Rowe V Krugman V reality

Personally I think blood sports are pornographic. Krugman is a persistent pessimist on the future track of US growth. Nick Rowe (the boat) is dipping his oar formally on the optimistic edge of the ram. But surprisingly for apparently Keynesian reasons. Me I am going to err on the side of Krugman’s pessimism because I do not think individuals think like this nor do I think they are homogeneous like this:

Since the actual natural rate has not changed, and since the market rate set by the Fed has not changed, you might think that no individual will want to change his desired savings or investment. But, because each individual (falsely) thinks that the natural rate has increased, relative to the market rate, each individual thinks that every other individual will increase desired investment and reduce desired saving. So each individual expects the Wicksellian/Keynesian cumulative process will cause rising prices and output. And this is what causes each individual to increase his own desired investment and reduce his own desired saving. And so there is a Wicksellian/Keynesian cumulative process of rising prices and output.

Keynesian or not.

Advertisements

One thought on “Rowe V Krugman V reality

  1. Krugman’s ‘smacking his own zombie head upside the head’ moment of the day:

    “Part of the answer, surely, is that people who should have been trying to slay zombie ideas have tried to compromise with them instead.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s