Gimmie that old time (macro) religion

In yet another post that stubbornly ignores the common pool problem aspect of climate change, our hero PK also makes what to me is a show-stoppingly astonishing statement:

“US employment is determined by the interaction between macroeconomic policy and the underlying tradeoff between inflation and unemployment”

I have been holding off posting while thinking about this for 10 days now, trying to figure out a reasonable reading.

To me, he’s saying that the government chooses the national employment level by using monetary and fiscal policy to pick its desired point on the Phillips Curve.

You know, like Alvin Hansen in 1951!

He’s not saying short term fluctuations in US employment, or putting any qualifiers on the statement. It’s one of the most amazing things I’ve seen written in quite a while.

Am I nuts? Isn’t US employment largely determined by demographics, preferences, technology, & regulation. You know, the demand and supply of labor?

Maybe somehow PK is subsuming all those elements into the “underlying tradeoff”?

Does anyone really still think that the government uses monetary/fiscal policy to putthe aggregate demand curve where it needs to be to get the employment the government wants from the Phillips Curve relation?

I guess I now understand why PK has been so mad these past few years. In his view as articulated in the quote above, the government has deliberately chosen to keep US employment low.

People who ascribe such omnipotence to the government whether from the left like PK or the right like Scott Sumner, scare the crap out of me.


Life among the Econ, part II (Pritchett edition)

“While all economists might share some commonalities from selection and training there are huge differences across the sub-specialties of the discipline. The clan called “open-economy macro-economists” deal with crises in which interventions are dramatic, dependent on decisions of few people, and in which outcomes are measured in days and weeks and two quarters is a long horizon. In contrast the clan called “development economists” typically deal with chronic problems which rarely have discrete interventions, societies (not outsiders) are primarily determinative of outcomes, and in which a decade is the short-run, not the long-run.”

Much more here, including this:

“an obvious “tell” of a development amateur is saying any of the following:

“It’s easy.”
“We can do this quickly.”
“We have a solution for every problem.””