Gary Cornell on Jonathan Gruber's Indiscretion

Link to Gary Cornell’s Stemforums website

I am delighted to have another guest post by Gary Cornell. This one is a reaction to my post “Jonathan Gruber in the Hot Seat.” (Note: Gary had an excellent guest post very early on in the history of supplysideliberal.com: “Gary Cornell on Andrew Wiles.” He also had a nice guest post recently on the Mathbabe blog: “Bring Back the Slide Rule!”) Here are Gary’s thoughts about Jonathan Gruber:

After Miles posted about “L"affaire Gruber,” I emailed him about my shock that somebody who had done so much consulting for government was so lacking in “Washington smarts.” He mentioned that “economists have a tradition of frankness among themselves.”  But it seems to me while this may be strongest among economists, it really is quite common for tenured academics in general. After all, as the joke goes, “tenure means never having to say you’re sorry.”

But I then went on to explaining how the National Science Foundation where I served as a rotating program director, had a very successful method of turning tenured faculty into temporary, reasonably high level government bureaucrats-who could and would get into a lot of trouble if they did or said the wrong thing! What they did was send you off to “rotator camp” for a week or so. At rotator camp you actually spent a lot of time learning how to talk - something tenured professors rarely have to worry about. For example, we were told to remember that we weren’t “giving grants” but “recommending them” or when we spoke to people we could never say we planned (as we all did) to favor young academics over senior people. (Amusingly we were told that could tell people that we would be favoring “recent Ph’D’s” over senior faculty, because saying the former made us guilty of “age discrimination” which was illegal,but the latter statement was fine!)

What I remember most vividly though, even after more than 20 years has passed, was how they ended things:

If there is only one thing you take away from these few days, let it be this: don’t do or say anything  that you wouldn’t want spun by your worst enemy on the front pages of the Washington Post.

Gruber, in spite of all his governmental consulting, apparently has never learned this!

“In school, we’re taught that stories rely on ‘conflict’ and that some conflicts are internal while some are external. …Track them to their source, though, and nearly all conflicts are internal—because they all start with someone, somewhere, wanting something.”

– Scott McCloud, Making Comics: Storytelling Secrets of Comics, Manga and Graphic Novels, p. 67. My title for this quotation is Utility Function Dominance.

Why Scott Fullwiler Misses the Point in “Why Negative Nominal Interest Rates Miss the Point”

Philippe James recently tweeted me a link to Scott Fullwiler’s July 11, 2009 post “Why Negative Nominal Interest Rates Miss the Point.” He begins by noting

Willem Buiter, Greg Mankiw, and Scott Sumner have all recently proposed negative nominal interest rates on reserves or currency as a way to stimulate consumer spending and bank lending.

Then he mention’s Silvio Gesell’s plan, which differs from mine but also yields a negative nominal interest rate on paper currency:

The classic example of a negative nominal interest rate—long suggested by a number of economists for avoiding deflation—is a tax on currency …

Scott questions the effectiveness of this plan, saying:

Well, I don’t know about you, but my response would be pretty clear if the Fed made such an announcement: I’d stop holding currency and just use my debit card (most major purchases already aren’t done with currency, anyway). And so would most everyone else. Banks would then sell their currency back to the Fed and the Fed would pay banks reserve balances in exchange (as it usually does). I highly doubt this would lead any bank to cut its lending rates, as Mankiw thinks.

The response and result are in essence unchanged if instead you require individuals to periodically pay to have their currency “stamped” for validation (which Buiter also describes)—I would use a debit card or go to the ATM machine on the day I was going to spend.

Here Scott points to the necessity of something I emphasize every time I talk to central banks about breaking through the zero lower bound: it is important for central banks to move all four key interest rates in tandem:

  • the target rate (= federal funds rate in the US)
  • the interest rate on reserves 
  • the lending rate (= discount rate in the US)
  • the paper currency interest rate.

If the central bank lowers just the target rate and the paper currency interest rate without lowering the interest rate on reserves, it will be just as ineffective at lowering the market interest rate as if the central bank lowers the target rate and the interest rate on reserves without lowering the paper currency interest rate. Market rates can still be pushed down if the lending rate is left higher, but a lending rate lower than the other rates would interfere with trying to push market rates up.   

So pointing out that lowering one of these rates won’t do much is not an objection to negative rates. To be effective, there has to be no place to hide from the negative rates, except by either buying foreign assets (which is a capital outflow and stimulates net exports) or by actually buying something, either to invest, store, or consume. Of course the central bank should lower all the rates it controls, not just one. 

In the remainder of Scott’s post, his analysis focuses on income effects. For example, even though he points out that for every saver earning less interest, there is a borrower paying less interest (and borrowers probably have higher propensities to consume than savers) he doesn’t think those offsetting effects plus the greater incentive to borrow will have much effect.

When Scott says the interest sensitivity of spending is low, that could well be true for nondurable consumption, but it is not true for durable consumption or investment. The stimulus I expect from negative interest rates is not primarily from the nondurable consumption Euler equation that is what comes to mind for many economists. It is primarily from durable consumption, investment and net exports. Indeed, even if there were no stimulus whatsoever to nondurable consumption, negative interest rates would be very powerful.   

Scott also worries about the effects on bank equity of below zero interest rates. As we have all seen, there are many other mechanisms to bail out banks whose equity is too low other than keeping interest rates too high. And looking forward to the future, we should, in any case, make sure that banks go into the next recession with much, much higher levels of equity than they went into this recession. Under those circumstances, negative interest rates might make it take longer for banks to get out of their capital conservation buffer, so it would be longer before they could again pay dividends or buy back stock, but the economy would be fine.   ’

Finally, in answer to Scott’s question

why not a simple payroll tax holiday, for example, as my fellow bloggers have proposed?

One answer is that negative interest rates can have a bigger effect on aggregate demand than even cutting payroll taxes all the way to zero. I should also mention that whether or not a payroll tax holiday stimulates the economy at all depends greatly on the monetary policy response. In the context of this argument it probably does have some positive effect in conjunction with the monetary policy response of staying at the zero lower bound. But away from the zero lower bound, the monetary policy response might easily cancel out the other effects of a payroll tax holiday on aggregate demand. (On this principle of short-run monetary dominance, see my column “Show Me the Money!”)

The other answer to Scott’s question is that relative to cutting interest rates to get the same effect on aggregate demand, a payroll tax holiday means higher taxes or lower spending later on–both of which are painful. Monetary stimulus is cheap, fiscal stimulus expensive. On this topic, you might like my post “Monetary vs. Fiscal Policy: Expansionary Monetary Policy Does Not Raise the Budget Deficit” has an enduring popularity. If huge amounts of government revenue fell from the sky due to, say, undersea natural gas–much more than could productively be spent on defense, scientific research and other public goods–it would be great in steady state to subsidize wages to help counteract the effect of various labor market distortions. But for most countries, that kind of government revenue doesn’t fall from the sky. It has to be raised through taxes.

Slate #1—>Governments Can and Should Beat Bitcoin at Its Own Game

From a technical point of view, Bitcoin is far ahead of governments in its beautiful implementation of electronic money.

But Bitcoin itself is not the future of money, because it is hard to believe that governments will willingly hand over control of the world’s monetary policy to the Bitcoin algorithm. Nor should they. Keeping the value of money constant over time is difficult and requires strong, capable institutions like central banks. But looking toward the future, it is the electronic dollar (and euro and yen and pound … ) whose value should be kept constant, not yesterday’s paper currency.

Many people are attracted to the gold standard because they think of gold as maintaining its value. But like Bitcoin, the value of gold relative to the goods and services we need to buy fluctuates in the markets every day. An economic yardstick of fixed value doesn’t come that easily. It has to be engineered—and the clearest path to engineering an economic yardstick of fixed value is electronic. 

The key advantage of electronic money over paper currency is this: Monetary systems based on paper currency allow for strongly positive interest rates, but not strongly negative rates; by contrast, it is easy to have interest rates on electronic money vary all the way from strongly positive to strongly negative. High interest rates make it expensive to spend now compared with waiting until later, while low interest rates encourage people to spend now. If interest rates can vary freely over a wide range, they are able to signal to households and businesses as loudly as necessary that the economy needs people to cut back on spending and save more when the economy is overheated, or cut back on saving and spend more when the economy is in a recession.

To zero in on the key problem, in our current monetary system we take for granted an interest rate of zero on paper currency. That interest rate of zero can falsely signal to households and firms that it is OK for them to hold back on spending—even at times when businesses desperately need the customers and people desperately need the jobs that extra spending would provide. Think of a one-year loan. With a positive interest rate, of, say, 2 percent, borrowers pay back their initial loan, plus 2 percent interest. With an interest rate of zero, borrowers pay back the loan with no additional costs. With a negative interest rate, of, say, minus 2 percent, borrowers pay back the loan, minus 2 percent. In effect they’re being paid for taking on a loan. Can you imagine anything that might better stimulate economic activity?

Yesterday’s paper currency is not only a barrier to speedy recovery from deep recessions—it is also a barrier to ending inflation. Many people don’t realize inflation in advanced economies such as the United States, the eurozone, and the United Kingdom is the result of conscious decisions of the Fed, the European Central Bank, and the Bank of England (with the Bank of Japan now trying to follow suit) to tolerate 2 percent inflation, in order to give monetary policy more room to maneuver. Here is the reasoning: Both households and businesses focus on interest rates in comparison with inflation when making spending decisions, so that higher inflation makes interest rates effectively lower. As economists say it, for a fixed nominal interest rate, higher inflation lowers the real interest rate. For example, if someone is paying 3 percent interest on a loan but inflation is 2 percent, then 2 percent is just making up for inflation, and only the remaining 1 percent actually gives the lender extra real value in terms of what the principal plus interest is worth. 

The key takeaway message for monetary policy is that because people look at how interest rates compare with inflation, an interest rate of zero that is 2 percent below inflation is much more stimulative than an interest rate of zero when inflation is also zero. (That is why the United States got more oomph from its zero interest rates than Japan, which had an inflation rate of zero or less.) 

As long as paper currency has an interest rate of zero, it is hard for other interest rates to go below zero, so the only way to get interest rates below inflation is to push inflation above zero. Take paper currency off its pedestal, and inflation is no longer necessary to provide this space for monetary policy, since interest rates can go down, instead of inflation having to go up. Then there is nothing standing in the way of ending inflation forever.

To make it possible to end recessions quickly and to end inflation forever, a government needs to take the following steps:

  1. Establish official government-sanctioned electronic money in a way that makes the use of electronic money as convenient and seamless as possible. This involves setting the stage for private innovation in electronic payment systems by giving full legal tender status to electronic money in all government-insured bank accounts and in other accounts that are officially certified as backed 100 percent by reserves held at the central bank.
  2. Dethrone paper currency from the exalted legal status it was given (very controversially) in the late 19th century, by giving anyone, at any time, the right to refuse payment in paper currency, unless a contract explicitly calls for payment in paper currency. Further demote paper currency by abolishing the guarantee that a paper dollar (or euro, or yen, or pound) will always be worth the same amount as an electronic dollar. But make sure that it is easy for people to convert paper currency into electronic form and vice versa.
  3. Search in the nooks and crannies of the legal code and government agency regulations and policies for places where it is assumed that interest rates are always zero or positive or where it is assumed that paper currency has a special status—and root those assumptions out. (For example, make it clear that people can’t show up with suitcases full of hundred-dollar bills to settle their taxes.) Encourage businesses to do the same with their business plans and their accounting.
  4. Give the central bank the authority to make interest rates negative, including making the interest rate on paper currency negative when necessary, by using the fact that a paper dollar is no longer guaranteed to be worth the same amount as an electronic dollar.
  5. Require the central bank to bring its inflation target down to zero over the course of 15 years and to forever afterward keep the value of a dollar in terms of goods and services within an unchanging narrow band. This should be revised only when necessary to take into account improved ways of measuring the value of a dollar (or euro or yen or pound).

It has become traditional for U.S. Treasury secretaries to periodically repeat the mantra that “a strong dollar is in our nation’s interest.” I would add one word to the mantra: “A strong electronic dollar is in our nation’s interest.” A strong electronic dollar is one that works smoothly in transactions, empowers monetary policy to bring a speedy end to recessions, and keeps its value over time with no concessions to inflation.

The path to a strong electronic dollar will require bureaucratic and political fortitude. But the economic principles involved are clear. The rewards at the end of that path—the taming of the business cycle and the end of inflation—insure that some nation will blaze that trail. (My bet is on the United Kingdom.) Then the rest of the advanced nations will follow.

But make no mistake: Giving electronic money the role that undeserving paper money now holds will only tame the business cycle and end inflation. Fostering long-run economic growth, dealing with inequality, and establishing peace on a war-torn planet will remain just as challenging as they are now. But every time one set of problems is solved, it allows us to focus our attention more clearly on the remaining problems. It is time to step up to that next level.

Liberty and the Golden Rule

In his radical book Fair Play (p. 16), Steven Landsburg puts forward this radical idea:

… we should care about other people’s liberty as well as our own. 

In On Liberty, Chapter IV, “Of the Limits to the Authority of Society over the Individual” (paragraph 12), John Stuart Mill puts forward the same idea, and explains just how radical it is:  

But the strongest of all the arguments against the interference of the public with purely personal conduct, is that when it does interfere, the odds are that it interferes wrongly, and in the wrong place. On questions of social morality, of duty to others, the opinion of the public, that is, of an overruling majority, though often wrong, is likely to be still oftener right; because on such questions they are only required to judge of their own interests; of the manner in which some mode of conduct, if allowed to be practised, would affect themselves. But the opinion of a similar majority, imposed as a law on the minority, on questions of self-regarding conduct, is quite as likely to be wrong as right; for in these cases public opinion means, at the best, some people’s opinion of what is good or bad for other people; while very often it does not even mean that; the public, with the most perfect indifference, passing over the pleasure or convenience of those whose conduct they censure, and considering only their own preference.

Part of the problem is in the limitations of the golden rule: “Do unto others as you would have them do unto you.” That is all well and good if they have the same preferences, but not if they want something different from what you would want in the same circumstances. Until further advances in technology, we are shut out of knowing directly what the world looks like from inside someone else’s mind, and have to guess based on how we would feel. But that sometimes steers us badly off target. Giving everyone personal liberty is a safeguard against our blind meddling.  

Of course, applying the golden rule at a meta-level would say “I want liberty, so I should give others liberty as well.” But there are many times when liberty is a higher law than applying the golden rule at the detailed level.

The National Security Case for Raising the Gasoline Tax Right Now

Here is a link to my 54th column on Quartz, “The national security case for raising the gasoline tax right now.”

In light of the title, I should point out that, from an efficiency standpoint (without regard to politics), there may no justification for phasing in a gasoline tax increase slowly. If a national security externality were like an environmental externality, that externality should ideally be reflected in the tax rate right now. But the national security externality is actually a pecuniary externality, so it would take some nontrivial reasoning to figure out whether or not there is any justification for phasing a gasoline tax in. It is an optimal taxation problem in which money in the hands of certain parties counts negatively. 

Danny Vinik's Interview with Miles Kimball for Business Insider: There’s an Electronic Currency that Could Save the Economy—and It’s Not Bitcoin

Link to the interview on Business Insider

Here, below the line of stars, is the full text of Danny Vinik’s interview with me for Business Insider. I linked to it when it first came out on November 21, 2013, and cleared with Danny the idea that I could copy it over in full here after some time had passed, given my role in making it possible. I think Business Insider holds the copyright. 

Danny Vinik and I talked for about 75 minutes. One thing I talked a lot about in the interview is that of all the possible ways to handle the demand-side problem, repealing the zero lower bound is the one that leaves us best able to subsequently pursue supply-side growth. Fiscal stimulus leaves us with an overhang of government debt that then has to be worked off by painfully higher taxes or lower spending. Going easy on banks and financial firms to prop up demand (as Larry Summers at least halfway recommends in his recent speech at the International Monetary Fund) risks another financial crisis. Higher inflation to steer away from the zero lower bound (as Paul Krugman favors) messes up the price system, misdirects both household decision-making and government policy, and makes the behavior of the economy less predictable. (On Paul Krugman, also see this column.)

Let me push a little further the case that electronic money can clear the decks on the demand side so that we can focus on the supply side with this example. Suppose you firmly believed that the demand side played no role in the real economy—that the behavior of the economy could be described well by a real business cycle model, regardless of what the Fed and other central banks do, and regardless of the zero lower bound. From that point of view, in which monetary policy only matters for inflation, electronic money would still be valuable as a way of persuading others that it was OK to have zero inflation rather than 2% inflation.

The United States has been marred in slow economic growth and a weak recovery for years now. Unemployment remains high. This is despite extraordinary efforts by the Federal Reserve to stimulate the economy. This drawn out period of low inflation and high unemployment has gotten more and more people talking about a “new normal” of mediocre growth.

Economists have been looking for ways to give central banks more power to combat recessions and prevent these long, drawn out recoveries. Larry Summers laid out this major impending economic challenge in his recent speech at the IMF. Normally, when a recession hits, central banks cut interest rates to incentivize firms to invest and to spur economic growth. But when interest rates hit zero, those banks lose one of their most important tools to combat recessions. This is called the zero lower bound.

Hitting the zero-lower bound means that interest rates cannot reach their natural equilibrium where desired investment equals desired savings. Instead, even at zero, interest rates are too high, leading to too much saving and a lack of demand. Thus we get the slow recovery.

Until recently, we hadn’t hit that bound. But since the Great Recession, we’ve been stuck up against it and the Fed has been forced to use unconventional policy tools instead. What Summers warned of is that this may become the new normal. When the next recession hits, interest rates are likely to be barely above zero. The Fed will cut them and we’ll find ourselves up against the zero lower bound yet again and face yet another slow recovery.

So what’s the answer?

University of Michigan economist Miles Kimball has developed a theoretical solution to this problem in the form of an electronic currency that would allow the Fed to bring nominal rates below zero to combat recessions. He’s been presenting his plan to different economists and central bankers around the world. Kimball has also written repeatedly about it and was recently interviewed by Wonkblog’s Dylan Matthews.

“If you have a bad recession, then firms are afraid to invest,” he told Business Insider. “You have to give people a pretty good deal to make them willing to invest and that good deal means that the borrowers actually have to be paid to tend the money for the savers.”

But paper currency makes this impossible. 

“You have this tradition that as it is now is enshrined in law in various ways that the government is going to guarantee to all savers that they will get [at least] a zero interest,” Kimball said.

If the Fed lowered rates below zero in our current financial system, savers would simply withdraw their money from the bank and sit on it instead of letting it incur negative returns. The paper currency itself — because it’s something that can be physically withdrawn from the financial system — prevents rates from going negative.

This is where Kimball’s idea for an electronic currency comes in. However, unlike Bitcoin, which prides itself on its decentralization and anonymity, Kimball’s digital currency would be centralized and widely used. He would effectively set up two different types of currencies: dollars and e-dollars. Right now, your $100 bill is equal to the $100 in the bank. If you’re bank account has a 5% interest rate, you earn $5 of interest in a year and that $100 bill is still worth $100. But what would happen if that interest were -5%? Then you would lose $5 over the course of the year. Knowing this, you would rationally withdraw the $100 ahead of time and keep it out of the bank. This is where the separate currencies come in.

“You have to do something a little bit more to get the negative rate on the paper currency,” Kimball said. “You have to have the $100 bill be worth $95 a year later in order to have a -5% interest rate. The idea is to arrange things so let’s say $100 in the bank equals $100 in paper currency now, but in a year, $95 in the bank is equal to $100 in paper currency. You have an exchange rate between them.”

“After a year, I could take $95 out of the bank and get a $100 bill or if I wanted to put a $100 bill into the bank, they would credit my account with $95.”

Got that? After a year of a -5% interest rate, $100 dollars are equal to $95 e-dollars. This ensures that paper currency also faces a negative interest rate as well and eliminates the incentive for savers to hoard dollar bills if the Fed implements a negative rate. Presto! The zero lower bound is solved.

The benefits of this policy go even further though: We can say goodbye to inflation as well.

“Once you take away the zero lower bound, there isn’t a really strong reason to have 2% inflation at this point,” Kimball said. “The major central banks around the world have 2% inflation and Ben Bernanke explained very clearly why that is. It’s to steer away from the zero lower bound.”

He’s right. Back in March, Ryan Avent asked Bernanke why not have a zero percent inflation target. Bernanke answered, “[I]f you have zero inflation, you’re very close to the deflation zone and nominal interest rates will be so low that it would be very difficult to respond fully to recessions.”

But if nominal interest rates are allowed to go below zero, then the Fed has ample room to respond to recessions even if rates start out low. This is another major benefit from eliminating the zero lower bound.

What Kimball, whose blog is titled Confessions of a Supply Side Liberal, is most excited about is moving beyond the demand shortfall the economy currently faces to the supply side issues that hold back long-term growth.

“If you care at all about the future of this country, one of the things you need to realize is we need to solve the demand side so we can get back to the supply side issues that are really the tricky thing for the long run,” he said. “The way to solve the demand side issues that is the most consistent with not messing up our supply side is monetary policy and making it so we can have negative interest rates.”

At the moment, e-dollars are still only a theoretical concept, but Kimball is hopeful that they could be put into action in the near future. He believes that if a government bought in, it could be using an electronic currency in three years and reap the benefits of it soon after. 

“This is going to happen some day,” he concluded. “Let me tell you why. There are a lot of countries in the world and some country is going to do this and it’s going to be a whole lot easier for other countries to do it once some country has stepped out.”

“Why, indeed, do we have public schools at all? There are advantages to having an educated public, and there are at least arguments to the effect that the private sector will undersupply education. But that’s an argument for government subsidies or vouchers; it’s not an argument for the government to actually run the schools. The reason the government wants to run schools is so that it can control what is taught. I hope that makes people uncomfortable.”

Jonathan Gruber in the Hot Seat

I want to hear what everyone really thinks. So I hate it when people get punished for being frank about their views. Jonathan Gruber is in that situation now. If you haven’t seen it, it is well worth the 55 seconds to watch this video of Jonathan’s comments. Then to see an example of the trouble this has brought him, take a look at what Peggy Noonan wrote in her November 21, 2014 opinion piece in the Wall Street Journal (to jump over the paywall, google the title “The Nihilist in the White House”): 

ObamaCare … has been done in now by the mindless, highhanded bragging of a technocrat who helped build it, and who amused himself the past few years explaining that the law’s passage was secured only by lies, and the lies were effective because the American people are stupid. Jonah Goldberg of National Review had a great point the other day: They build a thing so impenetrable, so deliberately impossible for any normal person to understand, and then they denigrate them behind their backs for not understanding.

One is most likely to be punished for being frank about one’s views if (a) one has not been frank about them all along and (b) if one’s views–or attitudes communicated along with those views–have unappealing aspects to them. So, with due allowance for the constraints one is under, one should (a) seek to be as frank as possible early on and (b) strive for views and attitudes that are as enlightened as possible to begin with.  

The other lesson from Jonathan Gruber’s experience is that, more and more, one must be ready for everything one says to be totally public. For that, I think it is good preparation to have had a blog at some point during one’s career (ideally starting early enough that any mistakes or infelicities can be put down to the inexperience of youth), since blogging seriously involves saying many, many things, all of which are intended to be fully public.  

Note: On the subject of telling the truth, you might be interested in these two posts:

Robin Hanson: Dark Pain, Dark Joy →

I recommend Robin Hanson’s post that I link above. There are many things we hide from others, and some that we hide from ourselves. Robin Hanson explores our hidden pains and hidden joys, and why we might hide them. 

There can be legitimate reasons for hiding things from others, though much less often than many people think. (I learned a lot from reading Sissela Bok’s books Lying and Secrets soon after they came out.) But it is too bad to hide something from oneself. As I wrote in my post “Truth or Consequences”: 

In my personal life, in order to keep myself from avoiding the truth, I often say to myself: “Whatever you decide is true, you don’t necessarily have to do anything about it,” lest fear of what I should do given certain findings tempt me to not find out the truth.

Let yourself see the truth, even if it means promising yourself you might not do anything about. As long as there is some chance the truth will set you free, it is worth facing it.

My Math Column with Noah in Spanish: "La Diferencia Fundamental Entre Los Niños Que Se Distinguen en Matemáticas y Los Que No"

blog.supplysideliberal.com tumblr_inline_nfolziwz6u1r57lmx.png

Yesterday, I was pleasantly surprised to stumble across the translation “La diferencia fundamental entre los niños que se distinguen en matemáticas y los que no” on Quartz of my column with Noah Smith “There’s One Key Difference Between Kids Who Excel at Math and Those Who Don’t.” (You can see a German translation of one of my columns, “Die „Hunger Games“ sind nicht unsere Zukunft – Sie sind schon Realität,” here and Japanese translations of quite a number of my posts linked here.)

I am grateful for all of the interesting things that have happened to me and all of the things I have learned since I have started blogging–something that might not have happened without Noah’s urging. And I am grateful for all of you who have taken the time to read some of the things I have written.

If you have time to read one more thing, you might like the column I wrote for Thanksgiving last year: “Human Grace: Gratitude is Not Simple Sentiment; It is the Motivation that Can Save the World.” In the same spirit, you might like Rebecca Hale’s Humanist Thanksgiving prayer. 

Q&A: Is There Anything to Supply-Side Economics?

Question: Hi Dr. Kimball - So i’m a Larry Kudlow fan- been so since 2005. Do I stand alone here? its easier to find a trend of more critics against Kudlow along with Supply Side Economics. I google SSE and the 1st page is flooded with why it doesn’t work. your thoughts much appreciated.

Answer:  I used to watch “The McLaughlin Group” all the time, and liked Larry Kudlow a lot there.

On your question about supply-side economics, It depends on what people mean by “supply-side economics.” At current rates, in my view neither incentive effects nor Keynesian multipliers are large enough for cutting taxes to raise revenue. But leaving that very specific tax issue aside, the supply-side is of crucial importance, much more important for long-run welfare than the demand side. That is a point I make at length in “The Deep Magic of Money and the Deeper Magic of the Supply Side.”

Several of my sub-blogs particularly address the supply side in many of their posts:

To me, that what I say in those posts is supply-side economics.