Thursday, September 29, 2016
Trumponomics
Regular readers of this blog know that I often disagree with Paul Krugman. But I come here today to agree with a recent post of his on the analysis put out by two Trump economic advisers. The Trump advisers' analysis is truly disappointing (though perhaps not surprisingly so, given what the candidate has said over the course of the campaign).
Their analysis of trade deficits, starting on page 18, boils down to the following: We know that GDP=C+I+G+NX. NX is negative (the trade deficit). Therefore, if we somehow renegotiate trade deals and make NX rise to zero, GDP goes up! They calculate this will bring in 1ドル.74 trillion in tax revenue over a decade.
But of course you can't model an economy just using the national income accounts identity. Even a freshman at the end of ec 10 knows that trade deficits go hand in hand with capital inflows. So an end to the trade deficit means an end to the capital inflow, which would affect interest rates, which in turn influence consumption and investment.
I suppose that their calculations might make sense in the simplest Keynesian Cross model, in which investment is exogenously fixed and consumption only depends on income. But that is surely not the right model for analyzing the impact of trade policy over the course of a decade.
Their analysis of trade deficits, starting on page 18, boils down to the following: We know that GDP=C+I+G+NX. NX is negative (the trade deficit). Therefore, if we somehow renegotiate trade deals and make NX rise to zero, GDP goes up! They calculate this will bring in 1ドル.74 trillion in tax revenue over a decade.
But of course you can't model an economy just using the national income accounts identity. Even a freshman at the end of ec 10 knows that trade deficits go hand in hand with capital inflows. So an end to the trade deficit means an end to the capital inflow, which would affect interest rates, which in turn influence consumption and investment.
I suppose that their calculations might make sense in the simplest Keynesian Cross model, in which investment is exogenously fixed and consumption only depends on income. But that is surely not the right model for analyzing the impact of trade policy over the course of a decade.
Wednesday, September 28, 2016
Saturday, September 17, 2016
Bank stocks are just as risky now as they were before the financial crisis
That is the most interesting thing I learned at the recent BPEA meeting. Click here to learn more.
Wednesday, September 14, 2016
Diagnosing and Treating the Slow Recovery
Monday, September 12, 2016
Saturday, September 10, 2016
Thursday, September 08, 2016
Wehner on Orwell on Fierce Modesty
I enjoyed this essay by Peter Wehner. It is not about economics, but the lesson should be heeded by anyone who engages in the national debate over economic policy.
Wednesday, September 07, 2016
Economics Teaching Conference
Economics educators may be interested in this upcoming conference. Frank Conway, founder of the Economic Rockstar, will interview me at the conference.
Saturday, September 03, 2016
Where I have been eating
For readers in the Boston area, here is a restaurant recommendation: Tiger Mama. Fun, Southeast Asian-inspired food from Chef Tiffani Faison. In the Fenway area of the city.