Some people seem to consider the case of Latvia the ultimate Keynes killer, showing that austerity policies suffice to get you out of deep recessions and not having to fall back on Keynesian stimulus.Hmm …What are the facts? Latvia today has a real GDP that still is far below its pre-crisis peak. Its unemployment rate is close to 15 %. Indeed an impressive success …Latvia and Sweden — the ultimate Keynes killers? (video)
Lars P. Syll | Professor of Social Studies and Associate Professor of Economics, Malmo University
(h/t Ralph Musgrave via email)
(h/t Ralph Musgrave via email)
4 comments:
Of topic but this is interesting in my view:
“A block diagram approach to
macroeconomic dynamics,
and why IS/LM is fatally flawed
TROND ANDRESEN
Department of Engineering Cybernetics,
The Norwegian University of Science and Technology,
N-7034 Trondheim, NORWAY.
A dynamic model of an individual, and then an aggregate (sector), economic unit is developed. This model and other building blocks are employed to create macroeconomic models represented through block diagrams. A simulation tool based on block diagram representation is applied to a simple textbook economy with firms and households. Finally, a dynamic extension of the IS/LM static model is presented in block diagram form, and it is demonstrated through the dynamic extension that IS/LM’s way of treating money stock is flawed to a degree that implies that IS/LM must be discarded.”
Conclusion
If we dynamise the static IS/LM model on the terms of its adherents (neoclassical
synthesicists), it rigorously follows that their view of money stock being an exogenous
variable together with government spending ( ), has to be substituted by the interest rate
and government spending as control variables. They should then logically transit to the
(Post) Keynesian position on the role of the interest rate. And all economics schools should
simply abandon the IS/LM model.
http://www.itk.ntnu.no/ansatte/Andresen_Trond/econ/system-econ.pdf
Krugman already has the right model in the Krugman cross.
See Rob Parteneau's Employing Krugman’s Cross: Farewell, Mr. Hicks?
Latvia, maybe dumb economists should look at demographic data? How are these emigrants doing?
Krugman already has the right model in the Krugman cross
Right on target.
Krugman's cross is a great graphic model of the economy, enabling us to to visualize the interactions of the public and private sectors' spending decisions that ultimately determine the levels of GDP and employment.
It should be taught in every undergraduate text. If politicians understood it and were willing to act based on that understanding much economic pain could be avoided, in the U.S. and - even more - in Europe.
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