Wednesday, March 2, 2016

Beyond sad

Syll quotes from Romer & Romer's response to Gerald Friedman on Bernie Sanders' economic policies:

The fact that there is a correlation between output growth and productivity growth is not surprising. Periods of rapid productivity growth, such as the 1990s, are naturally also periods of rapid output growth. But this does not tell us that an extended period of rapid output growth resulting from demand stimulus would cause sustained high productivity growth …

Romer and Romer discuss "periods of rapid output growth", "periods of rapid productivity growth", and the causal relation between them. That's the wrong focus.

It's an argument about a prediction, which is ridiculous from the outset. Will productivity go up when output growth goes up? Yes says Friedman. No say the critics. Fuck all that. Let's opt for better output growth and call it a day.

But the critics would rather argue about predictions. Why? I suspect it is because they don't know how to get better output growth. Remember, they called Friedman's prediction of high growth unbelievably unrealistic.

They don't know how to get high growth, and they've given up trying.

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