New Keynesian Orthdoxy and Hysteresis by Robert Waldmann
Must-Read: I want to endorse this line of thinking from Paul Krugman because I think it is completely right. My initial worries about Sanders-Friedman was that it made promises about where we could get as far as economic growth over the next decade that were very unlikely to be achievable. More important is the Romers' accurate critique that Sanders's plan would not even come close to getting us there even in the unlikely possibility that things do break the way that Sanders-Friedman. And that generates the corollary that is perhaps most important: Sanders's plans look seriously underpowered, and we should be trying to assemble a coalition to do even more than he envisions come 2017...DeLong:
Must-Read: IMHO, Paul Krugman should have had not two but four parting observations:
- Primaries are valuable testing grounds for candidates' ideas and teams, which is a point he makes.
- It's dangerous to believe something because it is what you want to hear, which is a point he makes.
- A point he doesn't make but should: If you believe that hysteresis is not a one-way ratchet--that it is as easy to boost potential via a high-pressure economy as to destroy it via prolonged depression--Sanders's stimulus plans are underpowered by a factor of four.
- A point he doesn't make but should: If you believe--which I do--that so far hysteresis has only gobbled about two-thirds of the gap between current production and the pre-2008 trend, then Sanders's fiscal stimulus plans are about the right size--and HRC's are much too small.