Archive for October 7th, 2009

Differences in Inflation Outlook amongst forecasters

October 7, 2009

FRBSF economists have a nice short paper on disagreements amongst forecasters on the inflation outlook in US economy.

Disagreement among economic forecasters about the future path of inflation has risen substantially since the start of the recession. The nature of this disagreement varies with the forecast time horizon, with some forecasters expecting much lower short-run inflation and others anticipating much higher long-run inflation. This variation may complicate the Federal Reserve’s monetary policy communications strategy.

The authors point how this complicates Fed mon policy and the need for Fed to communicate properly.

Want Govt to pass a proposal – Get Bentham on your side

October 7, 2009

Greg Mankiw points to this excellent NYT article by David Brooks. Brooks points to two kinds of guys- Mr Bentham and Mr Hume.

Mr. Bentham knows everything. He went to Stanford, then to the Kennedy school before getting a business degree. He’s got multivariate regressions coming out of his ears, and he sprinkles C.B.O. reports on his corn flakes for added fiber.

Mr. Hume is very smart, too, but he doesn’t seem to make much use of his intelligence. He worked on Wall Street for a little while, but he never could accurately predict how the market was going to move tomorrow or the day after that.

Then he explains more characterisitics of the two, and says in the end:

I’ve introduced you to my friends Mr. Bentham and Mr. Hume because they represent the choices we face on issue after issue. This country is about to have a big debate on the role of government. The polarizers on cable TV think it’s going to be a debate between socialism and free-market purism. But it’s really going to be a debate about how to promote innovation.

The people on Mr. Bentham’s side believe that government can get actively involved in organizing innovation. (I’ve taken his proposals from the Waxman-Markey energy bill and the Baucus health care bill.)

The people on Mr. Hume’s side believe government should actively tilt the playing field to promote social goods and set off decentralized networks of reform, but they don’t think government knows enough to intimately organize dynamic innovation.

So let’s have the debate. But before we do, let’s understand that Mr. Bentham is going to win. The lobbyists love Bentham’s intricacies and his stacks of spending proposals, which they need in order to advance their agendas. If you want to pass anything through Congress, Bentham’s your man.

:-)


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