[HN Gopher] Economist Bob Mundell has died
___________________________________________________________________
Economist Bob Mundell has died
Author : RickJWagner
Score : 21 points
Date : 2021-04-05 11:44 UTC (1 days ago)
(HTM) web link (www.forbes.com)
(TXT) w3m dump (www.forbes.com)
| quickthrowman wrote:
| Hopefully supply-side economics is the next to die. It didn't
| work in the Reagan 80s, and it didn't work in the 2010s in Kansas
| [0] Laffer and this guy that died are a total joke. Their
| theories exist to give political cover to politicians who aim to
| line the pockets of the rich.
|
| [0]https://en.m.wikipedia.org/wiki/Kansas_experiment
| gradys wrote:
| I don't have comment on the legacy of supply-side economics and
| and how successful e.g. Reagan's economic policy was, but it
| looks to me like we have more of a supply-side issue right now
| than demand-side.
|
| We have shortages of semiconductors, congested ports, all of
| the supply issues with early COVID PPE, absurdly low housing
| supply in the most desirable places to live, and so on.
| joe-collins wrote:
| While this might be a tangent to your larger point, I
| personally struggle when arguing about housing in California,
| in particular. Yes, supply might be low and more aggressive
| construction could do wonders for more affordable pricing, I
| have no disagreement with that. (And as a low-income retail
| worker in SoCal, I would certainly welcome that relief!)
|
| But at the same time, I see basic limits in our water supply,
| and less absolute constraints in the crowding around a
| handful of urban hubs, and wonder if more housing is truly a
| good idea, or if we might already be near the practical
| limits on capacity for the geography/hydrology and geometry
| we're working with.
| clairity wrote:
| we're not anywhere close to the natural limits, as we have
| plenty of technology and policy we could implement yet
| around resources like clean water, air, energy, and even
| space. the primary reason we don't is cost, both for
| externalities and for the remedies themselves.
|
| the 50-year plan for LA (the city) from about 50 years ago
| was projecting something like 7-8 million residents being
| housed here by now with basically the same current
| infrastructure. instead, we've only grown from 3 to 4
| million in that time, largely because of various
| restrictions on development (zoning, prop 13, etc.). note
| that LA city is ~470 sq mi, in contrast to NYC which is
| twice the population and ~300 sq mi.
| ohazi wrote:
| The "supply side" of "supply side economics" is a red
| herring. The theory has less to do with what actually affects
| the supply of goods at any given time and more with the
| theory that lowering taxes and decreasing regulation always
| necessarily results in more supply and lower prices even when
| it clearly doesn't.
|
| The theory ignores everything else that affects supply and
| only focuses on complaining about taxes and regulation.
| elliekelly wrote:
| That's not quite what "supply-side economics" means. From
| Wikipedia[1]
|
| > Supply-side economics is a macroeconomic theory that
| postulates economic growth can be most effectively fostered
| by lowering taxes, decreasing regulation, and allowing free
| trade. According to supply-side economics, consumers will
| benefit from greater supplies of goods and services at lower
| prices, and employment will increase.
|
| _Cf._ Demand-side economics[2]:
|
| > Demand-side economics is a term used to describe the
| position that economic growth and full employment are most
| effectively created by high demand for products and services.
| According to demand-side economics, output is determined by
| effective demand. High consumer spending leads to business
| expansion, resulting in greater employment opportunities.
| Higher levels of employment create a multiplier effect that
| further stimulates aggregate demand, leading to greater
| economic growth.
|
| > Proponents of demand-side economics argue that tax breaks
| for the wealthy produce little, if any, economic benefit
| because most of the additional money is not spent on goods or
| services but is reinvested in an economy with low demand
| (which makes speculative bubbles likely). Instead, they argue
| increased governmental spending will help to grow the economy
| by spurring additional employment opportunities. They cite
| the lessons of the Great Depression of the 1930s as evidence
| that increased governmental spending spurs growth.
|
| [1]https://en.m.wikipedia.org/wiki/Supply-side_economics
|
| [2]https://en.m.wikipedia.org/wiki/Demand-side_economics
| imtringued wrote:
| Supply side economics works if everyone is poor and there
| isn't enough stuff for everyone, the assumption is that the
| supply side can never be saturated and there is always
| excess demand (think of a hedonic treadmill). It works fine
| in developing countries with a young population.
|
| As soon as you have a developed nation with an aging
| population where everyone is scrambling to save for their
| own retirement, you get the exact opposite problem. People
| are deferring spending, which means deferring incomes,
| which means deferring jobs which means unemployment.
|
| There is lots of money available to invest into businesses,
| in fact, people are investing too much, interest rates fall
| through the floor. Low interest rates allow unproductive
| companies to stay alive and when the long term debt cycle
| ends they all die at once. That's not good for your
| retirement.
|
| When you expect to retire in 10 years, you want your
| savings to actually be able to buy things, by making sure
| there are people in the future willing to work for your
| money. That's why you invest your savings, to make sure
| companies exist that sell stuff to you in the future, but
| how are those companies supposed to survive the 10 years
| until you retire, if you never buy anything?
| coliveira wrote:
| In fact the problems of supply that you mention are a
| demonstration of the failure of supply side economics. The
| whole theory is based on the idea that if you give fiscal
| incentives to the supply side, you will have more supply. But
| what we see in reality is that more fiscal benefits were
| provided and the industries are not responding, according to
| the examples you gave.
|
| Another example is the healthcare and Pharma industry: more
| incentives should result in more competition and lowered
| costs, but exactly the opposite is happening: consolidation
| and higher costs.
| JumpCrisscross wrote:
| > _Laffer and this guy that died are a total joke_
|
| Laffer curves are empirically corroborated [1][2]. For most
| taxes, there is a point past which raising the tax rate starts
| decreasing revenue.
|
| The problem was politicians defining a made-up number as that
| point and voters going along with it.
|
| [1]
| https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.47...
|
| [2]
| https://www.sciencedirect.com/science/article/abs/pii/S03043...
| jayd16 wrote:
| Agreed. Its not controversial that at a 100% tax rate, work
| would not be done, and at a 0% tax rate no tax will be
| collected.
|
| The issue has always been using these points to extrapolate
| any policy you want because where you land on the curve or
| even the shape of said curve IS up for debate.
| throw0101a wrote:
| > [...] this guy that died are a total joke.
|
| An article Krugman wrote in 1999:
|
| > _Later Mundell would broaden this initial insight by
| proposing the concept of the "impossible trinity"; free capital
| movement, a fixed exchange rate, and an effective monetary
| policy. The point is that you can't have it all: A country must
| pick two out of three. It can fix its exchange rate without
| emasculating its central bank, but only by maintaining controls
| on capital flows (like China today); it can leave capital
| movement free but retain monetary autonomy, but only by letting
| the exchange rate fluctuate (like Britain-or Canada); or it can
| choose to leave capital free and stabilize the currency, but
| only by abandoning any ability to adjust interest rates to
| fight inflation or recession (like Argentina today, or for that
| matter most of Europe)._
|
| * https://slate.com/business/1999/10/o-canada.html
|
| His theoretical work allowed the Euro to be developed (which
| may or may not have been a good idea).
| imtringued wrote:
| >His theoretical work allowed the Euro to be developed (which
| may or may not have been a good idea).
|
| It's pretty much one of the most dysfunctional currencies out
| there.
| throw0101a wrote:
| Krugman in 1998:
|
| > _Here 's how the story has been told: a year or two or
| three after the introduction of the euro, a recession
| develops in part - but only part - of Europe. This creates
| a conflict of interest between countries with weak
| economies and populist governments - read Italy, or Spain,
| or anyway someone from Europe's slovenly south - and those
| with strong economies and a steely-eyed commitment to
| disciplined economic policy - read Germany. The weak
| economies want low interest rates, and wouldn't mind a bit
| of inflation; but Germany is dead set on maintaining price
| stability at all cost. Nor can Europe deal with "asymmetric
| shocks" the way the United States does, by transferring
| workers from depressed areas to prosperous ones: Europeans
| are reluctant to move even within their countries, let
| alone across the many language barriers. The result is a
| ferocious political argument, and perhaps a financial
| crisis, as markets start to discount the bonds of weaker
| European governments._
|
| * https://web.mit.edu/krugman/www/euronote.html
|
| Which is basically what happened in ~2010:
|
| *
| https://www.nytimes.com/2011/01/16/magazine/16Europe-t.html
|
| Germany being 'fiscally obstinate' is a continuing issue:
|
| * https://www.irishtimes.com/opinion/paul-krugman-the-
| world-ha...
|
| Europe is basically like the US was pre-Civil War, where
| people would say " _these_ United States ": not quite
| culturally whole, and pulling in all sorts of directions.
| Given the pull of (economic) gravity Germany has, everyone
| is kind of forced to follow their lead, even when it
| doesn't make much sense.
| andrepd wrote:
| > His theoretical work allowed the Euro to be developed
|
| I rest my case.
| bigbillheck wrote:
| More a Typhon than a Zeus.
| BlueTemplar wrote:
| Hmm, and not a mention of the US reaching peak conventional oil
| production around 1970, which pushed trade balance in the red,
| and was the main reason behind the stagflation and the end of the
| gold standard...
| pydry wrote:
| >Somehow Keynesianism--and monetarism--limped into the 1970s,
| saying you can manage domestic demand and supply, and therefore
| growth and employment, by adjusting taxes and spending and the
| money stock in a country, even though Mundell's field-defining
| articles of the previous two decades had shown that capital
| movements will overwhelm all efforts at domestic authorities to
| fine-tune their way to a desired result.
|
| It's weird the way this article determinedly avoids considering
| the notion that a hypothetical country (let's our hypothetical
| country "China") could impose capital controls to avoid being
| overwhelmed by inflows and outflows of capital and manage
| effective domestic growth by adjusting taxes and spending.
|
| This disproves Keynesianism, apparently.
|
| It's like saying that it is impossible to build anything next to
| the sea because it will be destroyed by waves.
| cryptonector wrote:
| I'm not sure the latter part ("manage effective domestic growth
| by adjusting taxes and spending") is correct at all. China
| manages its economy via SOEs and targeted and massive credit,
| as well as financial repression (of which capital controls are
| a component).
| jariel wrote:
| Capital controls come with huge costs, it's another form of
| import/export controls. Imagine being told the part you need to
| manufacture your car is 4x the normal price because of intense
| focus on capital controls, or worse, that you can't get it.
| pydry wrote:
| Imagine being Thailand in 1997: the stock market plunges 75%
| in one day, GDP contracts ~10%, a wave of bankruptcies,
| poverty and inequality skyrocketing while the government has
| to go begging to the IMF, accepting any and all demands that
| they make, no matter how unpopular.
|
| You're better off being China.
| jariel wrote:
| ? That crisis was literally started by misguided attempts
| at currency controls (!) i.e. Thai pegging their currency
| to USD and unable to 'hold the wall against the sea' so it
| eventually came crashing in.
|
| So yes, Thailand 1997 demonstrates very effectively one of
| the challenges with currency controls.
|
| Currency controls come with a cost, that has to be
| considered.
| pydry wrote:
| Capital controls are controls what kind of capital can
| enter and exit the country and when - e.g. transaction
| taxes or exchange controls (limiting how much currency
| you can buy or sell).
|
| Currency pegs are when the government tries to maintain a
| particular value against another currency. E.g.
| maintaining a $ peg by buying or selling US treasuries on
| the open market.
|
| They are not the same thing at all.
|
| Currency pegs should probably additionally be separated
| into two groups, as, well - "too high" (UK and Thailand)
| and "too low" (China).
|
| The crisis could be characterized as an attempt to adhere
| to the impossible trinity:
| https://en.wikipedia.org/wiki/Impossible_trinity
| jariel wrote:
| When the government is buying and selling currency at
| some rate commensurate with capital coming in and out of
| the country -> it's a capital control.
| pydry wrote:
| Reacting to capital leaving the country uncontrolled is
| not a capital control.
|
| It's a reaction to capital leaving the country
| uncontrolled.
|
| Fixed exchange rate regimen != capital controls.
| Joker_vD wrote:
| Yes, imagine being a business in a country under the US
| sanctions. Without ability to import cheaper foreign parts,
| what would happen? In a country large enough one would
| imagine it would lead to the appearance of the home industry
| that would provide a substitute. More expensive, and of lower
| quality, sure, but Rome was not built in a single day.
| jariel wrote:
| Imagine putting nuclear weapons on your lawn and pointing
| at your neighbour and being surprised that they decide not
| to trade with you.
| JumpCrisscross wrote:
| > _Without ability to import cheaper foreign parts, what
| would happen?_
|
| We'd lose the economies of scale that come with being a
| major exporter to Europe and South America, for starters.
| Which would lead to an R&D disadvantage. Which would
| further widen the gap. Strategically protecting industries
| is very different from blanket sanctions / capital
| controls.
| Joker_vD wrote:
| That's why I said "large enough country", that'd would
| allow to retain the scale somewhat. And if you look at
| the examples of Iran/EU trade and Russia/EU trade,
| perhaps the exports won't even go down that much, so
| perhaps doubling down on R&D to keep being competitive
| would even be feasible.
| tablespoon wrote:
| > Capital controls come with huge costs, it's another form of
| import/export controls. Imagine being told the part you need
| to manufacture your car is 4x the normal price because of
| intense focus on capital controls, or worse, that you can't
| get it.
|
| Lack of capital controls can come with a bigger costs, for
| instance if your country is weakened through the loss of
| strategic industries (or failure to gain them) while your
| businesses followed market incentives. The difference is that
| many of those costs are billed irregularly, so it's easy to
| pretend they don't exist by focusing on regularly billed
| things (e.g. price of widget now).
| cryptonector wrote:
| I don't know why you got downvoted, but capital controls are
| very much the other side of the same coin.
|
| My take is that we should aim for balanced international
| trade (not quotas, but balance), and that would require
| either capital controls or import/export controls at least to
| establish, and probably (but more flexibly) to maintain that
| order.
| billiam wrote:
| A man whose 1960s ideas were ideal for the seventies and helped
| destroy our economic system in the 1990s while enabling the
| billionaire winner take all society of today.
| dang wrote:
| Substantive critique is welcome, but please don't post
| rhetorical ideological drive-bys to HN. It leads to shallower,
| more repetitive, and nastier internet discussion--all of which
| is uninteresting.
|
| https://news.ycombinator.com/newsguidelines.html
| hindsightbias wrote:
| After the stimulus bills of 2020 one would think everyone is a
| Keynesian (maybe excluding Rand Paul, he probably voted against
| it).
| dragonwriter wrote:
| The 2020 COVID relief wasn't as much argued on Keynesian
| stimulus terms as, say, the 2009 ARRA stimulus, but more as
| disaster relief.
| hindsightbias wrote:
| They just don't want to use the K word.
| imtringued wrote:
| It goes both ways. The government closed businesses, but
| also gave them resources to stay in business. You can argue
| it was Keynesian, but you can also argue it wasn't.
|
| However, pretty much everything Biden did, was Keynesian.
| pessimizer wrote:
| Honoring a man who never got anything right. A man whose
| predictions were never bore any material fruit, but justified
| everything billionaires were going to do anyway.
| dragonwriter wrote:
| > Somehow Keynesianism--and monetarism--limped into the 1970s,
| saying you can manage domestic demand and supply, and therefore
| growth and employment, by adjusting taxes and spending and the
| money stock in a country, even though Mundell's field-defining
| articles of the previous two decades had shown that capital
| movements will overwhelm all efforts at domestic authorities to
| fine-tune their way to a desired result.
|
| On the one hand is an attractively reasoned theoretical argument
| as to why it _can't_ ever work. [0]
|
| On the other side is the repeated, concrete experience that it
| _does_ work.
|
| [0] Although, even per the article, it doesn't show that in the
| case of "a solitary global economic hegemon", which might, even
| if it was otherwise completely correct, be a pretty important
| limitation to its applicability to late-20th and early-(as in so
| far)-21st Century US policy.
| Judgmentality wrote:
| My comment is a tangent, but I just love sharing this
| paraphrase whenever I can:
|
| Socialism is something that works in theory but doesn't work in
| reality. Wikipedia is something that doesn't work in theory but
| works in reality.
|
| Ideas are great, but ultimately what matters is reality.
| heterodoxxed wrote:
| If Wikipedia editors were regularly getting merc'd by CIA-
| funded contras, we'd be talking about how Wikipedia only
| works in theory too.
| adwn wrote:
| Are you suggesting that the reason socialism doesn't work
| is that the CIA regularly kills, well, who exactly? The
| proponents of socialism? Hardly, they'd be assassinating
| 24/7 without making a dent.
|
| EDIT: To clarify, I'm _not_ claiming that the CIA didn 't
| murder socialist leaders. My point is that you can't look
| at all the failed socialist experiments and conclude that
| socialism would have succeeded if only the CIA hadn't
| murdered any socialist leaders.
| heterodoxxed wrote:
| You seem unaware of the history of US foreign
| intervention.
|
| https://en.wikipedia.org/wiki/United_States_involvement_i
| n_r...
|
| There's a very unfortunate reason only the strongmen
| last.
| adwn wrote:
| Oh no, I'm very much aware of it. What I'm saying is that
| your insinuation - that socialism only failed because the
| CIA murdered socialists - doesn't make sense, because
| socialism has been tried several times in different
| countries. It would only make sense if the CIA had
| exclusively murdered the _competent_ socialist leaders,
| while leaving the _incompetent_ socialist leaders alive
| to try out socialism in their countries. This would also
| require the CIA to have the foresight to know beforehand
| which leaders will turn out to be incompetent.
| [deleted]
| heterodoxxed wrote:
| | _This would also require the CIA to have the foresight
| to know beforehand which leaders will turn out to be
| incompetent._
|
| First, as I said before, when the CIA targets socialist
| leaders, only the strongmen survive. It's my belief that
| strongmen are not great leaders, they're just the best at
| not getting killed. This is why people associate
| "socialist" with "authoritarian", because the crunchy,
| hippy Bernie Sanders types get shot and their supporters
| get thrown from helicopters.
|
| Second, killing socialist leaders isn't the only thing
| the CIA does. Look up any CIA counter-revolution manual
| and part of their cointel is to do as much as possible to
| destabilize the politics and economy of the country. Any
| socialist leader (or even just mildly social democratic
| leader) has to contend with this in a way that a
| capitalist leader doesn't. Even under these
| circumstances, we still have relative success stories
| like Cuba, which while not great from a first world
| perspective is a much better place to be an average
| citizen than Haiti or Dominican Republic. Or Bolivia,
| which got coup'd but popular support was able to oust
| Anez and whose economic reforms have increased GDP per
| Capita by 50%.
|
| You can't state something as definitive as "socialism
| doesn't work" when history includes the greatest empire
| the world has ever known doing everything in its power to
| crush it.
| robocat wrote:
| I suspect you are using the word "socialism" wherever it
| would be more honest and clearer to use "communism".
| Firstly, your definition of socialism makes it a strawman
| or tautology - socialism is that which has failed.
|
| Many other people in the world use the word socialism to
| also have positive meanings where society shares its
| wealth with everyone in that society.
|
| Most every wealthy first world country has a significant
| taxation system that is inherently "socialist" IMHO. The
| individual is taxed, and the tax income is spent for the
| weal of all: on infrastructure, defence, social benefits,
| health benefits, etcetera. What word do you use for that
| concept?
|
| I am from New Zealand, which is definitely not a failed
| state, where: "Total core Crown revenue for the 2018/19
| financial year was $119.3 billion. Tax revenue []
| totalled $86.5 billion in the 2018/19 financial year."
| and "The three largest areas of total Crown expenditure
| for the 2018/19 financial year were: Social security and
| welfare: $34 billion, Health: $18.7 billion, Education:
| $15.3 billion".
|
| That is, in NZ, 3/4 of tax income was spent on
| "socialist" welfare state expenditures of education,
| health, and social services for the majority.
|
| I know that is off-topic, but I just find how you frame
| your arguments to be severely biased.
| andrepd wrote:
| Short story: in 1953 Jacobo Arbenz of Guatemala initiated
| a land reform program. Large uncultivated holdings were
| expropriated, the owners compensated as per the value
| they themselves declared on their tax forms, and
| redistributed to the landless peasantry. Previously, 2%
| of the population controlled 72% of the arable land (with
| the United Fruit Company alone owning 42% of arable
| land!), poverty was widespread, but at the same time much
| of the land was unused. Practices such as labour-as-rent
| meant that much of the population, especially indigenous
| persons, were effectively serfs in a feudal system.
| Health outcomes were also very poor.
|
| After the reforms poverty was slashed, The government
| also created a line of credit for the newly landed
| farmers to get their things going: it dispensed
| $3,371,185 in loans during 1953. By July 1954 $3,049,092
| had been paid back! An success almost without parallel in
| history.
|
| Cutting to the chase, the US didn't like that, so they
| initiated one operation to boot him out and install a
| sympathetic dictator. It failed, so they tried again, and
| it succeeded. The new establishment proceeded to revert
| all those reforms, give back land to foreign hoarders.
| The US also placed death squads through the countryside
| to enforce the change, paving the way for decades of
| civil war.
| imtringued wrote:
| Zimbabwe had the exact opposite experience. White farmers
| lost their land and then the Mugabe regime gave it to
| people who didn't farm on it. Food has to be imported and
| paid with loans denominated in a foreign currency.
| Zimbabwe can't print US dollars, so it obviously ended in
| hyperinflation.
| adwn wrote:
| Look, I don't want to defend or deny the many, many
| atrocities and crimes the US committed in the last 100
| years, far from it. However, one year (or even five
| years) is _much_ too short a timespan to judge whether a
| socialist reform is successful or not.
| heterodoxxed wrote:
| | _too short a timespan to judge_
|
| Be really cool if we had more time to see it through
| before they started massacring peasants.
| dang wrote:
| Please don't take HN threads on generic ideological tangents.
| This is a perfect example of what the HN guidelines ask you
| not to do:
|
| https://news.ycombinator.com/newsguidelines.html
| Judgmentality wrote:
| It was meant to be a fun example of focusing on reality
| instead of theory, not a political tangent. Anyway,
| apologies.
| WC3w6pXxgGd wrote:
| Socialism doesn't even make sense in theory.
| Causality1 wrote:
| To clear some inevitable confusion, Zeus in this context is
| intended as a compliment. Bob Mundell is not a libertine with
| jealousy and anger issues.
| throw0101a wrote:
| Paul Krugman tweeted this article that he wrote in 1999:
|
| > _Later Mundell would broaden this initial insight by proposing
| the concept of the "impossible trinity"; free capital movement, a
| fixed exchange rate, and an effective monetary policy. The point
| is that you can't have it all: A country must pick two out of
| three. It can fix its exchange rate without emasculating its
| central bank, but only by maintaining controls on capital flows
| (like China today); it can leave capital movement free but retain
| monetary autonomy, but only by letting the exchange rate
| fluctuate (like Britain-or Canada); or it can choose to leave
| capital free and stabilize the currency, but only by abandoning
| any ability to adjust interest rates to fight inflation or
| recession (like Argentina today, or for that matter most of
| Europe)._
|
| * https://slate.com/business/1999/10/o-canada.html
|
| * Via: https://slate.com/business/1999/10/o-canada.html
| dale_glass wrote:
| What a strange metaphor. Why Zeus?
|
| Zeus is known for using violence to get whatever he wanted, and
| screwing anything that moved (despite being married)
| mr-wendel wrote:
| The trick with economics is to realize that 99% of all discussion
| is about a particular flavor of economics. It's almost always
| about theory and implementation, not principles and abstractions.
| Inevitably, there is also a significant political aspect that is
| often (but not always!) overlooked.
|
| Even if there is a "raw" theory of economics that describes the
| "what" in a universally agreeable way it'll never tell us the
| "why" and "how" of it, let alone how politics should (or should
| not) be intertwined with the issues.
| tw04 wrote:
| The Zeus of economics? I'd say the last 50 years of wage
| stagnation for the working class and the massive increases in
| wealth inequality might call some of his theories into
| question...
| nickelcitymario wrote:
| I think it was meant to convey the impact he had on economics,
| not as a vote of confidence for those contributions.
___________________________________________________________________
(page generated 2021-04-06 23:01 UTC)