BPEA Spring 2012 Conference

The Brookings Papers on Economic Activity is a major venue for new research in applied macroeconomics and finance. The conference papers are here.  I can recommend Jay Shambaugh’s paper on the euro crisis, while the papers by DeLong/Summers, Stock/Watson and Dynan are all also directly relevant.

5 replies on “BPEA Spring 2012 Conference”

A fascinating and thought-provoking collection of papers. Many thanks for this post.

The juxtaposition of five papers dealing with the myriad policy challenges thrown up by this crisis in the advanced economies with a single paper on democratic change in the Arab world unintentionally betrays a hubris that is altogether unwarranted.

The naive assumption underpinning the analysis of the flurry of policy options discussed in the first five papers (most addressing symptoms and not causes of the malaise) is that the political and economic institutions and processes in the advanced economies, while possibly requiring some tweaks, are fundamentally sound. The broad conclusion of the sixth paper is that the historically embedded autocratic nature of the political and economic institutions and processes in most Arab countries has retarded both the advance of democracy and economic development.

It is perhaps not surprising, but it never seems to enter into the heads of those in this army of leading economists, scattering policy suggestions like confetti, that the severity and apparent intractability of the current policy challenges in most of the advanced economies is due to some fundamental dysfunction in the political and economic institutions and processes.

It is wonderful that so much data is available on a consistent basis for so many countries to permit such wide-ranging policy analyses, but is there ever any urge to look beneath the veneer, to recognise the varying extents of institutional and procedural dysfunction that render many of these wonderful policy prescriptions totally irrelevant?

But Ireland is in a league of its own when it comes to turning a blind eye to this dysfunction. Given the findings of the Mahon Tribunal, the various reports on abusive practices by clerics and the various reports on the banking collapse, the disjunction between these and the precise, scholarly material presented in Ireland on economic policy issues could not be more pronounced.

Surely it’s long past time to dispense with the projection of this optical illusion and to get to grips with the real underlying problems?

”There’s never been a more important time to be an economist”. This is a very unique recession and the paper’s level of analysis demonstrates this.

One of the main reasons why this is a unique recession is that mortgages cannot increase beyond the two concurrent careers required to repay them.

Every mortgage brings new money to the economy and indeed most of the economy’s money originates in this way. Maxing out mortgages could explain why the economy is so resistant to our kick starting efforts

The Jay Shanburgh touches on a major flaw withen the banking system – under the private eurosystem – checking accounts should be the equivalent of physical Euros.
They should not be loaned out as they are base money.

The success of the Irish “internal devaluation” scenario was lost when private debt was not written off via lets say a bank bond destruction.

People who are paying back less or no private debt can then be taxed at a higher rate.
I would suggest the Mario’s bloke decision to push Italian petrol prices to its highest level in Europe now(1.865 – a classic internal devaluation tax) is because of the lower private debt ratio in Italy.

The ECB / Ireland ? lost its credibility when it decided to bail out its fellow amigos at the expense of destroying the remaining rump physical economies – preventing these economies from adjusting into a more semi sustainable manner.
You cannot tax money that ain’t there.
You have either a nation state like high tax / low private debt system or a market state low tax / high private debt system.
Hybrids simply will not work very well.

Since I’m on a wrap-up, I’ll note the disappointing, but perhaps not unsurprising, lack of interest in this collection of papers. Perusing them again the failure by the authors of the first five papers to recognise that many of their policy prescriptions may be irrelevant in the context of governance by elites for elites jars with the clear conclusion of the sixth paper. But I suppose it’s always easier to notice the speck in one’s brother’s eye while failing to notice the beam in one’s own.

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