Simon Wren-Lewis — Helicopter money and fiscal policy

Both John Kay and Joerg Bibow think additional government spending on public investment is a good idea, and that helicopter money (HM) is either a distraction (Bibow) or fiscal policy by subterfuge (Kay). They are right about public investment, but wrong about HM.

In an age of moronism, SWL is probably correct from the pragmatic point of view. Under the neoliberal veil, politicians will never deploy fiscal policy. If they don't , and the central bank cannot offset even if it is willing to, this ship is going stern in the air.

Helicopter money in the US would result in a huge reaction from conservatives and Libertarians, however, who would see it as the work of the devil.

Mainly Macro
Helicopter money and fiscal policy
Simon Wren-Lewis | Professor of Economics, Oxford University

Lars P. Syll — Rethinking expectations

How Rational Expectations Theory involves fitting stylized "reality" to model rather than model to observed reality.

More keeper quotes.

Lars P. Syll’s Blog
Rethinking expectations
Lars P. Syll | Professor, Malmo University

Paul Davidson: A response to John Kay

INET published a paper, written by John Kay, that deals with the relationship between economics and the world we live in. The Map Is Not the Territory: An Essay on the State of Economics spells out methodological critiques of economic theory in general, and of DSGE models and rational expectations in particular.



INET forwarded Kay's paper to a handful economists and invited them to respond. Here we offer a perspective by Paul Davidson, Editor of the Journal of Post Keynesian Economics, and Visiting Scholar at the Schwartz Center for Economic Policy Analysis.

Davidson takes issue with the “classical” axioms, in particular with what he calls the "ergodic axiom": the notion that the future is predetermined by the past and present state of affairs, that past and knowable probability distributions govern future events. He praises rigor, consistency, and the deductive approach, but says the classical axioms are inapplicable to the world we live in: “The financial crisis of 2007-2009 should have been sufficient empirical evidence to indicate that the axiomatic basis of the mainstream theory needs to be replaced.”

Read Davidson's response to John Kay at INET.

(h/t Edward Harrison)