This piece on inflation by @BuddyYakov gets it exactly right: the problem we need to be addressing - in both the short term and long term - is not excessive growth in demand, but sluggish growth in supply. noemamag.com/how-to-put-the…
In retrospect it's strange that "supply side economics" has been associated with conservatives - in general, raising the economy's productive capacity is going to require a bigger public sector, not a smaller one.
The idea that there is a direct link between labor supply and employment needs full debunking elsewhere. But I'm just following textbook economics when I say: Demand determines employment, then labor supply conditions determine the wage at that employment level.
You can imagine a world where businesses post a wage, and then each day wait to see how many people show up to work at that wage. But that is not the world we live in.
To say "the Fed can deal with inflation," as people often do, is to say that the Fed can make us sufficiently poor to buy only what business is currently capable of producing, locking in the disruptions of the pandemic. Yes, it can; do we want it to?
When I say that investments in green energy are a natural way to deal with inflation, people look at me like I'm crazy. But given the central role of fossil fuel prices in almost all recent price accelerations (including this one), isn't it obvious? Jacob is on point here.
Shout out to @pigphilosophy!
The only thing in the piece I disagree with is the implied suggestion that those of us over 40 *don't* face a future full of floods, fires and storms.

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More from @JWMason1

25 Aug
Over on the right, you see how home purchases went up, and then when prices rose, purchases went down and construction went up? It's almost like there's a market or something. theovershoot.co/p/us-housing-n
No who knows anything about me would describe me as a great believer in markets. But I'm always struck by the extreme pessimism about market adjustment shown by inflation hawks.
In the world of inflation hawks, prices carry no information. When input prices rise, producers never find substitutes; they just pass it on. When output prices rise, no one finds ways to produce more of it. When goods prices rise, it never means we should consume something else.
Read 6 tweets
25 Aug
Here is a very sharp piece by @andrewelrod arguing that what has cost Democrats elections historically isn't inflation itself, but interest rate hikes, austerity and wage restraint policies in response to it. bostonreview.net/class-inequali…
Among other things, he notes that it was early dropping of price controls that hurt Democrats in the 1940s, and when Truman pulled off his surprise victory in 1948 he was campaigning on re-imposing them.
Conversely during the Korean War, despite a huge expansion in public spending, price controls - including the brief nationalization of the steel industry - quickly brought inflation under control.
Read 5 tweets
19 Aug
The entire story of core inflation, in one picture.
h/t @Claudia_Sahm, who pointed this out in her Stay-at-Home Macro substack/newsletter thing, to which you all should subscribe.
Anyone who says that today's high headline inflation numbers are a sign of economy-wide overheating simply hasn't looked at the numbers. Or if they have, they are not arguing in good faith.
Read 8 tweets
17 Aug
I fully endorse this piece by my colleague @rortybomb. Powell has overseen a dramatic shift in macroeconomic thinking at the Fed. It's far from certain it would have happened without him, or would be sustained under someone else. rooseveltinstitute.org/2021/08/16/pri…
It was Powell who decisively abandoned the "stars" - the so-called natural rate of unemployment and neutral interest rate - that had constrained thinking at the Fed for a generation. Maybe Yellen would have gotten there too - we'll never know. But it was Powell who actually did. Image
Powell has also been the first Fed chair in a generation, if not ever, to recognize the importance of demand conditions to income distribution, and the Fed's responsibility to take that into account. rooseveltinstitute.org/wp-content/upl… Image
Read 7 tweets
17 Aug
This @AlanaSemuels piece on what exactly is involved in getting a stuffed giraffe toy from a Chinese factory to a house in the US is a smart and interesting way of thinking about inflation. time.com/6088033/why-in… Image
In general, I think tracking a single commodity along its path from production to consumption is a great and underused tool for clarifying all kinds of economic arguments. The documentary Mardis Gras: Made in China is one of my favorites. What are some other examples?
A big part of the story here is bilateral negotiations between the many different players: Amazon; Viahart, the "seller" (who neither manufacture the toy nor collect the money); the freight forwarder; shippers and carriers; port operators; and the manufacturer. Image
Read 8 tweets
31 Jul
Unless I'm misreading the numbers (a possibility!), essentially all of the above-target price rises right now are in two sectors, oil and cars. If you're talking about "inflation" right now, that's the phenomenon you're referring to.
So if you are using "rising inflation" as an argument for anything, it's worth pausing and checking if the argument still works if you substitute "higher oil prices" and "more expensive cars."
It's not clear to me why either of those facts, on their own, would be arguments for scaled-back infrastructure spending, or curtailing unemployment benefits, or raising interest rates. But they are not, they still aren't when you call them "inflation."
Read 9 tweets

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