the shame-less indestructable nit wit neo liberal
"Let's assume that New Keynesian macroeconomics is 100% correct.
What role is there for fiscal policy?"
"....in normal times there is no role for fiscal policy as a tool to control Aggregate Demand. Monetary policy can handle AD all by itself."
"The New Keynesian case for fiscal policy as a tool to influence AD only applies at the Zero Lower Bound, when monetary policy is supposedly incapable of doing the job by itself. Let's concentrate on that ZLB case."
" New Keynesian macroeconomists recognise that a commitment to future monetary policy can still be effective at the ZLB. The central bank promises that in future it will leave interest rates "too low for too long". So, why can't we say that monetary policy still works, even at the ZLB? "
" is that such a promise might not be credible."
" OK. Let's grant them that assumption. Promises about future monetary policy are assumed not credible."
" First consider a permanent increase in government spending in a New Keynesian model. "
"The result is no change in the natural rate of interest. "
"For a given time-path of Y
a permanent increase of G and a permanent decrease of C
by an equal amount
will leave the consumption-Euler equation still satisfied
at the original time-path of real interest rates."
" Intuitively, a permanent increase in G means an equivalent reduction in permanent disposable income and an equivalent reduction in desired consumption."
what ? u cry what ?
" If the government takes part of national income and spends it ..
in New Keynesian models G does not appear in the representative agent's utility function "
lets stop right there
why would this assumption strike anyone
as anything but a trick move eh ??
G in this comes off like a welfare drain
but what if G is a transfer system ?
you know payments to paul out of taxes to peter ?
well there is no possible transfer system
WHEN THERE IS ONLY ONE AGENT !!!
there is no peter and paul
just as there is no defaults
and no real role for money
and
but i get ahead of myself
preview of next post on death to NK
rowe:
"... a temporary increase in G? "
" It's all in the framing. There is no reality in these matters."
" These are all social constructions of reality"
" We theorists shouldn't be suckered into believing that our conceptual schemes are out there in the real world. Except, the conceptual schemes of real people out there in the real world are part of the reality of that world, for a social scientist."
" And the Neo-Wicksellian social construction of reality, in which "monetary policy" is defined as "setting interest rates", is a damned bad reality to construct. Especially when we hit the ZLB."
wow that last passage is a real peach eh ?
"Neo-Wicksellian social construction of reality"
"The New Keynesian case for fiscal policy as a tool to influence AD only applies at the Zero Lower Bound, when monetary policy is supposedly incapable of doing the job by itself. Let's concentrate on that ZLB case."
" New Keynesian macroeconomists recognise that a commitment to future monetary policy can still be effective at the ZLB. The central bank promises that in future it will leave interest rates "too low for too long". So, why can't we say that monetary policy still works, even at the ZLB? "
" is that such a promise might not be credible."
" OK. Let's grant them that assumption. Promises about future monetary policy are assumed not credible."
" First consider a permanent increase in government spending in a New Keynesian model. "
"The result is no change in the natural rate of interest. "
"For a given time-path of Y
a permanent increase of G and a permanent decrease of C
by an equal amount
will leave the consumption-Euler equation still satisfied
at the original time-path of real interest rates."
" Intuitively, a permanent increase in G means an equivalent reduction in permanent disposable income and an equivalent reduction in desired consumption."
what ? u cry what ?
" If the government takes part of national income and spends it ..
in New Keynesian models G does not appear in the representative agent's utility function "
lets stop right there
why would this assumption strike anyone
as anything but a trick move eh ??
G in this comes off like a welfare drain
but what if G is a transfer system ?
you know payments to paul out of taxes to peter ?
well there is no possible transfer system
WHEN THERE IS ONLY ONE AGENT !!!
there is no peter and paul
just as there is no defaults
and no real role for money
and
but i get ahead of myself
preview of next post on death to NK
rowe:
"... a temporary increase in G? "
" It's all in the framing. There is no reality in these matters."
" These are all social constructions of reality"
" We theorists shouldn't be suckered into believing that our conceptual schemes are out there in the real world. Except, the conceptual schemes of real people out there in the real world are part of the reality of that world, for a social scientist."
" And the Neo-Wicksellian social construction of reality, in which "monetary policy" is defined as "setting interest rates", is a damned bad reality to construct. Especially when we hit the ZLB."
wow that last passage is a real peach eh ?
"Neo-Wicksellian social construction of reality"
