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Paul Krugman asks a Question
EconLog: Library of Economics and Liberty —
He argues that the Recalculation story falls apart when you ask why, say, a housing boom -- which requires shifting resources into housing -- doesn't produce the same kind of unemployment as a housing bust that shifts resources out of housing. This is a good question. I would say that answer may be that the dynamics of booms and busts are asymmetric. Note that the housing boom took place slowly, and it built up over a period of years. Several economists, Krugman included as I recall, were already talking about a housing bubble in 2004, even though in hindsight the biggest ...
Defending Schumpeter from Krugman
Angry Bear —
... Paul Krugman does not think highly of Austrian or liquidationist theories of the business cycle. He recently remade an argument which is hard to refute ...
links for 2009-10-05
Economist's View —
... Big Isn't Beautiful - Robert Shapiro
Reinventing 1934 macro - Paul Krugman
Writing for Tyler - The ...
links for 2009-10-06
J. Bradford DeLong's Grasping Reality with All Eight Tentacles —
... Roger Farmer: The US recession ended in May
Paul Krugman: Reinventing 1934 macro
It’s all there: mass unemployment is necessary, because you have to shift ...
How to explain Stimulus
Lawrance G. Lux —
One needs to read all the links to this link, before an understanding of the argument can be made; so be sure to follow all sourcing. Arnold Kling’s Recalculation theory is relatively simple to follow, as is the Schumpeter Quote provided by Krugman. Tyler Cowen gives some history as to previous development behind Arnold’s theory. It is here from which I will depart, outraging everyone with a modification of Arnold’s theory to be called the Recalculation Drain theory. I simply have to find some Point to start from in this quest for perfect theory, which may have literally nothing ...
Will stimulating nominal aggregate demand solve our problems?
Econbrowser —
... over and above "normal." We assume that "normal" unemployment, which is structural and frictional, is some roughly constant fraction of the labor force.
The way I look at things, we have a huge amount of structural and frictional unemployment these days. There is very little cyclical unemployment--limited to autos and household durable goods. If you measure the output gap using my definition of cyclical unemployment, then the output gap is tiny.
Paul Krugman finds this unconvincing:
the whole notion falls apart when you ask ...
Information is stimulus
interfluidity —
... engineers) saw the arbitrage, and found ways of offering those classes of debt. In both cases, if the market had been right, everyone would have been happy. But when the market was wrong, it was someone else's cost. Many entrepreneurs walked away rich and happy. Others lost, but only a small amount relative to what they'd have made of things worked out differently. It was a good gamble for them ex ante . Responding to Arnold Kling's " recalculation theory ", Paul Krugman asks (as he has asked many times ) why [doesn't], say, a housing boom — which requires ...
