Rogoff - learning to like inflation

Ken Rogoff has come out strong in calling for higher inflation to get the economy moving. His thought is to move he target to 2-4%. Below is a video from the PBS Newshour where Rogoff is on a panel with Paul Krugman saying the same thing.

Watch the full episode. See more PBS NewsHour.

Krugman on Keynes

For the 75th anniversary of the General Theory, Paul Krugman gave a good talk (called "Mr. Keynes and the Moderns") on how to read Keynes and how Keynes' ideas might be useful to policy makers now. It is available here and here.

Health Care - A International Comparison Chart

Paul Krugman has a good chart showing the quality and cost of health care around the world.

Charlie Rose - Krugman, Walker & Rogoff

Charlie Rose has interviews with Paul Krugman, David Walker and Ken Rogoff about the the current state of the economy: http://www.charlierose.com/view/interview/11710#schedule

Deficit Debate - Krugman vs. Holtz-Eakin

The PBS News Hour has a good debate about the deficit and debt debate between Paul Krugman and Douglas Holtz-Eakin.

Watch the full episode. See more PBS NewsHour.

Brad DeLong on the failure of macro

Brad DeLong has published a very readable essay called "Battered and Beaten" on the current crisis and the failure of policy to address the crisis. Another good DeLong post is "The Four Horsement of the Teapocalypse". Krugman has built on to this with his own thoughts on the intellectual and poltical failures of policy in a post called "The Instability of Moderation".

Krugman with the Snow

Paul Krugman has a post where he makes a good use of the Swan diagram to explain how the trade issues between the United States and China affect both economies, and how they could solve each others problems (if China would let them). Here is the diagram. It is a good teaching tool - I wonder why more textbooks do not use it. here is the Wikipedia link with more about the Swan diagram.

Dim expectations for the QE2

Paul Krugman has been looking at Japan and its lost decade for guide as to what the next round of Fed Quantitative Easing might look like. In a recent blog post he looked at how much effect the Central Bank of Japan's policy of quantitative had on the Japanese money supply. The evidence says it has almost no effect. Here is the graph to support this:

Krugman's explanation for this was that when an economy is up against the zero bound, monetary policy ceases to have any effect. Sounds familiar?

Bits and pieces

School has been busy lately and the economics news has been in rolling forward. There are a number of interesting pieces out there that could be really useful for teaching. For example, in today's New York Times, Robert Shiller has a column on the larger effect of unemployment on the employed called "Survival of the Safest", which has a lot of good insights about unemployment. One, that has real applications to teaching macroeconomics is an explanation of sticky wages (even though he does not use that term) in a recession.

The New York Times also has a great graphic showing the the TARP repayment. It shows that while some parts of the program have profited, most parts of the program have not (should that really be a surprise?). Gretchen Morganson follows that up with a column about why we should expect more TARP like programs in the future because the Dodd-Frank financial legislation set up more backstops for the financial industry and created more moral hazard opportunities by enlarging the potential firms that could be considered "too big to fail".

Paul Krugman has a good insight about how people view markets as morality good, and how that view is utterly wrong in this blog post called "Economics is not a Morality Play". This is an important point students need to understand. Economists do not like markets because markets are virtuous - any they are not. Economists like markets, when they work well, because they work to efficiently distribute resources to best meet needs. When markets do not work, economist think about how to use other tools to efficiently distribute resources to meet needs. That might mean changing markets with regulation or outright government action to deal with "market failure" through the provision of public goods.

Best economic minds are not so good?

Michael Hirsh in Newsweek has a piece on the the failure of economists to come to terms with the crisis. The article is a good summary of the arguments made in longer pieces by economists and other writers. This article would be a good primer to use with students to introduce them to the intellectual crisis in economics brought about by the crisis. More about what Hirsh is talking about can be found in these two Krugman pieces: "How did Economists Get it so Wrong" and "The Slump Goes On: Why?".

Why businesses are not hiring - AD

The chart below was from Paul Krugman's blog (he got it from Catherine Rampell) and it shows the reason what business say it the most important problem - looking back decades. Quiet simply it shows that the most pressing problem is the lack of sales (read lack of demand - not taxes or government policy).

Unemployment & Inflation - This time is different, not so much

Paul Krugman has good post on how high unemployment is affecting inflation unemployment in the way the Phillips curve would predict (he also has a good chart comparing this recession to earlier ones in regards to inflation and unemployment). He also notes alarm that the Fed seems to be ignoring this piece of economic theory.

Unemployment Numbers and their Meaning

The new unemployment numbers last Friday were grim. While unemployment did nudge down to 9.5 % (from 9.7%) that is because more people left the labor force. That is not a good sign - it shows we actually have longer time to go before there will be any recovery in jobs. Throughout this recession, but especially this spring when it seemed as if the numbers were showing the economy was slowly nudging toward recovery, the constant refrain was the unemployment is a lagging indicator (it follows behind the business cycle), so it will only come down after the economy is into recovery. However, and this is why it is important to teach students how unemployment is calculated, the unemployment number can be greatly affected by the number of workers who choose to leave the labor force because they are "discouraged". The Friday unemployment numbers show increasing worker discouragement - a bad sign. Ironically, as the economy recovers, unemployment should actually go up as more workers re-enter the work force because they believe they can find jobs.

We may be heading into a situation of sluggish growth with high unemployment. Not a recession and not a recovery. A bit like the seventies without inflation.


This news has further fuelled the debate over austerity versus additional stimulus spending. This is particularly focused on the extension of long-term unemployment. There are a number of good articles out there that get to this point well. First, Edward Glasser of Harvard has a good piece in the Economix blog at the New York Times web page in which he sets out the basis points of the debate and provides a historical lens to see the debate through.

On a related note. The Sunday New York Times had a good article on Kenneth Rogoff and Carmen Reinhart and their book "This Time is Different" which is a history of financial collapses going back 800 years. The point of their book, hence the title, is that through out history people have said that the financial collapses of their times are "different" from the previous experiences, but that is they are really very similar. Their analysis shows how speculative bubble cause vicious financial collapses that can lead to massive government debts and long protracted recoveries. Sounds familiar? Unfortunately, their book is to dense for students - which is too bad because the insight is so important. Because of that, I think the article is a good short and concise way to introduce students to the concepts of their book. I am planning to assign the Times article with another one by Paul Krugman and Robin Wells from the New York Review of Books which puts the ideas from "This Time is Different" into the context of the current crisis.

At this point I am debating when I should assign the articles. At the start of the year, as a way of introducing the current state of the economy, or during the unit on financial markets and their affect on the economy. Right now my thoughts are to have them at the start of the year.