Noahbot

((Oops, i had it saved in draft mode. Now it's late.))

From Robot Barro? at Noahpinion:

After relying on the dubious hypotheses of C. Mulligan to diagnose the slow recovery, Barro offers his prescription (and it is here where I really become annoyed):

To achieve a real recovery, government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.

So, basically, the recommendation is "the exact same bunch of policies that Republicans have been pushing on America without pause since the days when people listened to 8-track tapes." Cut taxes, cut spending, deregulate. Cut taxes, cut spending, deregulate. Cut taxes, cut spending, deregulate. Cut taxes, cut spending, deregulate. We get it!

So now it's time for me to haul out all the old counterarguments to the standard Republican program.

Perhaps Noah should haul out some new arguments. But if you don't mind, I'd rather talk about "individual incentives to work, produce and invest."


I don't know much about microeconomics. But I know it interferes with macro.

Hey, I'm an "individual". You don't see me at "social network" sites. You don't see me parroting Rush Limbaugh or Paul Krugman or Keynes, or anybody. The guy I agree with most -- Steve Keen -- I don't even go to his site, so as not to confuse my own thinking with his. I am an individual.

You can do everything in your power --

No, scratch that.

Let's push the magic button and pretend for a moment we can do everything that everyone says we ought to do to fix the economy. We can increase taxes and cut taxes, we can spend more and spend less, we can regulate and deregulate, all with no conflict and no contradiction. Magic, remember. So, what?

So, all of it is micro. All of it affects the players, or the "economic actors", or the "individuals". This is after all the whole point of Barro's prescription. And Noah agrees with it: "I mean, I like 'individual incentives to work, produce, and invest'. That sounds awesome to me; sign me up."

All of it is micro. None of it is designed with an eye on macro balances.

I always talk about the quantity of circulating money and the accumulation of debt and the ratio of these two numbers. People object. I think people object because I'm not doing micro: I'm not talking about individuals.

I am one, remember?

There is no economy composed only of individuals. The economy is transaction. The economy only exists when individuals meet, agree, and exchange things of value. The individuals are the actors, or the transactors I guess. The place where they meet and agree and exchange things is the economy: the macro environment.

No matter how many wonderful incentives you create for individuals, if you put those individuals in a bad economic environment, the outcome will be disappointing.


An example: Economists fail to see the danger of debt accumulation. Why?

"[O]ne person’s debt is another’s asset," Krugman says. Krugman is looking at debt as merely an agreement between two individuals. In such analysis there is no possibility that debt can become excessive. How could it? Surely, no amount of debt these two generate could be enough to create troubles for the economy! Oh, they may hurt themselves, but they cannot harm the economy... But what if there is an environment of too much debt?

You know the answer.