{"id":4498,"date":"2019-03-22T13:33:43","date_gmt":"2019-03-22T13:33:43","guid":{"rendered":"https:\/\/www.novonon.com\/blog\/2019\/03\/22\/updated-takes-from-paul-krugman-on-modern-monetary-theory\/"},"modified":"2019-03-22T14:43:35","modified_gmt":"2019-03-22T14:43:35","slug":"updated-takes-from-paul-krugman-on-modern-monetary-theory","status":"publish","type":"post","link":"https:\/\/www.novonon.com\/blog\/2019\/03\/22\/updated-takes-from-paul-krugman-on-modern-monetary-theory\/","title":{"rendered":"Updated takes from Paul Krugman on Modern Monetary Theory"},"content":{"rendered":"

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From a modern perspective, \u201cFunctional finance\u201d is really cavalier in its discussion of monetary policy. Lerner says that the interest rate should be set at the level that produces \u201cthe most desirable level of investment,\u201d and that fiscal policy should then be chosen to achieve full employment given that interest rate. What is the optimal interest rate? He doesn\u2019t say \u2013 maybe because through the 30s the zero lower bound made that point moot.<\/p>\n

Anyway, what actually happens at least much of the time \u2013 although, crucially, not when we\u2019re at the zero lower bound \u2013 is more or less the opposite: political tradeoffs determine taxes and spending, and monetary policy adjusts the interest rate to achieve full employment without inflation. Under those conditions budget deficits do crowd out private spending, because tax cuts or spending increases will lead to higher interest rates. And this means that there is no uniquely determined correct level of deficit spending; it\u2019s a choice that depends on how you value the tradeoff.<\/p>\n<\/blockquote>\n

https:\/\/www.nytimes.com\/2019\/02\/12\/opinion\/whats-wrong-with-functional-finance-wonkish.html<\/a><\/p>\n

https:\/\/www.nytimes.com\/2019\/02\/12\/opinion\/how-much-does-heterodoxy-help-progressives-wonkish.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

From a modern perspective, \u201cFunctional finance\u201d is really cavalier in its discussion of monetary policy. Lerner says that the interest rate should be set at the level that produces \u201cthe most desirable level of investment,\u201d and that fiscal policy should then be chosen to achieve full employment given that interest rate. What is the optimal […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-4498","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3pfIY-1ay","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/posts\/4498","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/comments?post=4498"}],"version-history":[{"count":2,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/posts\/4498\/revisions"}],"predecessor-version":[{"id":4501,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/posts\/4498\/revisions\/4501"}],"wp:attachment":[{"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/media?parent=4498"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/categories?post=4498"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.novonon.com\/blog\/wp-json\/wp\/v2\/tags?post=4498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}