Paul Krugman

Paul Krugman @paulkrugman

I'm not entirely sure about the politics of doing it this way, and don't claim any special insight. I can sort of see the advantages to Rs of not seeming totally obstructionist, and to Biden of seeming to reach out. But isn't this a zero-sum game? Hard to parse 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

So, trying to figure out the infrastructure deal. Three obvious points: 1. It's a big deal 2. It's also wildly inadequate, especially bc no investment in families 3. #2 may not matter, bc Ds clear that there will also be a reconciliation bill that fills the holes 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

What? Punishing the unemployed doesn't create jobs? Next you'll tell me that cutting taxes for the rich doesn't create growth. https://t.co/Nz87Gmxbmr — PolitiTweet.org

Paul Krugman @paulkrugman

It also reduces the likely short-run multiplier on the American Rescue Plan, which included a lot of state and local aid; governments that aren't cash-strapped won't spend that money fast, hence less risk of overheating 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

This presumably means that S&L austerity won't be the drag it was after the Great Recession 2/ https://t.co/IidNQwYlqY — PolitiTweet.org

Paul Krugman @paulkrugman

The pandemic slump was very different from the Great Recession in many ways. One is that state and local revenue has held up very well 1/ https://t.co/PRwYjODJNO — PolitiTweet.org

Paul Krugman @paulkrugman

A bizarre and troubling event: Andreu Mas-Colell, an eminent economist, may face huge fines for his alleged role in Catalonia's referendum on independence. A who's who of international economists has written in his defense https://t.co/ytRa5MBQnG — PolitiTweet.org

Paul Krugman @paulkrugman

The already weak case for worrying about stagflation just got a lot weaker https://t.co/QJto7x92RT — PolitiTweet.org

Paul Krugman @paulkrugman

Yes. Also, the surprisingly good condition of state and local finances means a slower effect of ARP aid, which isn't playing the expected role of averting drastic immediate cuts — PolitiTweet.org

Paul Krugman @paulkrugman

For example, the distinction between volatile and non-volatile prices: https://t.co/cUrKdfAljO — PolitiTweet.org

Paul Krugman @paulkrugman

And it has arrived! Now I can do light statistical work in style https://t.co/6GjHeYqWYP — PolitiTweet.org

Paul Krugman @paulkrugman

Indeed. Health spending was supposed to soar bc of aging population, expansion of coverage, and historical tendency to grow faster than GDP. Actual rise in spending relatively modest — PolitiTweet.org

Paul Krugman @paulkrugman

I never expected the supply-chain issues to be more than transitory, or the Fed to be irresponsible. But if you were worried about either possibility, this past week should have reassured you. Runaway inflation isn't coming 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

But last week's FOMC statement plus the "dot plot", while not extremely hawkish, suggested an institution aware that inflation might become a risk and willing to act if necessary 6/ https://t.co/oQzEpPDPJ8 — PolitiTweet.org

Paul Krugman @paulkrugman

The other inflation story was that the economy would overheat as a result of big fiscal stimulus, and that the Fed — dead set on maximizing employment — would ignore the warning signs and let inflation get embedded. 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

Excellent CEA post explaining why supply-chain problems look temporary 4/ https://t.co/JdFLTpf092 — PolitiTweet.org

Paul Krugman @paulkrugman

Timberrrrrr! (Spot lumber prices) 3/ https://t.co/VVg2zkWfZ1 — PolitiTweet.org

Paul Krugman @paulkrugman

Story #1 said that the Fed's intellectual framework — which makes a key distinction between volatile commodity prices and inertial "core" inflation — was all wrong, and that things like soaring lumber prices were harbingers, not transitory shocks 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

So, while I was away the case for inflation panic died. Or actually the cases, plural. For these past few months there have been two inflation stories, both crucially requiring a key failure on the part of the Fed. Now we know both stories are wrong 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Not saying that Friedman was a bad economist: he was, in fact, a great innovator. But hard now to see him as being remotely in the same league as, to take a nonrandom example, Keynes 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

By the way, Tobin was skeptical of the natural rate too — oh, and foreshadowed the collapse of the concept of the money supply as a well-defined measure. Funny how Tobin, not Friedman, appears to have won the long-run argument 6/ https://t.co/EI0FU0ghxx — PolitiTweet.org

Paul Krugman @paulkrugman

The crown jewel of Friedman's work, the natural rate hypothesis, has also fallen on hard times, though not to the same extent. It may be true that trying to keep unemployment low eventually leads to accelerating inflation. But not much evidence these past 25 years 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

This doesn't mean that the Fed is powerless: its control of the monetary base lets it move short-term interest rates, and both Romerromer-type studies and Sims-type VARs show that this matters. But M2 doesn't add much if anything 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

James Tobin was right in 1970: to the extent that there was a correlation between monetary aggregates and GDP (there hasn't been much of one in recent decades), Friedman had the causation reversed 4/ https://t.co/eNwlXAyLu8 — PolitiTweet.org

Paul Krugman @paulkrugman

Monetarism — the claim that monetary aggregates like M1 or M2 drive the economy, and that stabilizing them is all policy needs to do — is dead, and should never have had the influence it did. 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Carter talks about the declining influence of Friedman's economic doctrines, but maybe I can add a little, having done some of this myself and also having watched macro evolve over 40 years 2/ https://t.co/3AKEfnqHUJ — PolitiTweet.org

Paul Krugman @paulkrugman

Zach Carter has a characteristically fascinating article on Milton Friedman and his fading legacy. Somehow I never appreciated how Friedman started from right-wing politics, and built a reputation as a technical economist to serve that cause 1/ https://t.co/PGMLSk6rOW — PolitiTweet.org

Paul Krugman @paulkrugman

So let's talk about the Fed, which ... actually, that can wait until tomorrow 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Here's the tour, from Discovery Bicycle Tours — lovely people who provide a lot of support. No winery stay on my version, just a lot of hard but gratifying cycling. Well, and some wine and beer 2/ https://t.co/uWJrexufRq — PolitiTweet.org

Paul Krugman @paulkrugman

And I'm home, after 6 days cycling the Finger Lakes 1/ https://t.co/EfkdZniuZU — PolitiTweet.org