Who Were the Sea Peoples?

What he does is show that for every effect we supposedly generate through monetary policy, we can generate the exact same effect minus monetary policy, using taxation and expenditures alone. So it is the taxation and expenditures, and not the monetary policy, that is generating these effects. Now, he should do a similar post showing how all re-distributional effects in an Overlapping Generations Model are also due to taxation and expenditures, and not to the debt itself. Because the exact same technique he used for Cantillon effects demonstrates the exact same thing for an OLG model with government debt! UPDATE: As rob noted in the comments, my original posted was not worded as well as it could have been. Therefore, where I originally wrote "fiscal policy," the post now reads "taxation and expenditures."

Bruce Bartlett declares : "For the record, no one has been more correct in his analysis and prescriptions for the economy’s problems than Paul Krugman. The blind hatred for him on the right simply pushed me further away from my old allies and comrades." Meanwhile, talking about blind... well, not hatred, but at least contempt, Bob Murphy takes two completely consistent statements by Krugman, which Krugman himself told us how to reconcile in a blog post, and tries to claim they are wildly inconsistent! Murphy is stunned by "Krugman now saying such threats [from our government's deficit] are impossible according to economic theory," completely ignoring the bit about "for a country in our situation." Because, you know, the US in 2003 was not in the situation the US is now, is it? For instance, the US in 2003 was not in a liquidity trap, which, according to Krugman, it is now. It is one thing to question Krugman's analysis, and, for instance, d...

Ken B. and I got him right in the great debt war debates. He only wonders whether his argument is an extension of Krugman's argument, or an additional point : he never even contemplates the notion that his argument contradicts Krugman's in any sense.

Ken B. does a good job .

Let us create a new version of Bob's table as follows: Period 1: We transfer 65 apples from Young Bob to Old Al. Period 2: We transfer 99 apples from Young Christy to Old Bob. OK, at this point, Bob is up 34 apples, and Al was up (he's dead now) 65. And here's the punchline: Period 3: Old Christy says, "Screw this materialism business: Young Dave, take 197 of my apples. I can get by on 1." Period 4: Old Dave say, "Young Eddy, I recall Old Christy's generosity. Just eat your 100 apples: let's cease all of this milking the young to benefit the old. In this scenario, the position of Al and Bob is exactly the same as in Bob's. And this shows us that all of the latter rows in Bob's spreadsheet were utterly irrelevant to the position of Al and Bob. Al benefited at the expense of Bob. And Bob made up for that by benefiting even more at the expense of Christy. And that's it. Neither of them benefited at all from Dave, or anyone els...

Nick Rowe characterized Lerner's position as: "You can't make real goods and services travel back in time, out of the mouths of our grandkids and into our mouths." And he claims this position is false. So let us look at Bob Murphy "backing" up Rowe's position. He offers the following table: As I said, look. Look very carefully. How does Old Al benefit? He gets 65 apples from Young Bob, who is here in the present. Then Old Al dies. Therefore, every single further line of the table is utterly irrelevant to the welfare of Old Al! They have to be: he is dead. As far as Old Al goes, you can put your hand over the rest of the table. What we get is the surprising conclusion that, if we shift 65 apples of consumption from Young Bob to Old Al, Old Al is better off. Now, Lerner clearly understood that such transfers could occur: "The real issue, and it is an important one, between the economists and Mr. Eisenhower is not whether it is possible to ...

So Abba Lerner understood the idea behind these OLG models back in 1961, and was unimpressed: "MESSRS. Bowen, Davis, and Kopf have shown that the real burden of a project using up resources in the present can be shifted to future generations by internal borrowing, providing one defines 'generation' in a particular way. It is just as easy to prove that all politicians are economists or that all economists are dunces, provided one defines 'economist' in a particular way... "But there is no reason for supposing that the President was trying to use any language other than English, and what the President said is simply wrong (in English), unless indeed all the economists (including Bowen et al., as well as J. M. Buchanan, who plays similar linguistic tricks) are absolutely wrong. "The real issue, and it is an important one, between the economists and Mr. Eisenhower is  not whether it is possible to shift a burden (either in the present or in t...

Just to make sure I get Murphy mad again, I have re-read Krugman, and he is not making any false statements or misunderstanding the OLG models, when he writes : "It’s quite possible that debt can raise the consumption of one generation and reduce the consumption of the next generation during the period when members of both generations are still alive. Suppose that after the 2016 election President Santorum tries to buy senior support by giving every American over 65 a gift of newly printed government bonds; then the over-65 generation will be made richer, and everyone under 65 will be made poorer (duh)." All the OLG models show is that if you keep doing the above sort of thing again and again, generation after generation, you will again and again make the old wealthy at the expense of the young. At every point in every one of the OLG models I have seen, what we have is a series of transfers from the young to the old occurring during the period when members of both g...

Ryan Murphy contends that, if Ricardian Equivalence is not true, then: "Debt becomes a burden on future generations when they have not planned for it. Meanwhile, the people who invested in treasury bills of whatever did plan for that money to be there." This is an apples and oranges comparison. Of course future generations have not planned for a debt burden. They have not planned for anything at all: that will have to wait for the future, when they are one of the current generation. And sure, someone in the current generation who bought treasuries presumably planned to do so. But his future  progeny have not yet planned to inherit them, since they will only come to exist in the future. Ah, but what if this bond holder sells his bonds before dying? Well, then he will have cash or stock or something else to pass on to his heirs. What if he spends all of that on a huge party? Yes, that impoverishes future generations, but that is because he consumed his capital stock...

At time T1, a government agent, wearing a trenchcoat, transfers 3 apples from young Bob to old Al. At time T2, a government agent, wearing a trenchcoat, transfers 6 apples from young Christy to old Bob. At time T3, a government agent, wearing a trenchcoat, transfers 12 apples from young Dave to old Christy. At time T4, a government agent, wearing a trenchcoat, transfers 24 apples from young Eddy to old Dave. At time T5, a government agent, wearing a trenchcoat, transfers 48 apples from young Frank to old Eddy. At time T6, a government agent, wearing a trenchcoat, transfers 10 apples from young George to old Frank. At time T7, a government agent, wearing a trenchcoat, transfers 10 apples from young Hank to old George. At time T8, a government agent, wearing a trenchcoat, transfers 5 apples from young Iris to old Hank. At time T9, a government agent, wearing a trenchcoat, transfers 1 appl...

Let's leave aside the question of whatever Baker and Krugman meant during the great debt flame wars. I will just try to clarify what I have meant. Let us say that there have been several hammer killings in the news lately. This leads to calls for the outlawing of hammers, since they are "deadly weapons." But others point out that it is not hammers that are the real problem; no, it is murderous intentions. Hammers are also used for many worthy purposes. There is nothing inherently murderous about them; if hammers are banned, murderous people will simply pick up a rock or stout tree branch to kill their victims. Now, you certainly can't show the latter set of people are wrong by showing how it is possible to murder someone with a hammer! But that is what I see Rowe and Murphy doing with their examples. We could just as easily contrive an example in which debt is used to fund capital projects that raise the consumption of future generations at the expense of the c...

that debt is a red herring here . How so? Just go through his table: Every time he wrote "borrows," replace it with taxation, and replace "pay off" with "transfers to." The entire consumption pattern will be unchanged. It ain't the debt, it's the inter-generational transfers. UPDATE: The key to what makes Bob's model work the way he wants it is not the interest on the debt. At any point in time, for every dollar spent paying that interest, a dollar is received by someone who holds the debt. They key to Bob's model is that it is always the young who are being deprived of consumption to give the old more consumption. And it is very much key that they are alive at the same time so that this can be done! Of course, if you keep doing that, it will also be true that the young 100 years from now will be worse off.

It's back ! Here's is Noahopinion saying what I kept pointing out in round one of this debate: " But see, here's the interesting thing about Rowe's model: the government doesn't  need  to use debt to impose this burden on the young. It can achieve exactly the same result with zero debt, just by taxing the young directly and spending on the old (i.e. a Social Security system with unsustainably large contributions). In Rowe's model, debt is just an accounting system that keeps track of how much consumption has been transferred from the young to the old. But the debt itself doesn't really matter; only the consumption transfer matters. "So I think this tells us something important about debt in the real world. What matters is not debt, it's  intertemporal choice . The important question is not how much debt we rack up, but whether we want to move consumption from the future into the present or from the present into the future." Exact...

Bob Murphy thinks it is a terrible time for the United States government to borrow more. At one point in this essay, Bob goes totally off the rails: "This is because government debt involves present citizens living at the expense of future taxpayers..." Now, in the endless Internet debate on whether debt government debt "is" a burden on future generations, again and again, all I have ever seen the proponents of "yes" show with their models is that, used in a certain way, government debt can be a burden on future generations. No one has ever shown that it necessarily is such a burden, which seems to be the claim Bob is making. With reference to Murphy's models in particular, Daniel Kuehn and I repeatedly duplicated any inter-generational transfer he modeled in a way that didn't use debt at all. As Noahopinion put it , "So I think this tells us something important about debt in the real world. What matters is not debt, it's intertem...