An interesting Economist economic focus column this week. Curve ball: A link between unemployment and inflation is fashionable again

An interesting Economist economic focus column this week. Curve ball: A link between unemployment and inflation is fashionable again

If haircuts and dress styles can come back into fashion, then so can economic theories. That is why policymakers have recently been debating the implications of the shape of that very 1960s concept, the Phillips curve...more>>

Smith and Marshall and Wealth and Poverty

Greg Mankiw's recent post on the origins of supply-and-demand analysis -- and his mention of Alfred Marshall's role in the history of making this valuable tool such a central part of economics -- recalled to my mind another interesting feature of Marshall's Principles of Economics. I was going to blog on this other feature when I vaguely remembered doing so earlier. Here's that earlier post, from August 2004, which points out a telling difference in the great Alfred Marshall's perspective on the world compared to the perspective of the great Adam Smith:...more>>

"Ricardo's Difficult Idea"

The usefulness of mathematical modeling, a subject brought up by Krugman in this commentary, seems to have struck a bit of a chord. So let me follow up with one or two more commentaries from Krugman on this topic. Let's start with this defense of both economic models and Ricardo's theory of comparative advantage (this is fairly long -- Section 4, "The Two Cultures," deals directly with mathematical modeling):..more>>

"The Many Faces of Adam Smith"

The real Adam Smith was a complex thinker, capable of holding and exploring ideas even when they were in conflict. To understand Smith, Ms. Rothschild says his contributions must be viewed in light of 18th-century institutions...more>>

Economists as Engineers

Today I was thinking about the fact that I mainly got into economics to understand how the world works, not to do policy or try to use the tools of economics to recommend how to change economic institutions, though economic policy was certainly of interest too. But mostly I just wanted to understand it all, like a kid taking apart a toy to figure out how it works. I was particularly interested in understanding how money functions and what affect changes in the money supply would have on the economy. I have no idea why economics interests me so much, but it does...more>>

The Exchange Rate-Consumer Price Puzzle

Diego Valderrama, an Economist at the San Francisco Fed, discusses a puzzle. Why are consumer prices so unresponsive to exchange rate movements? Is it transportation costs, non-traded goods, or market power?:...more>>

Has economics grown up?

Neoclassical economics no longer dominates a mainstream economics as it once did. Is the neoclassical economics research programme breaking down, being supplanted by other research programmes - or are we simply seeing a new maturity in economics?

John Davis considers the issue in the latest Journal of Institutional Economics. His article The turn in economics: neoclassical dominance to mainstream pluralism? (PDF) is available to download. Here is the abstract:...more>>

Phillips Curve

In Arthur Laffer’s case, it might have been carelessness in the use of words, but the latest attack on the Phillips curve by Larry Kudlow (discussed by Mark Thoma and pgl) is unmistakably either disingenuous or ignorant. (I'd prefer not to use such inflammatory terms, but I just can't think of a nice way to say it.) I single out Larry Kudlow only because his is the most recent example. I’ve heard similar arguments in the past, and I’m never sure whether the people making the argument realize that they are attacking a straw man – a man made completely of straw, that is, with no hope of even finding the Yellow Brick Road. But it’s one or the other: either Larry Kudlow is trying to pull the wool over people’s eyes, or he is somehow unaware of the last 40 years of Phillips curve research...more>>

What is Inflation?

I’m not sure what combination of carelessness, ignorance, malice, and/or rhetorical convenience causes Arthur Laffer to mischaracterize the Phillips curve, but…maybe I should be nicer, since I actually agree with Laffer’s main point. ..more>>

Measuring Poverty: Income vs Spending

In today's Washington Post, Nicholas Eberstadt says poverty is mismeasured because the poverty rate is based on annual income. Applying the logic of the permanent income hypothesis, he suggests that consumer spending is a better measure of a family's well-being, and he says that its use would lead to very different conclusions.

Here is the essence of his argument:...more>>