A blog of the NYU Colloquium on Market Institutions and Economic Processes
THE BIG STORY OF SPENDING
by Mario Rizzo
There is an interesting interview with Ed Feulner, the outgoing president of the Heritage Foundation, in the weekend (Dec. 8-9) Wall Street Journal. The interview got me thinking about the progress made in the pro-economic-liberty cause, not only over the years of Heritage, but since, say, 1960. Read the rest of this entry »
by Mario Rizzo
Douglas Irwin, a very fine economist at Dartmouth College, has a very puzzling opinion piece in yesterday’s Financial Times. The root of the puzzle is that Irwin seems to accept what I consider the naïve monetarist view, yet calling it by a new name “market monetarism,” that the effectiveness of monetary policy largely revolves around portfolio adjustment effects that are induced by an increase in real balances. (Isn’t this warmed over Pigou, and 1970s monetarism?)
What seems to be new is the “Divisa monetary indexes” which weight the different components of the monetary aggregates by their monetary services. In principle, this is what Milton Friedman talked about in his course ”Money: The Demand Side” in the early 1970s. He said then that he thought it would be a good idea to weight the various components of the money supply by their “degrees of moneyness.” He did wonder, as I recall, if these weights would be stable over time.
Now, by this new measure, monetary policy has been tight. In fact, the money supply is no higher today than in early 2008. Read the rest of this entry »
by Chidem Kurdas
Paul Ryan is said to be influenced by Milton Friedman, Friedrich von Hayek and Ayn Rand. One might add that as the representative for Wisconsin’s first congressional district, he is from a state that has often been in the vanguard of policy thinking. Read the rest of this entry »
by Chidem Kurdas
Early in his career, long before he became a Nobel prizewinner and the household name for free market economist, Milton Friedman worked for the US Treasury. The following anecdote is from his 1998 memoir with his wife Rose, Two Lucky People. This revealing example of how public officials operate illustrates, in Friedman’s words, “the interaction between bureaucratic self-seeking and supposedly objective analysis.” It complements my previous post on whether politicians pursue the public good.
World War II had started. For Friedman and others at the Treasury, the main mission was to figure out how to finance the war effort while avoiding inflation. Read the rest of this entry »
by Jerry O’Driscoll
In the last two days, two prominent economists have asked me essentially the same question: what is the difference between Chicago and Austrian economics? It is interesting that both asked, particularly since one has a Ph.D from Chicago.
The second economist asked me specifically if Armen Alchian wasn’t really an Austrian. I’ll respond as I did to him. I learned most of my Austrian economics in the UCLA graduate economics program. (At that time, UCLA was known as Chicago West.) I was never an Alchian student, but one read lots of Alchian anyway. And his influence pervaded the department. It was obvious to me that Mises had influenced Alchian. Also Hayek, as is made clear in a video of Alchian interviewing Hayek.
Hayek’s classic essays on prices and information were on various reading lists at UCLA. Read the rest of this entry »
by Chidem Kurdas
China is expected to produce more than Japan this year, thereby becoming the world’s second largest economy after the US. Chinese annual output is only $5 trillion compared to American $15 trillion and per person income is only a fraction of the US, but it is clear that China is catching up.
We’re witnesses to a gigantic experiment in political economy. Here is an authoritarian government that apparently recognizes the superiority of free markets, private property and individual enterprise in organizing an economy. It has lifted the shackles off industry and commerce, to an extent, so as to benefit from these powerful forces. Thus China is growing at phenomenal rates.
But freedom of expression and political dissent remains suppressed even as economic freedom expands. In the ever-resonant words of Milton Friedman, “Economic freedom is an essential requisite for political freedom. By enabling people to cooperate with one another without coercion or central direction, it reduces the area over which political power is exercised.” Read the rest of this entry »
by Thomas McQuade and Chidem Kurdas
Though it should be obvious to all that markets are of immense benefit to humanity, any appreciation of these institutions is almost always hedged with a perceived need to constrain and regulate—in short, to subject them to conscious outside control. The reasoning is understandable: the unconstrained pursuit of self-interest can only lead to chaos.
But the preference for constraint through centralized direction betrays a profound misunderstanding of the way markets work.
Can we explain that claim any better than the volumes already written on the topic? We find that, when we discuss the issue, we agree on the basics, but differ in emphasis and details—and details matter. Here is part of our discussion, in point/counter-point format. Read the rest of this entry »
by Mario Rizzo
I have not posted in a while since I have been on vacation. During that time an interesting dispute has arisen among friends Tyler Cowen, David Henderson, Arnold Kling, Peter Boettke, Bob Murphy, Steve Horwitz and others over whether Ben Bernanke was right to bail out specific banks. (Some of this has gotten mixed up with the issue of what Brian Boitano would have done — oops, I should say Milton Friedman.)
I think the question could be simply stated in two parts. First, is it possible to prevent general deflation and not bail out big banks? Second, if so, what would be the effect on the economy of bringing the banks to bankruptcy court while preventing outright deflation? Read the rest of this entry »
