May 01, 2003

Principles of Macroeconomics

Paul Krugman previews the macro chapters of the forthcoming Krugman and Wells Principles of Economics textbook:

Posted by DeLong at May 1, 2003 03:04 PM | TrackBack


I used to like Paul Krugman back when spent more time writing about economics, but lately he's just become irrational shrill and partisan. This latest attempt to cover his tracks is just more econ-babble.

(one of the borg would have said it).

Posted by: atrios on May 1, 2003 03:49 PM

I like the text "Now suppose that President Hillary Clinton .." (first link).

Posted by: Alan on May 1, 2003 04:30 PM

I'm enjoying the Krugman lectures. Not that this adds anything to my knowledge of macroeconomics, but given the political discourse over economic policy later - it would seem some influential people never learned the law of scarcity. As in those vertical long-run supply curves and the basic premise of crowding-out. Hey, even some White House economists have lately suggested that crowding-out does not exist. Excuse me - but which AER paper disproved the law of scarcity?

Posted by: Hal McClure on May 1, 2003 04:58 PM

Incidentally, Krugman is actually being nonpartisan with his President Hillary Clinton example. Even Democratic fiscal stimulus fails to increase employment and output over the long-run.

Posted by: Hal McClure on May 1, 2003 05:04 PM

Atrios, did you read that he mentioned you in a NYT article?

Posted by: Bobby on May 1, 2003 06:32 PM

I suspect that first comment is by an imposter.

Posted by: Max Sawicky on May 2, 2003 08:53 AM

Krugman says 0.75% is the lower limit for Fed funds - mutual fund welfare and financial plumbing at risk. Does anybody have anything on this? Seems we are 1 medium or 2 small eases away from the floor.

Posted by: K Harris on May 2, 2003 10:15 AM

K Harris

Given the general money market fund cost, if 3 and 6 month rates come down further returns could go "negative" for some of the higher cost money market funds. Liquidity trap indeed.

Posted by: anne on May 2, 2003 10:43 AM

K Harris

I'm not sure where this 0.75% floor comes from eiher. My theory as to why investment demand remains weak has less to do with liquidity traps and more to do with the nature of fiscal policy: weak on short-term stimulus but over the long-term too expansionary. Could it be that the forecasts of large future deficits are keeping long-term rates high relative to short-term rates and actually making the recession worse?

Posted by: Hal McClure on May 2, 2003 10:44 AM

Hal McClure

A money market fund with .75 in expenses would have real real problems if the shortest rates were to fall even to 1%. This would be no small problem.

Posted by: anne on May 2, 2003 11:52 AM

I think there is one difference to note between fiscal stimulous and the Feds control of interest rates. Fiscal stimulous can effect the economy in a shorter period than a change in interest rates(interest rates take about 18months to kick in I think?). So, when looking for a way to boost the economy in a time when we are not at full employment, fiscal stimulous can act a bit quicker (assuming that a legislature could get their act together).

Oh yes and arn't we all dead in the long run?

Posted by: markmeyer on May 2, 2003 04:26 PM


I believe the figure is six months, not 18 months.

I would be interested to learn more about the outside lag for fiscal policy. Can anyone suggest some good literature?

Posted by: David on May 2, 2003 09:08 PM
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