Tuesday, September 6, 2011
TBA reading for 9.7
Check out the following NY Times piece, which discusses views on The Federal Reserve. In the future, I'll try to post the Wednesday reading before Monday's class to give everyone time to do their own blog post (remember to start a blog on this site and follow our classes page!) and to respond to two other blog posts. For now, though, just leave a quick comment on this post. Somewhere in your response, provide a provocative, thesis-like statement that we can discuss tomorrow.
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The question of whether or not there is enough aggregate demand (total level of spending in the economy) is part of macro economics, which does not begin until well after Smith.
ReplyDeleteNonetheless, as this piece suggests, much of the debate over modern macroeconomics has to do with competing visions over what the economy is and what it should do: is it a naturally occurring phenomenon that we should avoid touching, or is even not intervening a form of intervention, and thus something that we have a duty to intervene in in the most effective manner possible?
The two most important macro thinkers of the 20th century, John Maynard Keynes and Milton Friedman, owe a certain debt to Mandeville: Keynes saw recessions as periods when virtues like savings and thrift became vices, and thus periods when, in a certain manner of speaking, private vices produced public benefits; Milton Friedman argued that the greed had a positive effect, and economies with a lot of greed prospered.
What would Smith say about the field of Macroeconomics, which was not yet known to him?
Interesting NYT piece. There were a few pieces of info I learned about the Fed that I hadn't previously known. This included the make-up of the 12 voting members with 14-year terms and Presidential nominations subject to Senate approval. Also the development of the doves v inflation hawks movements will be interesting to follow. It seems as though the inflation hawks will prevail, as there is much less incentive for the Fed to put forth aggressive economic measures. Lastly, I wonder what would or would not allow Sweden's practice of aggressive asset buying to work in the US.
ReplyDeleteThis article challenged my view of inflation quite a bit. Before reading the piece I would have automatically thought of inflation as a big negative, and for the most part I still see it that way; however, I hadn't thought about how inflation could jumpstart spending and benefit debtors. Debtors could certainly use a break at this point, so this aspect of a "money injection" into the economy may not be such a bad thing. Inflation is still a tricky thing, though; it is not something you would want to mess around with too much. Inflation "turned up" to the proper level (which would be difficult to determine) could be a way to reverse the more harmful effects of the recession (such as making debts almost impossible to repay), but close manipulation of the market would likely be required to pull this off.
ReplyDeleteI found this article to be both informative and thought-provoking. There were many pieces of information which I had not known prior to reading this article, some of which were major items such as the organizational structure of the Fed, while others were small, such as particular responses to actions taken by the Fed and its chairman, Ben Bernanke. I agree with the doves' idea that more aggressive action must be taken towards unemployment as this is certainly a key problem in our economy, but I disagree with the notion that this problem can be solved by government involvement. Rather, I believe that this is a problem which would be most effectively solved by private corporations bringing their businesses back to this country instead of outsourcing jobs.
ReplyDeleteBen Bernanke has the toughest job in the world. This article is informative even though I thought I knew a lot about the Fed I still learned a lot about it. I would have to agree with Rob in privatizing the business cycle in "stimulating" the economy... notice the quotations around stimulating. Government involvement doesn't work because we have seen it fail. We need to get to the point where the businesses can actually habdle themselves.
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ReplyDeleteIt is interesting to see the various opinions surrounding the Federal Reserve’s policy making. My perspective is in line with inflation hawks, as I think that the value of the dollar is closely related to the economy’s strength. To me it seems detrimental to continue raising inflation and printing more money. How would adding more currency quicken the economy’s recovery? I’m not sure if the Fed should do more or less than what it is doing now, without knowing if it has traditionally held an aggressive or passive role with economic policy.
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