January 29, 2007 has been declared Milton Friedman day. To add balance to the day, I am posting the following article on Monetarism. It draws on an earlier article, “Milton Friedman: The Great Conservative Partisanâ€, which provides a fuller survey of Friedman’s work. Readers may also want to visit www.Maxspeak.com that has an e- colloquium on Friedman. (more…)
2006 was the year that oil prices came close to breaching eighty dollars per barrel. This was despite the fact that there were no significant supply interruptions and oil demand actually fell in industrialized countries. That raises the question of what caused the spike. (more…)
Deep thinking involves going to the root of ideas, analyzing core assumptions and the logic upon which arguments are built. In a sense it is analogous to the Research component of R&D. Research represents deep thinking, while Development takes the product of that thinking and turns it into something that can be marketed profitably. In like vein, physicists distinguish between pure and applied physics, while economists distinguish between theory and policy. (more…)
It’s baaaaaack! After briefly disappearing in the late 1990s, economists have again revived the twin deficit hypothesis that asserts government budget deficits are the primary cause of trade deficits. Worse than that, some new Democrats and liberal commentators have also signed on to the “budget deficits cause trade deficits†argument, especially regarding the trade deficit with China. Take Nicholas Kristof in the New York Times (April 23, 2006): (more…)
MEMO
TO: Progressive Presidential Candidates:
RE: Framing a Winning Economic Policy
FROM: Thomas I. Palley
The unbalanced U.S. boom that has followed the 2001 recession provides a real window of opportunity for progressive Democrats to reverse the laissez-faire extremism of the last 30 years. This window may open still wider if the economy suffers a recession in the next two years (The Next Recession ). If progressives are to take full advantage of this opportunity, they will need a new economic policy frame. Here’s a suggested road map. (more…)
World asset prices have been booming for the last five years, with many bourses setting new record highs. Along with record real estate values, this has created fears of a global asset price bubble. Now, MIT’s Ricardo Caballero has come up with the proposition that prices are rationally up because of a global shortage of financial assets, and there is little reason to worry. Close inspection reveals his analysis to be unpersuasive on both the facts and the merits, and it also carries dangerous policy implications. (more…)