A study published recently by the International Monetary Fund, "Public Investment as an Engine of Growth," examines the impact of accelerated infrastructure investment on growth and productivity in “126 lower- and middle-income countries.” It finds “no robust evidence that the investment booms exerted a long-term positive impact on the level of GDP.” It does find some evidence, that spending increases GDP at the time of expenditure, albeit “probably very little,” but the ... Read More
Krugman Ignores Failed Keynesian Predictions
In his blog post yesterday, Paul Krugman claimed: “We have a pretty good model of aggregate demand, and of how monetary and fiscal policy affect that demand. … And it remains true that Keynesians have been hugely right on the effects of monetary and fiscal policy, while equilibrium macro types have been wrong about everything.” ... Read More
Does Alan Krueger’s defense of the Obama Admin’s economic policies add up? You be the judge
Last week, I debated Alan Krueger, President Obama’s former Chairman of the Council of Economic Advisors on Bloomberg TV’s In The Loop with Betty Liu. I made the argument that the administration pumped trillions of dollars of fiscal stimulus into the economy over the last six years, over-predicted the impact stimulus would have on growth, and, as a result, did little else to fix the structural problems slowing the recovery. Because of this, we have suffered five years of ... Read More
Shouldn’t valid economic theories produce accurate forecasts?
In a series of blog posts, John Cochrane presents two graphs showing how both the Fed and CBO have continued to make significant mistakes in forecasting large Keynesian rebounds, and have slowly revised their forecasts downward. The downward forecasting is consistent with a point I made on March 3rd, after the CBO’s Budget and Economic Outlook was published. If Keynesian economics properly modeled the current circumstances, it would make accurate near-term forecasts of ... Read More
Recent Study Finds Minuscule Losses on AAA-Rated Tranches of Subprime Mortgages
Pervasive misunderstandings about the causes of the financial crisis have significantly slowed the economic recovery. The public mistakenly believes banks ... Read More
