Unintended Monetary Policy Effects – Tale II: ECB Crisis Policies

by Andreas Hoffmann and Nicolás Cachanosky The Federal Reserve’s (Fed) and European Central Bank’s (ECB) policy responses to the recent financial disasters offer two tales of unintended consequences. Our previous post outlined undesired effects of the Fed’s policies. In this post, we suggest that the ECB’s stabilization policy did not only fail to achieve its … Continue reading Unintended Monetary Policy Effects – Tale II: ECB Crisis Policies

The Bank of Japan Creates a State-Led Monopolistic Banking System

by Taiki Murai and Gunther Schnabl[*] In the second half of the 1980s, 13 Japanese city banks climbed into the group of the world's largest banks, boosted by a domestic speculation boom. With the bursting of the Japanese financial “bubble” in the early 1990s, a gradual decline followed. Since then, the Japanese city banks have … Continue reading The Bank of Japan Creates a State-Led Monopolistic Banking System

COSMOS + TAXIS Issue on Jane Jacobs

by Sandy Ikeda Jane Jacobs’ writings span several disciplines—including ethics and most especially economics—but she is best known for her contributions to and her critique of urban planning, design, and policy. Many of those whom she influenced in academia, policy, and activism took the occasion of her one-hundredth birthday in 2016 to celebrate those contributions … Continue reading COSMOS + TAXIS Issue on Jane Jacobs

Should Central Banks Lean Against the Wind?

by Andreas Hoffmann The pre-crisis Jackson Hole Consensus view on how to take asset market developments into account in monetary policy can be summarized as follows: Because it is hard to spot bubbles in asset markets with certainty ex-ante, central bankers should not lean against the wind when there seems to be a boom in … Continue reading Should Central Banks Lean Against the Wind?

A Crisis in Economics?

by Mario Rizzo Periodically, people warn about the “crisis in economics.” I have heard about several of these over my professional career. Somehow the mainstream or orthodox economists never seem to notice these crises or take them seriously. They continue doing what they were doing. Today the crisis, if there is one, is due to … Continue reading A Crisis in Economics?

Two Tales of Unintended Consequences of Monetary Policy – Tale 1

by Nicolás Cachanosky and Andreas Hoffmann Even when a policy is successful in achieving its desired ends, we have to consider its unintended and unforeseen consequences, resulting from cumulative market adjustments to policy changes that make it hard to judge the overall outcome of a policy in our complex economy. The Federal Reserve and European … Continue reading Two Tales of Unintended Consequences of Monetary Policy – Tale 1

O’Driscoll: Allan Meltzer Remembered

Allan Meltzer has died at age 89. The number of articles on Meltzer these days indicate the significance of his contributions. Carnegie Mellon University and Bloomberg published good summary articles on Meltzer's outstanding academic career, ideas and influence in policy. Jerry O'Driscoll's personal note on Alt-M emphasizes that Meltzer was also a great manager and … Continue reading O’Driscoll: Allan Meltzer Remembered

An Axiomatic Case for the Flat Tax

by André Casajus[*] and Andreas Hoffmann Estonia was the first European country to introduce a flat tax on income in 1994. Many others followed. For example, Hungary successfully introduced a flat tax in 2012. In the U.S., some of the States (e.g. Pennsylvania) have introduced a flat tax on income. As in Germany, however, the … Continue reading An Axiomatic Case for the Flat Tax

200 Years of the Theory of Comparative Advantage

by Shruti Rajagopalan Today is the 200th anniversary of David Ricardo’s On the Principles of Political Economy and Taxation, published on April 19, 1817. This remarkable, and rather unintuitive idea, is an essential component of every economist’s arsenal. When challenged by the mathematician Stan Ulam to name one proposition in the social sciences that was … Continue reading 200 Years of the Theory of Comparative Advantage

The Viennese culture of conversation: Understanding and defending fragile orders

by Stefan Kolev* For a better understanding of the turbulences of our time, studying those earlier politico-economic debates which focused on fragile orders of economy and society can certainly prove insightful. In The Viennese Students of Civilization, Erwin Dekker addresses such an age and interprets the works and impact of economists often labeled as the … Continue reading The Viennese culture of conversation: Understanding and defending fragile orders

Globalization Alone Does Not Produce Losers!

by Gunther Schnabl* The Brexit and the election of U.S. President Donald Trump were unexpected and were followed by a search for explanations. Subsequently, the common view spread that globalization is at the root of the frustrations of more and more people who are susceptible to strong nationalist statements from populists. This is surprising because … Continue reading Globalization Alone Does Not Produce Losers!

The Venezuelan Crisis and the Political Costs of Reforms

by Pablo Duarte* Venezuela is in deep political and economic crisis. According to Reuters – quoting a leaked document from the Venezuelan Central Bank – output fell 19% and prices increased 800% during 2016. Even though the “Socialism of the 21st Century”, the political program initiated by former President Hugo Chavez, has been losing support … Continue reading The Venezuelan Crisis and the Political Costs of Reforms

Are we all Debt Liquidationists now? … No!

by Andreas Hoffmann A growing number of economists suggest that governments in highly indebted countries should consider liquidating debt via financial repression. In other words, they want governments to intervene in financial markets and push government borrowing costs below the rate of inflation to erode the real value of debt. In a previous post, I … Continue reading Are we all Debt Liquidationists now? … No!

Call for Papers: 2017 SDAE Meetings (Deadline: April 1, 2017)

The annual meeting of the Society for the Development of Austrian Economics will be held during the Southern Economics Association meetings in Tampa, FL at the Tampa Marriott Waterside Hotel and Marina, November 17-19, 2017 (Friday to Sunday; more information can be found here: https://www.southerneconomic.org/conference/). Members interested in presenting papers, serving as chairs/discussants, or proposing … Continue reading Call for Papers: 2017 SDAE Meetings (Deadline: April 1, 2017)

The Socialism of the 21st Century is on its Way out!?

by Andrea L. Tapia-Hoffmann* Rafael Correa was inaugurated as President of Ecuador in 2007. He joined forces with Chavez to promote the idea of a so-called "Socialism of the 21st Century" in Latin America. After Chavez’s death in 2013, Correa became the self-proclaimed leader of the movement. Because the new socialism has led to severe … Continue reading The Socialism of the 21st Century is on its Way out!?

Call for Papers: Austrian Monetary Economics Conference

I would like to bring the following to your attention: – Call for Papers – Monetary Policy in the 21st Century: The Renaissance of Austrian Monetary Economics Madrid, November 2nd and 3rd, 2017 Submission deadline: June 30th, 2017 The Faculty of Political Economy in co-operation with the Master Programme in Economics of the Austrian School … Continue reading Call for Papers: Austrian Monetary Economics Conference

Beware of Financial Repression

by Andreas Hoffmann Government debt levels in many advanced economies, especially in Southern Europe, in the US and in Japan, have reached peacetime records. People are worried and rightly so: C. Reinhart and K. Rogoff have provided evidence that elevated debt-to-GDP ratios may contribute to stagnation or even debt crises. As austerity policies are unpopular … Continue reading Beware of Financial Repression

Discussion of Israel Kirzner’s Work on Entrepreneurship

Check this out at Liberty Matters. Lead Essay: Peter J. Boettke, "Israel M. Kirzner on Competitive Behavior, Industrial Structure, and the Entrepreneurial Market Process" [Posted: March 1, 2017] Responses and Critiques Mario J. Rizzo, "Kirzner’s Theory of the Market Process" [Posted: March 6, 2017] Peter G. Klein, "Entrepreneurial Discovery: Who Needs It?" [Posted: March 8, … Continue reading Discussion of Israel Kirzner’s Work on Entrepreneurship

The Fed’s Institutional Design

by Gerald P. O’Driscoll, Jr.[1] I have been reading Central Bank Governance & Oversight Reform, edited by John H. Cochrane and John B. Taylor. It is a conference volume of unusually high quality with all the discussions of presentations included. I plan to write more about the book later, but to highlight one chapter here. … Continue reading The Fed’s Institutional Design

The Revival of State Banking in Europe

by Alexander Fink[1] and Andreas Hoffmann Since 2009, the role of government in banking has increased substantially in Europe. This is, first, a consequence of capital injections or bailouts of private banks (for instance Dexia in Belgium, Royal Bank of Scotland in the UK, Hypo Real Estate and Commerzbank in Germany, Fortis in the Benelux, … Continue reading The Revival of State Banking in Europe