Finance Basic To Advance Level Knowledge

George Selgin is now blogging .  It is about time.  He is the individual who introduced me to nominal GDP targeting, the monetary disequilibrium view of recessions, benign vs. malign deflation, and other interesting ideas. I was fortunate to have him as a professor and now the rest of world can have access to him too.   To get a taste of the Selgian view of the world, here is a recent article of his evaluating the Fed's performance and here is an older monograph where he promotes his Productivity Norm Rule for monetary policy. 

That is what Noah Smith finds when he graphs TFP by durable and nondurable sectors.   Here is the stunning figure he provides:  Here is Smith: From this graph, it definitely looks like something big did happen to technological progress. But it looks like it happened not in 1973, as Cowen claims, but a decade earlier. In the 15 years to 1963, the two sectors progressed pretty much in tandem. But sometime in the early- to mid-60s, they diverged wildly, with nondurables TFP rising anemically through the late 70s and then basically flatlining until now. Durables TFP looks to have suffered its own very minor slowdown in the mid-70s (which is probably the reason why overall TFP looks like it took a turn around that time), but then exploded with unprecedented vigor after '93. Smith is responding to an earlier  post  of  mine that Tyler Cowen  linked  to yesterday.  In that post I showed using John Fernald's data  that the TFP growth ra...

Tyler Cowen responds to some of the Great Stagnation critics by pointing to trends in total factor productivity (TFP): The critical responses to The Great Stagnation prefer to attack median income measures and in general they are reluctant to talk about total factor productivity.  Yet we are pointed very much toward the same conclusion. The point is that the Great Stagnation theory matches nicely with the standard story of TFP growth:  there was a "golden age" of TFP growth during the1948-1973 period, but thereafter it stalled  until about 1995.  That is an interesting rebuttal from Cowen, but haven't we made some impressive TFP gains since 1995 given the advances in technology?  To see just how marked this TFP decline was after 1973 and whether the recent TFP gains make up for any of the loss, I went to the data.  Below is a figure constructed using the quarterly TFP series of John Fernald at the San Francisco Fed. (Click on figure to enlarge.) ...

I have been reading with interest the discussion surrounding Tyler Cowen's new book, The Great Stagnation .  The main argument of the book is that the technological progress has slowed. We have picked the "low-hanging fruit" of economic growth and now are mired in slow growth.  Count me a skeptic on this one.  I believe we have just gone through one of the greatest technological innovations of our time with the advent of the internet and faster computing.  Moreover, these technologies are still improving and the potential positive spillover effects from the rest of the world catching up with the advanced economies are tremendous (e.g. imagine what will happen to R&D funding on cancer and AIDS once several billion Asians are rich enough to start demanding it).  Rather than a great Stagnation, I see us at that cusp of a Great Acceleration. Regarding the past few decades, Cowen cites the decline in median income to support his thesis.  I can only cite ane...

The answer is no for most of us.  If, on the other hand, you live inside a Florida prison then the answer is yes.  For the economies inside Florida prisons now use honey buns as a medium of exchange .  And as Nick Rowe has tirelessly explained , recessions can only occur when there is an excess demand for the medium of exchange. I am not sure, though, what a prison economy recession would look like... (HT Tyler Cowen )