Category Archives: Macroeconomic policy

Explaining Why Federal Deficits Are Needed

Why you should expect and applaud federal deficits.

Former BIS Chief Economist Warns of Massive Debt Defaults, Need for Debt Jubilee; Fingers Europe as First in Line

Even though the former chief economist of the BIS calls for a debt jubilee, it’s only part of the medicine needed to get the economy out of the ditch.

Ann Pettifor: Why Radical Monetary Policy Failed in the UK

The failure to use fiscal policy in tandem with monetary policy means that the timid and short-sighted private sector has lacked confidence to ratchet up investment in productive, income-generating activity – as opposed to speculative activity.

Investment Manager GMO Debunks Mythology of “Sound Finance,” or Deficit Hawkery

Yves here. Sometimes it is best to let things speak for themselves. In that spirit, I am embedding a very important paper by the well-respected investment management firm GMO which debunks the tenets of “sound finance,” meaning the claim that governments need to balance their budgets. I expect to be referring to it regularly, particularly […]

The Heavy Price of Economic Policy Failures

Why economic failures argue for the need for more democratic control over policy, or at least the ability to cut the power of institutions that get it wrong.

Eurozone Delays and Half Measures

Are the eurozone’s continuing woes the result of its incomplete construction or because of policy errors in responding to the crisis?

Mathew D. Rose: Now It Is Poland’s Turn

Germany is very upset that Poland has voted in a populist, Euroskeptic, anti-austerity government. And Germany is particularly unhappy that the new regime is increasing its control over public media….which Germany already has in place.

Labor Market Policy: Parts of the Picture are Missing

The standard empirical evaluations of labour market policy only consider the direct effects of single programmes on their participants. This column argues that this fails to capture important aspects of real-world labour market policy – policy regimes and strategies. Using Swiss data, it employs a novel empirical approach that concurrently examines the effects of supportive and punitive policies (‘carrots’ and ‘sticks’). Policy regimes are shown to exert economically relevant effects, and accounting for these effects is crucial when designing labour market policy.

Medieval Champagne Fairs: Lessons for Development

History does hold lessons for economic development, and one of them is that public-order institutions are crucial – for good or ill.

The Sneaky Way Austerity Got Sold to the Public Like Snake Oil

How a budget approach cloaked in the aura of science and technical jargon became a tool for promoting austerity.

Randy Wray: Debt-Free Money and Banana Republics, Part II

More discussion of the problems with the “debt-free money” construct, to the extent that it can even be called a construct.

Volatility and Reforms: The Overlooked Virtues of Economic Uncertainty

The Great Recession highlighted the prominent role that economic uncertainty plays in hindering investment and growth. This column provides new evidence that economic uncertainty can actually play a positive role by promoting the implementation of structural reforms with long-run benefits. The effect appears to be strongest for countries with poorly informed voters. These findings suggest that times of uncertainty may present an opportunity to implement reforms that would otherwise not be passed.