage growth.
"RBC" counterfact...W-dot is wage growth.<br /><br />"RBC" counterfactual assumes the Fed can keep NGDP on target (i.e. Assumes market monetarist model).Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-62786744796137505132015-11-19T10:23:45.438-08:002015-11-19T10:23:45.438-08:00BTW, I read your "unrate" as the unemplo...BTW, I read your "unrate" as the unemployment rate, but I wasn't sure, so I spelled mine out. Also I'm embarrassed to say I don't know what "W-dot" is, so I skipped that.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-60658974677966914882015-11-19T10:13:32.454-08:002015-11-19T10:13:32.454-08:00Jason, thanks for your reply! You write:
"Sc...Jason, thanks for your reply! You write:<br /><br />"Scott says in the quote above NGDP growing at 5% (because of CB) implies RGDP "would have kept growing (although ... slowed slightly)"."<br /><br />But I read that as Scott's MM counterfactual. I didn't think that had anything to do with his idea of an RBC counterfactual wrt RGDP. To turn that into an RBC counterfactual (in the following sentences) he lets RGDP continue to drop as if it was the non-counterfactual case. I can see having a problem with that as an RBC counterfactual, but I don't get that sense from your response above... it sounds to me like you're saying that bit you quoted is Scott's idea of an RBC counterfactual rather than an MM counterfactual.<br /><br />Let me summarize how I read Scott in a table:<br /><br />Pre-2008 (no recession):<br />NGDP-dot = 5%<br />RGDP-dot = 3%<br />Inflation rate = 2%<br />Unemployment rate = 5%<br /><br />Post-2008 (recession: i.e. what actually happened w/ made up #s):<br />NGDP-dot = -5%<br />RGDP-dot = -7%<br />Inflation rate = 2%<br />Unemployment rate = 10%<br /><br />Post-2008 Counterfactual according to Scott under MM:<br />NGDP-dot = 5% (Fed acts to keep this on trend which has real effects)<br />RGDP-dot = 2.5% (slight drop due to "supply-side reasons")<br />Inflation rate = 2.5% (slight increase)<br />Unemployment-rate = 5.25% (slight rise due to "supply-side reasons")<br /><br />Post-2008 Counterfactual according to Scott under RBC, but with MMist constrolling the Fed to keep NGDP on trend:<br />NGDP-dot = 5% (MMist Fed is keeping this on trend)<br />RGDP-dot = -7% (unaffected by MMist Fed)<br />inflation rate = 12% (this should have been 10% to match Scott, oh well)<br />Unemployment rate = 10% (unaffected by MMist Fed)<br /><br />OK, where did I go wrong?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-38894224966201516642015-11-19T09:42:37.661-08:002015-11-19T09:42:37.661-08:00Todd, "cult of MMT?" ... did you mean &...Todd, "cult of MMT?" ... did you mean "cult of MM?" ... MMT is a different kind of cult wrt fiscal stimulus, isn't it? Like the polar opposite perhaps.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-418469551170373442015-11-18T22:32:05.792-08:002015-11-18T22:32:05.792-08:00Nice rant, Jason!
It seems like a theory made up ...Nice rant, Jason!<br /><br /><b>It seems like a theory made up solely for the purpose of justifying not doing any fiscal stimulus</b><br /><br />You have concretized exactly what bugs me about the cult of MMT.Todd Zorickhttps://www.blogger.com/profile/10976192775890569092noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-77323926176951136062015-11-18T21:22:18.831-08:002015-11-18T21:22:18.831-08:00"It seems like a theory made up solely for th..."It seems like a theory made up solely for the purpose of justifying not doing any fiscal stimulus."<br /><br />That is the best explanation of Sumner's antics that I have ever read.<br /><br />The problem is that Sumner refuses to explain why anyone should believe that central banks can control NGDP at the zero lower bound besides asserting that it can. I think I've asked him directly at least three times now and he hasn't even tried to give a reasonable answer yet.<br /><br />Nick Rowe is a lot more reasonable most of the time, but I'm not sure how he justifies the ability of central banks to control NGDP at the zero lower bound (probably something about buying all the assets in the universe, now that I think about it, but, of course, that ignores the result of most monetary models where money demand is indeterminate when money and safe assets earn the same interest rate).<br /><br />"Instead, he leaves (bright young things like you) the glorious job of developing causal theory."<br /><br />So, in other words, Sumner has assumed a result he would like a model to have and tells everyone else to come up with the math to support it. Why doesn't anyone understand that this is exactly the opposite of science? A good scientist doesn't first come to a conclusion then try to find evidence to support his or her conclusion. Rather, a good scientist looks at the evidence and then arrives at a conclusion. I guess everyone has forgotten elementary level science (and sane epistemology).<br />John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-52117667681743284762015-11-18T20:57:44.233-08:002015-11-18T20:57:44.233-08:00"If the mainstream view is that fiscal policy..."If the mainstream view is that fiscal policy is ineffective away from the zero lower bound because the central bark offsets it by monetary policy, that is an admission that fiscal policy would be effective if the central bank did not interfere with it. Or, as economists like to say, fiscal policy is effective, ceteris paribus."<br /><br />Yes. Government consumption has real effects in mainstream (RBC and NK) models. The whole monetary offset argument assumes that central banks care about reversing the real (or supply-side, if you like that better) effects of fiscal policy. The models that they refer to suggest that the central bank would not want to interfere because fiscal policy is actually changing flexible price output which is what the central bank is supposedly targeting. <br /><br />"Central bank targets 2% inflation. Inflation falls to 1%, and a stimulus package is put in place that raises inflation to 2%.<br />The central bank can only offset that if it lowers its target to 1%."<br /><br />That argument seems to come up a lot. Fiscal stimulus has no nominal effects in RBC and NK models. Really, what's happening in monetary offset is 1. the government increases spending 2. The wealth effect and the labor-leisure trade-off make the household work more and consume less (so the multiplier is less than one) 3. the central bank doesn't like this (because it's stupid and doesn't want to keep output at its flexible price level - its sole goal) and tightens monetary policy so that consumption falls (which is not consistent with a competitive equilibrium).<br /><br />"the generic "Keynesian" view of the majority of academic economists (even those that aren't Keynesian) is that outside a liquidity trap, monetary policy is optimal for demand management."<br /><br />The reason is because, in NK and RBC models, changing the government spending to private consumption ratio from its optimal level (which is determined by setting the marginal utility of consumption equal to the marginal utility of government spending) reduces utility. Interestingly enough, RBC models suggest pro-cyclical fiscal policy; not because it stabilizes output, but because it helps maximize utility.John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-45278975191986054702015-11-18T17:30:26.216-08:002015-11-18T17:30:26.216-08:00"I realized expectations that aren't summ..."I realized expectations that aren't summed up with a discount factor to infinity can make your model do anything. If the Fed "really wanted" to make NGDP growth 18% next year, it could in Market Monetarism. Just take E[NGDPt+1] - NGDPt = 18%. There you go!"<br /><br />Nick Rowe criticizes those who do not believe in expectations as denizens of the Concrete Steppes. But it is one thing to believe in expectations and quite another to believe that expectations have just exactly the value that your theory needs to work. Then expectations become a fudge factor.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-52292428393956749422015-11-18T17:15:21.460-08:002015-11-18T17:15:21.460-08:00Yep, Bill. That seems like the gist of it. At leas...Yep, Bill. That seems like the gist of it. At least when e.g. inflation is below target. If inflation was on target, then moves fiscal policy would be countered by monetary policy automatically in the AD-AS model framework. Since monetary policy is defined by a target (in this picture), it's can't "not interfere" if fiscal policy were to increase inflation by 1%. The central bank would have to adjust its target to 3% (assuming 2% target originally) to let fiscal policy not be offset.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-65171491015937817372015-11-18T17:04:20.352-08:002015-11-18T17:04:20.352-08:00"Monetary policy = NGDP" is not a tautol..."Monetary policy = NGDP" is not a tautology; it's a definition. And definitions can either be useful or not. However, to me that definition adds as much clarity as saying "phlogiston = fire". The central bank creates or destroys outputiston and that causes NGDP to go up or down.<br /><br />Sumner also goes back and forth between saying that is a definition and saying it is a causal relationship.<br /><br />I wouldn't really care about Sumner's unfalsifiable "theory" ... except that it has been looked into by Ben Bernanke and the Fed and warped Matt Yglesias's mind. If the Fed (or the ECB, or the BoJ) can't meet an inflation target, why the heck should we believe it (they) can meet an NGDP target?Green Lantern-esque willpower? Then why not use it for the inflation target?<br /><br />I'm also a bit upset that I was almost taken in by it until I realized expectations that aren't summed up with a discount factor to infinity can make your model do anything. If the Fed "really wanted" to make NGDP growth 18% next year, it could in Market Monetarism. Just take E[NGDPt+1] - NGDPt = 18%. There you go!<br /><br />It seems like a theory made up solely for the purpose of justifying not doing any fiscal stimulus. It has very little use besides that purpose (if you can name a use for MM besides justifying not doing fiscal stimulus, let me know).<br /><br />Also, let me know my inferential errors and I will correct them!<br /><br />FYI, I do take on Noah Smith every once in awhile ...e.g. here:<br /><br />http://informationtransfereconomics.blogspot.com/2015/05/im-not-sure-noah-smith-understands.html<br />http://informationtransfereconomics.blogspot.com/2015/02/why-do-macroeconomists-think-they-know.html<br /><br />However 1) Paul Krugman is always right, and 2) if you think Paul Krugman is wrong, refer to back to 1).<br /><br />Actually both Smith and Krugman use fairly standard models in their writing. These models may be wrong, but they are usually fairly explicit and not unfalsifiable.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-5835240411657604452015-11-18T16:42:52.758-08:002015-11-18T16:42:52.758-08:00It's one I read again any time I'm feeling...It's one I read again any time I'm feeling a bit uppity to help put me back in my place.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-30639266091711217022015-11-18T16:40:39.489-08:002015-11-18T16:40:39.489-08:00Should have said: "RGDP growth means unemploy...Should have said: "RGDP growth means unemployment does not <b>rise</b>" or "RGDP growth means <b>employment</b> does not fall" above ... typo.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-28727352647806720882015-11-18T16:39:21.886-08:002015-11-18T16:39:21.886-08:00I am not saying "RBC stipulates if RGDP falls...I am not saying "RBC stipulates if RGDP falls then NGDP falls". This is not true of RBC theory. RBC theory stipulates that NGDP is irrelevant to the path of RGDP (and therefore recessions) because inflation can take on any value. Nominal changes do not have any effects except on nominal variables in RBC.<br /><br />Scott says in the quote above NGDP growing at 5% (because of CB) implies RGDP "would have kept growing (although ... slowed slightly)".<br /><br />Unless Scott is giving up Okun's law (maybe he is?), RGDP growth means unemployment does not fall.<br /><br />What do we call a situation where NGDP keeps growing, RGDP keeps growing and unemployment doesn't rise? Well, it's definitely not a recession!<br /><br />Now RBC says when you don't have a recession, there couldn't have been any real factors that would have caused a recession (otherwise those real factors would have caused RGDP to fall and unemployment to rise, ie a recession).<br /><br />Scott seems to want to create a situation where there is a difference between NGDP growth at 5% (and RGDP growth of 3%) in normal times and NGDP growth at 5% (and RGDP growth of 3%) that is avoiding a recession.<br /><br />But how do we know we have avoided a recession if it leaves no trace on RGDP, NGDP or unemployment?<br /><br />Are we avoiding a recession right now? Were we avoiding a recession in 1996?<br /><br />There is no difference between a time that is "avoiding a recession" and a time that is not having a recession ... at least in terms of macro variables.<br /><br />NGDP-dot = 5%<br />RGDP-dot = 3%<br />W-dot = 4%<br />unrate = 5%<br /><br />Are those the macro parameters of an economy avoiding a recession or one not in a recession?Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.com