Point: Defeated

This is the first hand-written emoticon I have ever seen.

Sorry For The Non-Posting, Dear Reader

But I have a good excuse:

August Noam Hooker was born on April 18th, 2012, at 9 pounds, 9 ounces. He is the man!

Scanning Electron Microscopy

My advice for macroeconomic stabilization is precisely the same as my advice for scanning-electron-microscope image focusing. Briefly, it’s “Do something to fix it until it starts getting worse in the other direction.”
Inexperienced SEM students will sit there with a blurry image and timidly roll the focus, getting nowhere nearer to a good image. The key here is timidly: the student rolls the focus knob so slowly, like Eddie Izzard’s safecracking shower-user, that it is unclear whether the image is getting better or worse.  The better way to focus the image is to roll the focus back and forth in long, manly strokes, so that the change in the image is plain, and the optimum focus (both its quality and where the knob needs to be to get it there) can be ascertained.

As Matt Yglesias points out, the people in charge of our macroeconomy are being excessively timid. Half of them are taking the conventional route, i.e. pursuing looser monetary and fiscal policy in the face of a recession, but they are doing it so timidly that as a result we don’t really have a good test of those policies’ effectiveness. Did we really even fight the recession? On the fiscal side, Paul Krugman says the gigantic stimulus really just helped fill in the hole left by state and local budgets. On the monetary side, Scott Sumner says that money is too tight, even at today’s low, low interest rates.

The other half of our leaders are suggesting we turn the knob backwards, i.e. move towards tighter monetary and/or fiscal policy. They think the SEM image will get sharper if we move in an unconventional direction.

I suggest what I would tell any timid SEM student: ROLL THE GODDAMN KNOB until the image is clearly better, and keep doing it until it gets worse—that’s the way you know when you’ve gone too far. Then go back. The economic equivalent would be to try a two trillion dollar stimulus and QE 4, 5, and 6. When we get full employment and then inflation, we’ll know it’s time to cut back.

Or do what Republicans want and cut back now. But cut way back—make the Social Security retirement age 75 and stop unemployment insurance after three months (and see who votes for you). But only after moving decisively in one direction or the other will we gain some understanding of the dynamics of what's going on.