Wednesday, October 18, 2017


In Rethinking Macroeconomic Policy at Quantitative Ease, Carola Binder asks the key question:

"How could we replace or transform the existing modes of analysis?"

Three policy challenges that Binder identifies in the article:

 • Low inflation and low nominal interest rates limit the scope of monetary policy in recessions
 • “Should policymakers care whether inequality is helpful or harmful for growth?”
 • Stabilization policy [is] disconnected from the ... discussion of inequality and growth

These are current issues: low inflation and low interest rates; inequality; economic growth; and stabilization (by which I assume they mean avoiding the next Great Recession). It looks to me like all these economists at all these conferences are caught up in the current problems of policy.

It seems right that economists should be concerned with current problems because we are concerned with those current problems. But maybe it isn't right. Maybe economists ought to be concerned instead with the historical processes that led to the current problems. Rather than trying to come up with ways to move beyond current problems, they should focus on understanding the original sources of those problems.

That would "transform the existing modes of analysis".

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