Video
I’ve been traveling a bit lately and catching up on some writing deadlines, hence less posting than usual. In the meantime, I’ve been doing some videos that readers might enjoy.
Thanks to the nudge by the excellent marketing team at Hoover, I’m doing a weekly “grumpy economist rant” of short videos. The collection is here. So far I’ve done
“Just let them build,” on housing supply and what happens if you subsidize demand without fixing supply
“The trouble with tariffs.” Free trade basics.
“The price control trap” Price controls don’t work, even in natural disasters
“Where does inflation come from?” You probably know where I’m going on that one.
“Your EV is a non-starter.” They don’t reduce carbon emissions, because what you don’t burn someone else will.
“Taxes without distortion.” If the question is how to raise revenue with minimal economic damage the answer is a pure consumption tax.
More are coming each week. I welcome suggestions. What makes you grumpy? Or, what insights can simple economics offer to the issues of the day?
These might also be useful as discussion starters in economics classes.
I also had a nice discussion of Fed independence with Art Rolnik (formerly director of research at the Minneapolis Fed, among many other things) and Gary Stern (former president of the Minneapolis Fed), via the Heller-Hurwicz Economics Institute. And a good AIER podcast on independence with Veronique De Rugy and Tom Hoenig.
Healthcare! All politicians want to talk about is insurance and subsidies, to me these are just bandaids over the hemorrhaging wound called healthcare cost. Much like a trillion federal $$ caused tuition costs to explode, pouring more federal $$ into healthcare will just cause costs to continue to grow. We continue to stimulate demand while removing the constraint of affordability and using insurance to pay routine costs of living. If you were king what would be the first five steps you would take to address affordability?
The discussion with Arthur Rolnik and Gary Stern via the Heller-Hurwicz Economics Institution provided important insight into the question of why central-bank independence matters. One takeaway from the remarks during the discussion stated purely in economic terms fits the following observation:
Strict fiscal dominance is infeasible if the monetary authority credibly enforces 𝑖(𝑡) ≥ 𝜋(𝑡). That is not a political statement; it is a mathematical property of the b(0) = PV({s(t)}|𝑖(𝑡),𝜋(𝑡); t = 0 ... ∞) FTPL equation of equilibrium. Once monetary independence is compromised: (a) the constraint on fiscal dominance weakens, (b) the economy moves closer to the FTPL knife-edge, and (c) the regime switching point (t = t* > 0) (end of strict fiscal dominance) becomes relevant.
Examples: (A) Weimar Republic pre-1923, and post-1922; (B) The Republic of Argentina in Peronist and Nestorian presidencies, and Javier Milei presidency.
In Cochrane, The Fiscal Theory of the Price Level, 2023, the switching point t* > 0 from a regime of strict fiscal dominance to a regime of passive fiscal authority is implied in the FTPL equilibrium condition. The conditions that give rise to the change in regime from non-Ricardian to Ricardian, however, are not explicitly modelled. To avoid events similar to the pre-1923 Weimar Republic and the 20th century Republic of Argentina fiscal and monetary crises, we should be very concerned over any move to impugn the independence of the Federal Reserve System board of governors and the Federal Reserve Bank presidents. It is my sense, following viewing of the video record of the discussion between John, Art and Gary, that there is a shared concern for the continuing independence of the FRS board of governors and U.S. monetary authority. Others may disagree.