Nobel Lies/October 17, 2011, 8:38 AM

Nobel Lies ノーベル賞の嘘

The right was quick to claim this year’s economics Nobel as an anti-Keynesian prize. Chris Sims sets the record straight:

Professor Sims doesn’t want to be pigeonholed. “I’m not ‘non-Keynesian,’ ” he said, adding that he has been an active “promoter of new Keynesian macroeconomic models,” because they “are the place in our profession where theory and data and policy decision-making are coming together.”

“It doesn’t really make much sense to stand on the sidelines and take potshots at them,” he said. “If you don’t like the way they’re working, you should try to do better.”

He and Professor Sargent have been “trying to do empirical macroeconomics using formal tools of statistics,” he said. “Those tools aren’t in themselves ideological.”

Professor Sims spoke favorably of the Obama administration’s fiscal stimulus programs, which are Keynesian in their countercyclical spending. “An expansionary fiscal policy is probably what we need right now,” he said.

Let me also add a bit of meta here. What does an economics Nobel mean? What does it do? Not what some people seem to think.
ここで少しメタ的なことについて僕に付け足させてほしい。ノーベル経済学賞に何の意味があるのか? いくらかの人が思っているようなものではない。

Anyone who imagines that the Nobel can tip the balance between rival schools of thought in macroeconomics or anything else is just being silly. The committee that chooses each year’s Nobel is just a committee ― smart, well-informed, and scrupulous, but not gifted with godlike powers of discernment not granted to mortal men.

So why does the prize matter? Mainly, I’d say, because it gives visibility. And the main way the Nobel can alter the debate is by highlighting work that wasn’t getting as much attention it arguably should. Something like, say, Herbert Simon’s Nobel can raise the profile of a line of work in ways that affect both public debate and actual research.
それならその賞はなぜ重要なのか? 僕に言わせりゃ、大部分はそれが可視性を与えてくれるからだ。ノーベル賞が議論を変えることができるのは、主に、間違いなくもっと注目を集めるべきであるのにそうなっていない研究に光を与えることを通してのことだ。たとえば、ハーバート・サイモンへのノーベル賞は公共の議論と実際の研究の双方に影響を与え、その線に沿った研究のプロフィールを高めることができた。

In my own case ― hey, we can’t avoid that subject ― I think there were two things. One was that the trade and geography under increasing returns project that a number of us had advanced over the previous several decades was not as widely known even within economics as you might have expected; the field can be surprisingly fragmented. The other was that a lot of people who knew me only as a Times columnist were informed for the first time that I had this other side. The point, however, is that the verdict wasn’t what mattered; it was the increased visibility.

So the Sims/Sargent prize isn’t a vindication of anyone or any particular point of view; it’s basically a signal saying, hey, if you haven’t been aware of this important line of work, now is a good time to read up on it.

Oh, and in case I haven’t made this clear, hearty congratulations again to both men.


Hungary, Misunderstood?/January 21, 2012, 5:25 PM

Hungary, Misunderstood? ハンガリーは誤解されてるのか?

My Princeton colleague Kim Lane Scheppele has another post about Hungarian affairs, below the fold. Incidentally, she’s going to Budapest this coming week; she’ll be giving some public lectures and meeting with a number of people. Wish her luck.
僕のプリンストンの同僚Kim Lane Scheppeleがハンガリー問題についての新たなポストをしてくれた。この下にある。ところで、彼女は今週ブダペストに行く;公開講座を行いたくさんの人々と会合を持つことになっている。彼女に幸運があらんことを。

Here’s her latest:

Hungary, Misunderstood?
Kim Lane Scheppele

On Tuesday, January 17, the European Commission launched an urgent “infringement procedure” against Hungary for violating EU treaties with its new laws. On Wednesday, January 18, Viktor Orbán dramatically appeared before the European Parliament to defend his country’s new constitutional order.

Orbán’s defense could have been guessed in advance from what Fidesz government officials have been saying for weeks as they fanned out around the world to explain why they rewrote the Hungarian constitution. They claim that they have been misunderstood. And they repeatedly say that their many foreign critics do not understand Hungary.

In this post, I will take up the most frequent arguments that the government has made in its own defense. And, as I will show, its explanations for the new constitutional order are not credible.

The main government explanations are:

1. Fidesz has a popular mandate for change and democracy requires a government to give the public what it wants.
2. Fidesz has consulted with the public about the constitution and this is the constitution that the public approved.
3. Fidesz has consulted with European agencies and they have approved, too.
4. Fidesz is replacing a communist constitution, and finally closing the chapter on the communist period.
5. Fidesz is acting on the basis of Christian principles, like other states within Europe.
6. Everything in the new constitutional order can be found in other European countries.

I will take up each of these in turn.

First, the Fidesz government says that it has a mandate for change. In spring 2010, 53% of the voters chose for Fidesz. The existing Hungarian electoral law then turned the 53% vote for Fidesz into 68% of the seats in the Parliament. Now Fidesz argues that the public signed up for radical change, so the public should get what it wants.

The problem with the argument is that the numbers do not sustain it. The latest Ipsos poll results from January shows that Fidesz popularity in Hungary continues to plummet after the public has seen what the government is actually doing. Now, only 16% of eligible voters say that they would vote for Fidesz again. (See the chart below.) Fully 84% of those who were interviewed in January, shortly after the new constitution went into effect, said that Hungary is headed in the wrong direction.


As the chart shows, however, even with this lack of support, Fidesz is still the most popular party in the country. The absence of a viable opposition, however, does not mean that Fidesz is doing what Hungarians want.

If Fidesz had a mandate for change – that mandate is no longer there. The Hungarian public no longer supports the government.

Second, the government claims that this is the constitution Hungarians wanted. As I have said before, the government never campaigned on a platform of changing the constitutional order. In fact, Fidesz party leaders explicitly denied before the election that they would write a new constitution if they won. New constitutions are often accompanied by a public referendum to ensure public support for such a transformative change. But no referendum has been offered in Hungary.

Was the Hungarian public ever consulted about this new constitution? Well, sort of. The government sent out a survey to all Hungarian citizens asking them twelve questions about what the new constitution should say. This survey went out before there were any concrete proposals on the table, so the questionnaire was not a referendum on a draft constitution. But the questionnaire did not serve as input to the constitutional drafting process, either.
ハンガリーの大衆はこの新憲法について意見を求められたのか? まあ、少しは。政府は、全てのハンガリー市民へ新憲法に何が書かれるべきかについての12の質問を尋ねる調査票を送った。この調査は、テーブルの上に具体的な提案がなされる前に行われたので、その質問事項は憲法草案に関しての国民投票ではなかった。しかも、その質問事項は憲法草案のプロセスに取り入れられることもなかった。

The government distributed the questionnaire in early March 2011, and the draft constitution was presented to the parliament on March 14, 2011. Most of the responses were not returned – let alone tabulated – by the time the proposed constitution was for adoption, so they could not possibly have affected the drafting process.

Moreover, the vast majority of the public did not respond and no one outside the government knows what the public said. While the government reported that there was an 11% return rate, , the tally of opinion was never publicly presented. No one outside the governing party has seen the responses.

Even if we knew the results, however, it is hard for the survey to have made much of a difference. The twelve questions asked of citizens did not bear on the most important issues in constitutional design, like the powers of the Constitutional Court, the existence of an independent judiciary, the nature of the electoral system or even the extent of media regulation. Instead the questions asked about whether the constitution should protect biodiversity in the Carpathian Basin or permit children to be taxed or punish people who failed to appear when called before parliamentary committees.

The constitutional questionnaire recalls the survey spoofed by the famous Hungarian writer István Örkény in his “one minute story,” called “Public Opinion Poll.” In the story, hapless communist citizens are asked a series of random questions only to have the results conclude that everything is perfect, except that the #19 bus could run more often. (For English, go to the end of this video.)
その憲法についての質問事項は、有名なハンガリーの作家Istvan Orkenyが『one minute story』でからかった、「世論投票」と呼ばれる調査を思い起こさせる。この話の中で、不運な共産主義者の市民は、#19バスはもっと頻繁に運行できるということを除いて、全てが完璧であるという結論を出すしかない一連のでたらめな質問を尋ねられる(英語が使える人は、このビデオの最後の方を見てほしい)。

Has the public approved this constitution? Not in its initiation, its drafting process or its particulars.
大衆はこの憲法を承認しているのか? 初めはそうではなかったし、草案過程でも個別例でもそうではない。

Third, the government also claims that it has consulted with European bodies about the most important elements of its constitutional reform. But the European agencies that were consulted would disagree. Hungary has repeatedly produced draft laws for review by European authorities that did not reflect the laws that were actually introduced into the Parliament. Each time, the English-language versions offered to foreign reviewers were substantially more compliant with European law than the laws actually enacted in Hungarian, which suggests that the government wants to appear more Euro-friendly than it is actually willing to be. European bodies are now suspicious of Hungary, as a result. I’ll give just two examples.

During the one month that the constitution was open for public debate, the Hungarian government sent an English translation to the European Commission, as EU law requires it to do. But the English translation left out the controversial and inflammatory preamble. The preamble asserts that sovereignty rests in the Hungarian “nation” (that is, ethnic Hungarians and not Hungarian citizens of all ethnicities). It also includes potentially destabilizing references to Hungary’s “historic constitution” that implicitly laid claim to territories now belonging to neighboring states. In addition, the English version of the constitution presented to the EU was riddled with translation mistakes that changed the sense of the text. . By the time the preamble was added and the translation was corrected, the EU lost virtually any opportunity to comment since the time from introduction to adoption of the constitution was only one month. And the errors and omissions were not random, but systematically made the constitution look better to European eyes than the Hungarian version would have.

When the Hungarian government sent a draft law on the central bank to the European Central Bank in fall 2011, the English version was also misleading. Nonetheless, the ECB was highly critical of the draft. The actual law introduced into the parliament, however, was much worse since it proposed to merge the central bank with the bank regulator to create a new agency with a Fidesz official at its helm, a major institutional change not in the English version. When international bodies discovered the bait-and-switch, the IMF walked out of its negotiations with Hungary and has refused to go back unless the law is changed.

With these experiences, it is no wonder that European bodies are suspicious of Hungary at this point. The government has claimed to have consulted when it repeatedly failed to provide complete and current translations of laws. Moreover, all the errors of translation and omission go in one direction – toward the conclusion that Hungary is putting a Europe-friendly face forward in English while doing anti-European things in Hungarian.

Fourth, the government defended the new constitution by saying that its actions complete the post-communist transition. They claim to have gotten rid of a communist constitution and by finally closing the books on the communist past. But these claims, too, are misleading.

Yes, it is true that the constitution that was replaced on January 1, 2012 was officially called “Law XX of 1949, as amended.” The Stalinist constitution imposed in 1949 was a standard-issue Soviet constitution. In a root-and-branch reform agreed at the National Roundtable in 1989, the communist spirit was eliminated and much of the language of the text was completely replaced. Those constitutional changes were supplemented by additional amendments in 1990, after the first multiparty elections brought democratic opposition parties to power. The end result bears almost no relationship to the original 1949 text. See for yourself! The 1989-1990 constitution was then elaborated by a Constitutional Court famous around the world for its strong opinions on human rights.
たしかに、2012年1月1日に置き換えられた憲法が公式に「改訂版1949年XX法」と呼ばれていたのは事実だ。1949年に課されたスターリン憲法は標準的なソヴィエト憲法だった。1989年に国民円卓会議で同意された徹底的な改革の中で、共産主義の魂は消えうせ、条文のほとんどの言葉が完全に書き換えられた。それらの憲法の変更に加えて、最初の複数政党選挙で民主的な野党が劇的な勝利を収めて権力についた後の、1990年にも追加的な修正が行われた。その最終的な結果として、元々の1949年憲法の条文とはほとんど関係ないものになっていた。ご自身で見ていただきたい! 1989-90年憲法は人権への強固な見解で世界中に知られた憲法裁判所によって精巧なものになっていた。

Until the Fidesz government started modifying this constitution to eliminate checks and balances, Hungary had a constitution that could proudly take its place among the democratic constitutions of Europe. It is that democratic constitution that was killed off with the new year, not a communist constitution at all.

Fifth, in his defense of the new constitution before the European parliament Wednesday, Viktor Orbán said that his country was trying to restore religion to the center of public life. Surely, he said, having a religious constitution is not out of the European mainstream.

True, a number of European countries, like Poland and Ireland, have constitutions in which religion features strongly. But those are countries with very religious populations. By contrast, Hungary is a highly secular society. Only 21% of Hungarians attend religious services regularly, compared with 84% of the Irish and 55% of the Poles. . Less than half the Hungarian population believes in God, compared with 73% of the Irish and 80% of the Poles. (See the Eurobarometer chart below.) Why, then, is it so crucial for Hungary to have a constitution that proclaims the country to be a Christian nation, and then goes on to include the full checklist of conservative religious views, like the legal protection of the fetus from the moment of conception and a ban on gay marriage? Surely in deciding whether Hungary is a Christian nation, the views of Hungarians should have something to do with it.
たしかに、ポーランドやアイルランドのように、たくさんのヨーロッパの国が宗教的色彩の強い憲法を持っている。対照的に、ハンガリーは非常に世俗的な社会だ。アイルランド人の84%やポーランド人の55%と比べて、ハンガリー人のたった21%だけが定期的に宗教的な儀式に参加する。アイルランド人の73%やポーランド人の80%と比べて、神を信じるハンガリー人の割合は半分以下だ(下のEurobarometerのチャートを見てほしい)。それなら、どうして、ハンガリーがその国をキリスト教国家であると宣言して、受胎の瞬間からの胎児の法律的な保護やゲイの結婚の禁止といった、保守的な宗教的観点の照合表をすべて満たすところまで行く憲法を持つことがそれほど重要なことになるのか? ハンガリーがキリスト教国家かどうかを決めるためには、必ず、ハンガリー人の見方が関係してくるはずだ。


Finally, defending its blizzard of laws, the Fidesz government often says that nothing it has done is out of the European mainstream. But Fidesz wants its critics to evaluate what it has done by taking tiny pieces out of context, when context matters. Going through all of these claims specifically would take far more space than I have. But let me give a one example of what happens when one compares the Hungarian case with European law.

Fidesz has been criticized for its extensive use of private member’s bills, proposed laws that do not have party sponsorship. The Fidesz government responds that nearly every parliamentary system in Europe permits individual members of parliament to introduce private member’s bills. Yes, in many parliamentary systems, bills may be introduced by a single member rather than by a party fraction. Generally, the option of a private member’s bill is designed to give the parliamentary minorities a voice.

In the Fidesz government, however, private member’s bills have been used for almost every important piece of legislation. In fact, for much of the time since Fidesz took office, very few government-sponsored laws have been introduced on the floor of the Parliament. Ten of the twelve constitutional amendments that were passed since Fidesz took office began as private member’s bills. Even the new constitution itself went through the parliament as a private member’s bill! Instead of being a minority-protective procedure, Fidesz has been using the private member’s bill option to entrench its super-majority.
しかし、フィデス政府では、議員提出法案はほとんど全ての立法の重要な部分において使われている。フィデスが政権について以来ほとんどの期間、政府の支援による法律が議会に提案されたことはほとんどない。フィデスが政権について以来、12の憲法修正の内10が議員提出法案として始まっている。新憲法自体も議員提出法案として議会を通っている! 少数派を守る手続きとなる代わりに、フィデスは超多数派の身を守るために議員提出法案という選択肢を使ってきた。

So why did Fidesz use this parliamentary tactic? Under the rules of parliamentary procedure in Hungary, private member’s bills can use a streamlined procedure. No committee review. No multiple readings. No mandatory consultation with opposition parties or interested groups. With a private member’s bill, the Fidesz government could take a constitutional amendment from first proposal into full legal effect in 10 days or less. The new constitution took only about a month from first proposal to final vote. Private member’s bills are clearly the option to use if one is in a hurry.
ところで、どうして、フィデスはこんな議会戦術を使うのか? ハンガリーの議会手続きルールの下では、議員提出法案は迅速な手続きを使うことができる。委員会の審査はない。複合的な解釈(multiple readings)はない。野党や利益団体と諮問する義務もない。議員提出法案を使えば、フィデス政府は、憲法修正案を提案から法的に完全な発効まで10日かそれ以下ですませることができる。新憲法は提案から採決までたった一ヶ月ほどしかかからなかった。議員提出法案は明らかに急を要するときに使用される選択肢である。

No other country uses private member’s bills for the most important bills that a parliament will enact. In other countries, private member’s bills are used for personal causes of individual MPs, not for government programs. But in Hungary, the government passed most of its constitutional agenda through the parliament using the device of the private member’s bill. In each case, the Fidesz bloc in the Parliament voted with no dissents in favor of every private member’s bill introduced by a member of their party. The pattern of votes gives the lie to the claim that these were independent proposals from individual members of parliament acting alone. The only logical explanation was that Fidesz found the ordinary parliamentary procedure too constraining because it required laws to be vetted by parliamentary committees, to be offered to the opposition for comment, to go through a process of consultation with interested groups and to go through multiple readings with full time for debate.
議員提出法案を議会が制定する最重要の法案のために使っている国は他に存在しない。他の国では、議員提出法案は政府計画のためではなく、個々の議員の個人的な主張のために使われている。だが、ハンガリーでは、政府は議員提出法案という道具を使って、憲法の協議事項のほとんどを議会に通している。いずれの場合でも、議会のフィデス陣営は、その政党の一人の議員によって提案された全ての議員提出法案へ異議を申し立てることなく賛成票を投じる。投票のパターンは、個人で活動する独立した議員による独立した提案が存在するという主張は嘘であることを示している。唯一の論理的な説明は、法律で、議会委員会の調査、野党に意見を述べる機会を与えること、利益団体に意見を聞くというプロセスや、フルタイムの議論を伴う複合的な解釈(multiple readings)が必要とされているために、フィデスが通常の議会手続きは制約がありすぎると知ったということだ。

In the end, however, even the streamlined procedure of the private member’s bill proved too rigorous for Fidesz. On the last day of 2011, the Fidesz parliament passed a change to the rules of parliamentary procedure. Since January 1, if a 2/3rds vote of the parliament approves, a bill can go from first proposal to final vote with no debate – and no wait or consultation – at all.

I could multiply examples endlessly, showing how institutions, procedures and powers in the Hungarian constitutional order may share a name with counterparts elsewhere in Europe. But the Hungarian version of these institutions, procedures and powers virtually never share the same spirit. When the Hungarian government says that its laws are no different from those of other countries in Europe, it is almost always wrong.

So why, then, did the Hungarian government adopt this new constitution? It is not because the public demanded it. It is not because the new constitution replaced a communist constitution. It is not because the religious beliefs of the public urged it. And it is not because it is within the European mainstream.
それなら、なぜ、ハンガリー政府はこの新しい憲法を採用したのか? それは大衆が望んだからではない。それは新憲法が共産主義憲法を取り替えるためではない。それは大衆の宗教的な信念が促したためではない。そして、それがヨーロッパの主流にあるからではない。

The Fidesz government, facing ever-sharper criticism from abroad and from within its own public, insists that Hungary is simply misunderstood. And it repeats that it had a popular mandate, that it is ending communism, that it respects the religious sensibility of Hungarians and that it is well within the European mainstream.

But some of us still live in the reality-based community, where it is normal to work forward from evidence to conclusions rather than the other way around. When one looks at the Hungarian government’s explanations for why this new constitution was necessary, none hold up under scrutiny.

Yes, the Hungarian government is misunderstood – by itself. It misunderstands its own position in the world and with the citizens of Hungary.

後書き:差別じゃないが、NY Timesのあの広告はもう勘弁してほしいな。

Treasuries, TIPS, and Gold (Wonkish)/September 6, 2011, 9:18 PM

Treasuries, TIPS, and Gold (Wonkish) 財務省証券、物価連動債、そして金(オタク風)

(Yes, it’s 4:30 AM where I am. I found myself wide awake, thinking about gold prices. You got a problem with that?)

In assessing economic prospects since the financial crisis of 2008, there have been two kinds of people: people who divide people into two kinds and people who don’t inflationistas and deflationistas. The inflationistas look at budget deficits and monetary base, and see severe inflation and soaring interest rates as the obvious outcome; the deflationistas say, hey, we’re in a liquidity trap, so monetary base is sterile and budget deficits are just soaking up some but not all of the world’s excess saving.

I am, of course, a big deflationista, and as I see it record low interest rates strongly vindicate my position. As I like to point out, if you’d believed the inflationistas at the Wall Street Journal and elsewhere, you would have lost a lot of money.

But what about gold? As some readers and correspondents love to point out, you would have made a lot of money if you’d bought gold early in this mess. So doesn’t that vindicate the inflationistas, to some extent?
でも、金に関しては? 読者やメル友の中にそのことを指摘したがる人がいるんだが、もしあなたがこの混乱の初期に金を買っていたら、お金をがっぽり稼げただろう。それなら、これはある程度までインフレ論者の立場を証明することになるのか?

My usual response has been that I have no idea what drives the price of gold, to say that it’s a market driven by hoarding in Asia, Glenn Beck followers, whatever. But maybe I’ve been too flip here. Why not think about what actually should be driving gold prices? And I mean think about it, rather than going for slogans about inflation, debased currencies, and all that.
僕のいつもの返答は何が金の価格を押し上げているのかは分からないというもので、それはアジアでの買いだめやグレン・ベックの支持者その他のことによって左右される市場であると言ってきた。でも、たぶん僕はこのことを軽く考えすぎだった。なぜ、実際に金の価格を押し上げているはずのものが何かを考えないのか? そして、僕はインフレや通貨の堕落、その他のスローガンへ向かうよりも、そのことについて思案している。

Well, I’ve been thinking about it ― and the answer surprised me: soaring gold prices may be quite consistent with a deflationista story about the economy.

OK, how do we think about gold prices? Well, my starting point is the old but very fine analysis by Henderson and Salant (pdf), which was actually the inspiration for my first good paper, on currency crises. H-S suggested that we start by modeling gold as an exhaustible resource subject to Hotelling pricing.
オッケー、僕が金価格についてどう考えているのか? 僕の出発点はヘンダーソンとサラント(pdf)による古くはあるが、すごく見事な分析であり、それは実際に通貨危機に関して、僕が始めていい仕事ができた論文にインスピレーションを与えた。ヘンダーソンとサラントは金をホテリング・プライシング(Hotteling pricing)に従う枯渇資源としてモデル化することから始めることを提示した。

Here’s how it works. Imagine that there’s a fixed stock of gold available right now, and that over time this stock gradually disappears into real-world uses like dentistry. (Yes, gold gets mined, and there’s a more or less perpetual demand for gold that just sits there; never mind for now). The rate at which gold disappears into teeth ― the flow demand for gold, in tons per year ― depends on its real price:


Crucially, at least for tractability, there is a “choke price” ― a price at which flow demand goes to zero. As we’ll see next, this price helps tie down the price path.
本質的に、少なくとも取り扱いやすくするためには、「チョーク価格(choke price)」―フローの需要がゼロになる価格―が存在する。次に見るように、この価格により、価格の軌道は拘束される。

So what determines the price of gold at any given point in time? Hotelling models say that people are willing to hold onto an exhaustible resources because they are rewarded with a rising price. Abstracting from storage costs, this says that the real price must rise at a rate equal to the real rate of interest, so you get a price path that looks like this:
それなら、ある一定の時点において、金の価格を決めているものは何か? ホテリング・モデルが示すところによると、人々が喜んで枯渇資源を持とうとするのは、その価格が上昇することにより報われるからであるという。これは、貯蔵費を無視すれば、金の実質価格は実質利子率と等しい率で上昇する必要があるということになり、その時、価格の経路はこんな感じになる:


Obviously there are many such paths. Which one is correct? Given rational expectations (I know, I know) the answer is, the path under which cumulative flow demand on that path, up to the point at which you hit the choke price, is just equal to the initial stock of gold.
明らかに、そのような経路は多数存在する。どの経路が正しいのか? 合理的期待を想定すれば(分かってる、分かってる)、その答えは、ある経路でフローの需要がチョーク・プライスに達する時点までの集計が、初期の金のストックとちょうど等しくなるような経路だ。

Now ask the question, what has changed recently that should affect this equilibrium path? And the answer is obvious: there has been a dramatic plunge in real interest rates, as investors have come to perceive that the Lesser Depression will depress returns on investment for a long time to come:
今、あの疑問を考えてみよう、最近、この均衡の経路に影響を与えることができる何が変わったのか? そして、その答えは明らかだ:投資家が、小恐慌は長期的に投資の収益性を圧迫すると捉えるようになってしまったために、実質利子率が劇的に低下した。


What effect should a lower real interest rate have on the Hotelling path? The answer is that it should get flatter: investors need less price appreciation to have an incentive to hold gold.
利子率が低くなることはホテリング・パスにどんな影響を与えるのか? それを平坦にさせるというのがその答えだ:投資家に金を保有するインセンティブを持たせるため必要な価格上昇は少なくなる。

But if the price path is going to be flatter while still leading to consumption of the existing stock ― and no more ― by the time it hits the choke price, it’s going to have to start from a higher initial level. So the change in the path should look like this:


And this says that the price of gold should jump in the short run.

The logic, if you think about it, is pretty intuitive: with lower interest rates, it makes more sense to hoard gold now and push its actual use further into the future, which means higher prices in the short run and the near future.

But suppose this is the right story, or at least a good part of the story, of gold prices. If so, just about everything you read about what gold prices mean is wrong.

For this is essentially a “real” story about gold, in which the price has risen because expected returns on other investments have fallen; it is not, repeat not, a story about inflation expectations. Not only are surging gold prices not a sign of severe inflation just around the corner, they’re actually the result of a persistently depressed economy stuck in a liquidity trap ― an economy that basically faces the threat of Japanese-style deflation, not Weimar-style inflation. So people who bought gold because they believed that inflation was around the corner were right for the wrong reasons.

And if you view the gold story as being basically about real interest rates, something else follows ― namely, that having a gold standard right now would be deeply deflationary. The real price of gold “wants” to rise; if you try to peg the nominal price level to gold, that can only happen through severe deflation.

OK, none of this necessarily rejects other hypotheses about gold; in particular, there could be a bubble over and above the Hotelling aspect. But the crucial message is, I think, right: If you believe that gold prices are signaling an inflationary threat, I have to tell you, I do not think that price means what you think it means.

Update:Larry Summers directs me to a 1988 paper he wrote with Robert Barsky (pdf) with a similar theme, although applied to the gold standard era rather than recent events.

Austerity Europe/February 22, 2012, 8:55 AM

Austerity Europe ヨーロッパの緊縮財政

Good numbers on European austerity programs are hard to come by, but the FT has a useful interactive graphic:


It’s not comprehensive, I think, even for the countries it covers ― for example, Portugal actually imposed significant austerity in 2011, even if it fell short of the IMF program. Still, this really confirms that Greece and Ireland are the austerity kings, with Spain less so.

So, what are the growth impacts?


Yep, slashing spending in a depressed economy depresses the economy even more, and if you don’t have to, you shouldn’t do it ― you should wait until the economy is stronger. Don’t take my word for it ― just ask Mitt Romney. It’s a Keynesian world.

Austerity and Growth/February 18, 2012, 5:54 PM

Austerity and Growth 緊縮財政と成長

Or, actually, shrinkage.

Watching Europe sink into recession – and Greece plunge into the abyss – I found myself wondering what it would take to convince the chattering classes that austerity in the face of an already depressed economy is a terrible idea.

After all, all it took was the predictable and predicted failure of an inadequate stimulus plan to convince our political elite that stimulus never works, and that we should pivot immediately to austerity, never mind three generations’ worth of economic research telling us that this was exactly the wrong thing to do. Why isn’t the overwhelming, and much more decisive, failure of austerity in Europe producing a similar reaction?

Let me give you a picture, inspired by some of the empirical studies of fiscal policy the Romers describe in their course notes (pdf). In the chart below I compare two measures for European countries. The x-axis shows the change in real government purchases of goods and services from the first quarter of 2008 to the most recent date I could get from Eurostat, measured as a percentage of 2008Q1 GDP. (This means, by the way, that I didn’t catch the full force of Greek austerity). The y-axis shows the percentage change in real GDP from 2008Q1 to 2011Q4. Can we say that there is a clear correlation here, and not in the direction austerity advocates would like to see?


OK, I’m aware of all internet traditions the problems here. To some extent we may be looking at reverse causation, with troubled economies forced into harsh austerity while those doing well (e.g., Poland) can keep expanding spending. Also, austerity programs generally involve sharp cuts in transfer payments and tax hikes as well as declines in real purchases, so you don’t want to interpret the slope of a line through the scatter – around 3 – as a measure of the multiplier.

But it is pretty striking, isn’t it? The truth is that we’ve just had a powerful test of the Keynesian proposition that when monetary policy isn’t available, changes in government spending move the economy in the same direction – and the results of that test say that what has lately passed for policy wisdom is instead almost criminal folly.
でも、それはすごく鮮烈なものと言えないか? 真実は、金融政策が利用できない時には、政府支出の変化は経済と同じ方向に動くというケインズ主義的な主張についての強力なテストが行われたということだ―そしてそのテストの結果は、最近、賢明な政策として通っているものがその逆にほとんど犯罪的なほどの愚行であることを示している。

Zero Bounds and Butter Mountains (Wonkish)/February 6, 2012, 5:42 PM

Zero Bounds and Butter Mountains (Wonkish) ゼロの限界とバター山(オタク風)

Well, I see that Bill Gross is still demanding that we fight the slump by … raising interest rates. I wish I could say that he had no support; there are, in fact, a lot of Very Serious People demanding a rate rise, and a growing number of stories about the plight of savers.
えっと、ビル・グロースが今でもこの不況に立ち向かうよう主張しているようなんだが、その方法と言ったら…利子率を上げること。彼に味方なんていないよと言えたらいいんだが。実際にはたくさんのVery Serious People(すごくマトモな人々)が利子率を上げることを求めているし、預金者の窮状についてのお話がますます現れるようになっている。

So let me explain how I think about zero rates and their relationship to the depression we’re in. (Yes, it is a depression, even if we’re having some job growth; there was a lot of job growth between 1933 and 1937, but it was still the Depression).

Think of the supply and demand for loanable funds. The tricky thing about interest rates is that there are seemingly two theories of interest rates ― loanable funds, which is about supply and demand for savings, and liquidity preference, which is about the tradeoff between money and bonds. Which is right? Both are ― because savings and investment also depend on GDP, which can change. That’s one point of approach into the IS-LM model.
貸付資金への需要と供給を考えてほしい。利子率について扱いにくいのは、利子率には見かけ上二つの理論があることだ―貸付資金、つまり貯蓄の需要と供給のことと、流動性選好、つまり貨幣と債券のトレードオフのこと。どっちが正しいの? 両方正しい―なぜなら貯蓄と投資はどちらもGDPに依存しているが、それは変化しうるから。それはIS-LMモデルへと近づく第一歩になる。

So what is happening when we’re at the zero lower bound? One way to think about it is to draw the supply and demand for savings that would prevail if the economy were at full employment. They look like this:
そして、我々がゼロ下限にある時、何が起こっているのか? それを考える一つの方法が、もし経済が完全雇用だったらこうなるだろうという貯蓄の需要と供給を描いてみることだ。それはこんな感じになる:


The policy problem is that for whatever reason ― in current conditions, mainly the deleveraging taking place after an era of debt complacency ― the interest rate that would match savings and investment at full employment is negative. Unfortunately, that’s not possible, because rather than lend at a loss people can just hold cash. So we have an “incipient” excess supply of savings, which is eliminated not via a fall in interest rates but via a fall in income, i.e., a depression.

Now, the figure above may look familiar from microeconomics; it’s more than a bit like the standard analysis of a price floor that creates a persistent excess supply of a good, such as the way European price floors on agricultural products created butter mountains, wine lakes, etc..

One way to think about macro policy in a liquidity trap is that it’s about trying to reduce that incipient surplus, say through government spending to make use of the excess savings.

But what the people who want to raise rates are demanding is that we take the price floor that is causing this destructive surplus, and raise it higher.

Yes, savers would like higher returns, just as farmers would like higher prices for their butter. But free-market oriented economists, of all people, should understand that you can’t just decree higher returns without paying a price in economic disruption.


Untruths, Wholly Untrue, And Nothing But Untruths/January 13, 2012, 9:00 AM

Untruths, Wholly Untrue, And Nothing But Untruths 嘘、大嘘、そしてまったくの嘘

I was deeply radicalized by the 2000 election. At first I couldn’t believe that then-candidate George W. Bush was saying so many clearly, provably false things; then I couldn’t believe that nobody in the news media was willing to point out the lies. (At the time, the Times actually told me that I couldn’t use the l-word either). That was when I formulated my “views differ on shape of planet” motto.

Now, however, Mitt Romney seems determined to rehabilitate Bush’s reputation, by running a campaign so dishonest that it makes Bush look like a model of truth-telling.

I mean, is there anything at all in Romney’s stump speech that’s true? It’s all based on attacking Obama for apologizing for America, which he didn’t, on making deep cuts in defense, which he also didn’t, and on being a radical redistributionist who wants equality of outcomes, which he isn’t. When the issue turns to jobs, Romney makes false assertions both about Obama’s record and about his own. I can’t find a single true assertion anywhere.
と言うか、ロムニーの選挙演説の中で真実だと言えるものが何かある? それはオバマがアメリカのことを謝っていることについて攻撃しようとするものだが、彼はそんなことをしていない。それは防衛予算の大幅な削減について攻撃しているが、彼はそんなこともしていない。それは結果の平等を求める急進的な再分配論者であることを攻撃しているが、彼はそんな人じゃない。問題が雇用に移ると、ロムニーはオバマの成果や彼自身についても嘘の主張をする。僕はそこに一つとして真実の主張を見つけることができない。

And he keeps finding new frontiers of falsehood. The good people at CBPP find him asserting, with regard to programs aiding low-income Americans, that

What unfortunately happens is with all the multiplicity of federal programs, you have massive overhead, with government bureaucrats in Washington administering all these programs, very little of the money that’s actually needed by those that really need help, those that can’t care for themselves, actually reaches them.
which is utterly, totally untrue. Administrative costs are actually quite small, and between 91 and 99 percent of spending, depending on the program, does in fact go to beneficiaries.

which is utterly, totally untrue. Administrative costs are actually quite small, and between 91 and 99 percent of spending, depending on the program, does in fact go to beneficiaries.

At this rate, Romney will soon start lying about his own name. Oh, wait.

後書き:最後のリンク先は、ロムニーが自分の名前を間違えたという記事。CNNの討論会でWolf Blitzerという人との挨拶のとき、ロムニーは本当の名前はウィラードなのに何故か「私のファーストネームもウォルフです」と発言した。寒いギャグなのか、本当に間違えたのかは不明らしい。

Bleeding Britain/November 30, 2011, 10:24 AM

Bleeding Britain 血を抜かれるイギリス

These days, ambulance-chaser economists like yours truly have an embarrassment of riches: so much is going wrong, in so many places, that one hardly knows where to start.

But let’s spare a moment for a disaster that’s being overshadowed by the euro crisis: Britain’s experiment in austerity.

When the Cameron government came in, it was fully invested in the doctrine of expansionary austerity. Officials told everyone to read the Alesina/Ardagna paper (which is succinctly criticized by Christy Romer (pdf)), cited Ireland as a success story, and in general assured everyone that they could call the confidence fairy from the vasty deep.

Now it turns out that contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? More austerity!
今、緊縮政策はまったく緊縮的であることが明らかになっている。結果的に、全面的な緊縮政策にも関わらず、財政赤字は高いままになっている。それじゃあやるべきことは? もっと緊縮財政だ!

Underlying the drive for even more austerity is the belief that the underlying economic potential of the British economy has fallen sharply, and will grow only slowly from now on. But why? There’s a discussion in the Office for Budget Responsibility report, p. 54, that basically throws up its hands ― hey, these things happen after financial crises, it says, and cites an IMF report (pdf).
それでもさらに緊縮政策を追い求める衝動の根底に、イギリス経済の基礎的な潜在力が急速に落ち込んでいて、これからはゆっくりとしか成長できないのではないかという信念がある。でも、どうしてなんだろうか? 予算責任局の報告書54ページに審議が載っているが、そこでは基本的にさじを投げている―これらのことが起こったのは金融危機の後だと彼らは言う、そしてIMFの報告書(pdf)を引用している。

So I wonder: did they read the abstract of that report? Because here’s what it says:
そこで不可解なこと:彼らはその報告書の要約を読んだのか? だって、そこにはこう書かれている:

Short-run fiscal and monetary stimulus is associated with smaller medium-run deviations of output and growth from the precrisis trend.

That is, history says that a financial crisis reduces long-run growth potential if policymakers don’t limit the short-run damage it does.

And yet what’s happening in Britain now is that depressed estimates of long-run potential are being used to justify more austerity, which will depress the economy even further in the short run, leading to further depression of long-run potential, leading to …

It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.

And the truly awful thing is that Cameron and Osborne are so deeply identified with the austerity doctrine that they can’t change course without effectively destroying themselves politically.

As the Brits would say, brilliant. Just brilliant.

Revenge of the Global Savings Glut (Wonkish)/April 18, 2011, 11:27 AM

Revenge of the Global Savings Glut (Wonkish) 世界的貯蓄過剰の復讐(オタク風

Chinese inflation is getting headlines, as it should. But it’s worth bearing in mind that this is essentially a real problem, not a monetary problem.

Think of it in terms of the loanable funds model (which misses some issues, but gets at the essence, I think). Imagine a world in which capital flows equalize interest rates between the North (advanced economies) and the South (emerging economies); savings schedules slope up, investment demand down:


Now imagine a financial crisis in the North that reduces investment demand while increasing desired savings:


In effect, this creates a new global savings glut, this time originating in advanced economies rather than in the decisions of China etc. to accumulate reserves. What markets “want” to do is send capital South. But because the doctrine of immaculate transfer is false, this requires a rise in the relative price of goods and services in the South.

This could happen three ways: currency appreciation; inflation in the South; deflation in the North.

What we’re getting from emerging-market politicians are lots of complaints about US monetary policy, coupled with reluctance to let currencies rise. This amounts to a demand that Northern deflation be the solution; that demand neither will nor should be honored.

And as for businesses that were counting on low Chinese costs, well, they were basing decisions on the assumption that the renminbi would be undervalued forever. Guess not.

Eurozone Problems/January 30, 2012, 4:17 PM

Eurozone Problems ユーロの問題

I’m giving a talk in Paris tomorrow. Here are some slides; they won’t come as a shock to regular readers, but it may be useful to see them all in one place.

First, I make the case that the overall economic crisis is driven by private debt, not public debt:


Then I point to the huge swing of the private sector into financial surplus, which necessitated large public deficits to avoid a much deeper slump:


I then turn to Europe, which has the additional problem of a capital flow bubble from north to south induced by the euro, which has to be reversed:


The counterpart of these current account imbalances was a large divergence in relative price levels:


Implicitly, Europe is relying on “internal devaluation” to reverse this divergence. But the reality is that this is very hard given nominal rigidity, even in Ireland, which is wrongly held up as an example of successful adjustment:


Also, Europe has bought into the notion that fiscal irresponsibility is at the heart of the crisis, which is true only of Greece and not true of the troubled countries as a group:


And even on the IMF’s reckoning, none of the austerity countries is plausibly on the road to a tolerable fiscal situation:


I Am A Frankfurter/November 9, 2011, 9:43 AM

I Am A Frankfurter 俺はフランクフルト人だ

And I say that with relish ― although actually I’m in Mainz, doing a couple of talks.

Here’s a slide from one of the talks: