tag:blogger.com,1999:blog-2098432983500045934.post2386843126449482764..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: If, if, and ifThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2098432983500045934.post-70328899090280877412016-07-05T05:39:49.206-04:002016-07-05T05:39:49.206-04:00From the PDF: "The concept of a single, long-...From the PDF: "The concept of a single, long-run steady state to which the economy is converging is abandoned, and is replaced by a set of possible regimes that the economy may visit."<br /><br />You could see this as an outgrowth of <a href="https://www.stlouisfed.org/~/media/Files/PDFs/Bullard/remarks/Bullard_Inflation_Targeting_in_the_USA_06Feb2012_final.pdf" rel="nofollow">Jim Bullard's "wealth shock"</a> view from 2012:<br /><br />"<b>For those who take the “large output gap” view, the expectation is for real GDP to grow rapidly after the recession comes to an end, as the economy catches up to its potential. It is like a rubber band, there is supposed to be a bounce back period of rapid growth...<br /><br />The wealth shock view puts a different expectation in play. The negative wealth shock lowers consumption and output. But after the recession ends, the economy simply grows from that point at an ordinary rate, neither faster nor slower than in ordinary times. It is more like an earthquake which has left one part of the land higher than another part. There is no expectation of a “bounce back” to a higher level of output after the recession ends.</b>"<br /><br />Since 2012 at least, Bullard has been thinking in terms of alternatives to automatic return to the trend path. Now he has a "new characterization" which lets him think in terms of those alternatives.<br /><br />And Bullard has reasons for moving to the new characterization. In the paper from 2012 he said "<b>most analysts have been looking for exactly this [bounce back] effect since the summer of 2009. It has not happened.</b>" He said the wealth shock view "<b>is closer to what has actually happened since mid-2009.</b>"<br /><br />But there is one thing Bullard doesn't have. He doesn't have an explanation. He can't explain the change from "automatic return to trend path" to the "earthquake" that suddenly shifts the trend path to a new, lower level. He doesn't have an explanation for the sudden shift in trend.<br /><br />Oh, he's got uncertainty. Sure. But he doesn't have an explanation. <br /><br />He doesn't have an explanation because, like all the rest of them, he fails to consider the consequences of private debt accumulation.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.com