Category The 2008-9 recession
“Buy domestic” policies are individually irrational too
Most (all?) economists agree that in a global recession, when each country wants to boost demand for the goods it produces, policies which steer demand to domestically-produced goods are individually rational (provided other countries don't retaliate), but collectively irrational when all countries do the same. I think most economists are wrong. It's not just collectively […]
In defence of crass materialism (temporarily)
Economists are sometimes accused of crass materialism. Normally I would plead innocent, and accuse the accuser of misunderstanding economics. But right now I am in favour of crass materialism. I want government investments which yield a monetary return. Government investments which make people happy but bring in no cash aren't as good right now. And […]
Canada is not the United States: Stimulus-by-infrastructure edition
In an earlier post, I asked "Just who is supposed to build the new infrastructure?" Since then, no-one seems to have even attempted to provide an answer, so I'm asking it again. I agree with the following points: The US needs a large fiscal stimulus. Canada needs a not-quite-so-large fiscal stimulus. A US infrastructure program […]
Government borrowing, private spending
1. "If a private firm decides to borrow more and increase its investment spending, aggregate demand will increase." 2. "If government decides to borrow more and increase its investment spending, aggregate demand will increase". 3. "If government decides to borrow more, and lend to a private firm to increase its investment spending, aggregate demand will […]
Strengthen automatic stabilisers instead?
Suppose you believe that Canada (or the US, or wherever), needs a more expansionary fiscal policy now. If so, answer these questions: 1. Would you also recommend a more expansionary fiscal policy at some future time, if Canada ever found itself in the same situation as it is now? 2. If so, why would you […]
Federal budget speculation: Things you want to see and/or things you expect to see
The Conservatives will bring down their budget Tuesday, and we may as well join in the frenzy. Readers are invited to submit their proposals in the following categories (and are encouraged to add categories if the ones below don't fit): Good ideas that are likely to be part of the budget: Since the Liberals have […]
Canadians should stop beating themselves up: it’s really not our fault
Last week, my colleague Bernard Beaudreau and I were guests on the local Radio-Canada afternoon show to discuss recent events (lots of fun, BTW: if there's anything more riveting than an economist on the radio, it's two economists), and at one point I found it necessary to argue against the notion that the recession that […]
How do we reduce our debt/income ratios? The paradox of debt.
It's a common theme that the financial crisis was caused by too much debt, relative to our incomes. So if we want to get out of the crisis, we need to reduce our debt/income ratios. How? For an individual, the answer is easy and obvious: spend less, save more, and pay down debt. But for […]
One useful insight from Austrian business cycle theory
I am not an Austrian, but… Three decades ago (ouch!) I made a valiant effort to understand Austrian business cycle theory. I failed. I wanted to believe it, because I found the existing theories (Old Keynesian or New Classical) unsatisfactory. But I couldn't get it to make sense.
Employment in the current and in previous recessions
Alex Tabarrok at Marginal Revolution has posted a graph comparing the decline in US employment during the current recession with what happened in the past, and Menzie Chinn at Econbrowser has offered a similar graph for industrial production. At first glance, these graphs seem comforting: the current experience seems to be following a moderate course, […]
Worthwhile Canadian Initiative 
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