Bubble, Bubble, Conceptual Trouble/October 20, 2012, 9:46 AM

Bubble, Bubble, Conceptual Trouble バブル、バブル、概念的問題

We’re living in the aftermath of a major financial crisis. Reinhart-Rogoff warned in advance that recovery was likely to be slow; so, with less historical detail, did I. And so it has proved.

But based on the discussion I’ve heard, both on the blogs and in forums like that House of Commons debate Monday, there’s a lot of confusion even among economists about what the pattern of slow recovery from financial crisis is really telling us. Basically, there seems to be a confusion between saying that something is usual and saying that it is necessary. Those aren’t the same thing.

Here’s how I interpret what we see in the historical data: financial crises leave an overhang of private-sector problems, principally excessive debt on the part of some subset of economic agents — households, in the case of the United States. Because these agents are either forced or strongly induced to slash spending, the “natural” rate of interest, the interest rate consistent with full employment, falls sharply — and in the case of a severe crisis, falls well below zero.

What this means in turn is that conventional monetary policy, which normally bears most of the burden of economic stabilization, is no longer up to the job.

Now, there are other policy options. You could use discretionary fiscal policy, a k a stimulus, to boost demand; you could use unconventional monetary policy to depress interest rate spreads and/or raise expected inflation, helping get past the zero lower bound problem. Historically, however, countries tend not to do these things, or not to do them on a sufficient scale. Why? Politics. Intellectual confusion. Inertia. Misplaced fears.
今でも、政策オプションはある。需要を押し上げるために、裁量的財政政策、別名景気対策を使うことができる。ゼロ金利下限の問題を回避するためには、利子率のスプレッドを圧縮させ、予想インフレ率を上昇させる非伝統的な金融政策を使うこともできる。しかしながら、歴史的に、国家はこういったことをやってこなかったか、あるいは十分な規模でそれをやれなかった。なぜか? 政治のため。知的混乱のため。惰性のため。筋違いの恐れのため。

Basically, it takes much more clarity and unity to pursue either discretionary fiscal expansion or unconventional monetary policy than it does to cut the Fed funds rate, and few countries manage to display that kind of clarity and unity. And that, in turn, is why it took a war to end the Great Depression; there’s nothing special about military spending from an economic point of view, but as a political matter Hitler managed to override the usual objections to stimulus.

Which brings me to the conceptual confusions.

First, I get a lot of complaints that people like me are being inconsistent: we say that financial crises are usually followed by prolonged slumps, yet we also want to End This Depression Now! and claim that it could be done very quickly. But there’s no inconsistency: there are simple policy actions that could quickly end this depression now, there were simple policy actions that could have quickly ended depressions past. The problem is that now and then policy makers tend not to take these actions — which is why some of us write books.

Second, there’s a lot of confusion about the difference between demand and supply. Over and over again one hears that we can’t expect to return to 2007 levels of employment, because there was a bubble back then. But what is a bubble? It’s a situation in which some people are spending too much — and we can’t expect those people to return to past spending habits. But this says nothing about whether other people can spend more, so that the economy doesn’t suffer from inadequate overall spending. Larry Summers used to like to say that you don’t have to refill a flat tire through the hole; indeed. Yes, highly indebted households in the US will have to spend less in future; but the government can spend more, we can have lower trade deficits, and in general there’s no reason why aggregate demand needs to be low despite the past excesses of some players.
第二に、需要と供給の違いについて多くの混乱がある。繰り返し、繰り返し2007年はバブルだったんだから、その頃の水準の雇用状況に戻ると期待することはできないと聞かされ続けている。でも、バブルって何だろう? それは、ある人々があまりにもお金を使いすぎた状態のことだ――そして、その人々が過去の支出習慣に戻ることを期待することはできない。でも、このことは、経済が全般的な支出不足で苦しまないですむように、他の人々がもっと支出することができるかについて何も語っていない。ラリー・サマーズはかつてパンクしたタイヤの穴を埋める必要はないと言った。もちろん、高水準の債務を負った家計は将来支出を減らさないといけなくなる。でも、政府はもっと支出を増やすことができる。アメリカの貿易赤字をもっと減らすこともできる。そして、一般的に、あるプレイヤーが過去にやり過ぎたからといって、総需要が低くならないといけない理由は存在しない。

One last point: we still keep hearing the “structural” argument, that we have to expect prolonged high unemployment because it takes time to turn construction workers into manufacturing workers or whatever. One answer is that this portrait of the economy is factually wrong: job losses have not been concentrated in a few sectors or professions, they have been broadly spread across the economy. But there’s also a conceptual answer: if shifting workers across sectors requires mass unemployment, how come the bubble years — when we were moving out of manufacturing into housing — weren’t high-unemployment years? Why does moving into the bubble sectors mean more jobs, but moving out into other sectors mean fewer jobs? I’ve never heard a coherent answer.
最後に一点:我々は「構造」論について聞かされ続けている。建設業の労働者を製造業か何かの労働者に移すためには時間がかかるんだから、長期の高失業率が続くと考えるべきなんだと。一つの答えは、この経済の描写は事実として間違っているということだ:雇用の喪失はある特定の部門や職業に集中しているのではなく、経済全般に広がっている。だが、概念的な答えもある:もし労働者を部門間で移動させることに大量の失業が必要なんだったら、バブルの時期――製造業から住宅部門に人々が移っていた時期――はなんで失業率が高くなかったの? なんでバブってる部門に人を移動させることは雇用増になって、バブってた部門から人を移動させることは雇用減になるの? 僕はこれまで首尾一貫した答えを聞いたことがない。

Back to the main point: yes, the aftermath of crises is usually a bad time. But that’s because the policy response to crises is usually lousy. We are repeating that story — but we shouldn’t.