水曜日, 8月 15, 2018

ケネス・ボールディング 『科学としての経済学』



ケネス・ボールディング 『科学としての経済学』

http://nam-students.blogspot.com/2018/08/blog-post_15.html@


1971年日本経済新聞社 清水幾太郎訳

  目次

  日本版への序文

1 社会科学としての経済学

2 生態科学としての経済学 ☆☆

3 行動科学としての経済学

4 政治科学としての経済学

5 数理科学としての経済学 ☆

6 道徳科学としての経済学

7 経済学と人類の将来

  訳者あとがき



パーソンズ体系:

http://nam-students.blogspot.com/2010/09/blog-post_7474.html


社会システム/行為システム/生命システムの関係

                                     
                                        ________
                                       /信託シ/社会的共同体
                                      /ステム/___/①|
                                     /⑦経済/ 政治/社会システム
                                    /___/④__/   |
                                    |   |   |   |
                                    |   |   |   |
                                ____|___|___|___|
                               /    |  /   /|  /|
                              /文化   | /___/_|_/ |
                             /システム  |/   /  |/  |
                            /_______|___/___|③行為システム
                           /       /  ⑥    /    |
                          /行動システム /パーソナリティ/     |
                         /       / システム  /      |
                        /_______/_______/       |
                        |       |       |       |
                        |       |       |       |
                ________|_______|_______|_______|
               /        |      /       /|  /   /
              /         |     /       / |_/___/
             / ⑤        |    /       /  |/   /
            / テリック・システム |   /_______/___|___/
           /            |  /       /    |  /
          /             | /       /     | /
         /              |/       /      |/
        /_______________|_______/_______|   ②生命システム
       /               /               /
      /               /               /
     /               /               /
    /  物理ー科学システム    /     有機体システム   /
   /               /               /
  /               /               /
 /               /               /
/_______________/_______________/
 


NAMs出版プロジェクト: マンキュー マクロ経済学 第4版 9th ed

《化学者、物理学者、そして経済学者は食料の缶詰の開け方を見つけようとして、
砂漠の孤島にみんなはまり込んでいます。
 「缶が破裂するまで火であぶりましょう」と化学者が言います。
 「いや、いや」と物理学者は言います。「高い木の上から岩の上に落としましょう」
 「私にはアイデアがあります」と経済学者が言います。「最初に、我々が缶を開ける
人を仮定します・・・・。」》

マンキューマクロ邦訳応用編第3版第1部2:4,67頁

Mankiw 9th p.260:

A  chemist, a  physicist, and  an  economist  are  all  trapped  on  a  desert  island, trying to figure out how to open a can of food.
  “Let’s heat the can over the fire until it explodes,”  says the chemist.
  “No,  no,”  says the physicist, “let’s drop the can onto the rocks from the top of a high tree.”
  “I have an idea,”  says the economist. “First,  we assume a can opener .  .  .”

This old joke takes aim at how economists use assumptions to simplify—and sometimes oversimplify—the problems they face.  

https://en.wikipedia.org/wiki/Assume_a_can_opener

It derives from a joke which dates to at least 1970 and possibly originated with British economists.[3] The first book mentioning it is likely Economics as a Science (1970) by Kenneth E. Boulding:[4]

https://translate.google.com/translate?sl=auto&tl=ja&u=https%3A//en.m.wikipedia.org/wiki/Assume_a_can_opener

https://ja.wikipedia.org/wiki/%E3%82%B1%E3%83%8D%E3%82%B9%E3%83%BBE%

E3%83%BB%E3%83%9C%E3%83%BC%E3%83%AB%E3%83%87%E3%82%A3%E3%

83%B3%E3%82%B0

ケネス・エワート・ボールディング(Kenneth Ewart Boulding1910年1月18日 - 1993年3月18日)は、イギリス出身のアメリカ経済学者
彼は伝統的な経済学は一部に過ぎないと考え、経済学(あるいは社会科学)の領域を広げる諸著作を書いたことに特徴がある。



  • Economics as a Science, (McGraw-Hill, 1970).
清水幾太郎訳『科学としての経済学』(日本経済新聞社, 1971年/日経新書, 1977年)


ボールディング
『科学としての経済学』1971年邦訳
「数理科学としての経済学」☆

134頁
《…これらのモデルの表現に用いられた言語の文章力やエレガンスのゆえであろうか、これ
らのモデルが人々の心を強く捕えたあはり、モデルを更にリアリティに密着した近似に仕上げ
るのを妨げるに至った。確かに、数学のピューリタニズムのために、すなわち、言語としての
数学が豊潤、色彩、諷刺などを明らかにする力を欠いているために、私たちに満足を与えると
同時に不正確な世界のモデルの虜にならずに済むということはあろう。しかし、その半面、数学
の使用に伴う推論や操作の技術のため、現実の世界への関心が失われるという危険もあって、
これも科学の進歩の大きな障碍になるのである。一人の物理学者、一人の化学者、一人の経済
学者が、何一つ道具を持たず、ただ缶詰1個を持って無人島に打ち上げられたという有名な話
がある。物理学者と化学者とは、缶詰を開ける精巧な機械を考案したが、経済学者は、ただ
う言ったという。「缶切りがあると仮定せよ!」
すべての数学は仮定から出発する。しかし、
応用部門においては、現実に存在しない仮定から出発し、この仮定から非常に複雑な推論の連
鎖へ進み、そのために、結論の説得力が推論のみから得られるようになり、論理の連鎖が仮定
以上に真理に接近し得ないということを忘れてしようのは、あまりにも暢気な態度である。》

参考:

Conversations with History: Kenneth Boulding

https://youtu.be/cLjhaaP9bP8


☆☆
46:
出生率Bと死亡率D

二つの均衡がある
Eは安定均衡
Dは不安定均衡


1971年日本経済新聞社 清水幾太郎訳

  目次

  日本版への序文

1 社会科学としての経済学

2 生態科学としての経済学 ☆☆

3 行動科学としての経済学

4 政治科学としての経済学

5 数理科学としての経済学 ☆

6 道徳科学としての経済学

7 経済学と人類の将来

  訳者あとがき



パーソンズ体系:

http://nam-students.blogspot.com/2010/09/blog-post_7474.html


ボールディングの言葉では、


   統合

交換    脅迫、各システム(162頁)


             生命システム            行為システム     社会システム
                ____________________________
               /\                /\        /社会的共同体
              /__\              /__\      /__\
             /\  /\            /\  /\    /社会システム  
            /__\/__\          /__\/__\__/経済\/政治\
           /\      /\        /\      /\    
          /  \    /  \      /  行為システム  \  
         /    \  /    \    /行動  \  /パーソナリティ 
        /______\/______\__/_システム \/_システム_\ 
       /\              /\             
      /  \            /  \        
     /    \  生命システム  /    \           
    /      \        /      \        
   /        \      /        \        
  /          \    /          \     
 / 物理・科学システム  \  / 有機体システム    \   
/______________\/______________\


社会システム/行為システム/生命システムの関係

                                     

月曜日, 8月 13, 2018

「日本十進分類法(NDC)新訂10版分類基準(2018年8月版)



__

国立国会図書館 NDL (@NDLJP)
「日本十進分類法(NDC)新訂10版分類基準(2018年8月版)」を掲載しました。
ndl.go.jp/jp/data/catsta…


__
目次 本基準の凡例 .......................................................................................................................... 1 本表・補助表編 ...................................................................................................................... 2 

総記 ..................................................................................................................................... 2 
哲学 ..................................................................................................................................... 8 
歴史 .................................................................................................................................... 11 
社会科学 ............................................................................................................................ 21 
自然科学 ............................................................................................................................ 50 
技術 ................................................................................................................................... 63 
産業 ................................................................................................................................... 80 
芸術 ................................................................................................................................... 91 
言語 ................................................................................................................................. 103 
文学 ................................................................................................................................. 105 
一般補助表 ....................................................................................................................... 110 
 凡例 .............................................................................................................................. 110
  Ⅰ 形式区分 .................................................................................................................. 111 
相関索引・使用法編 ............................................................................................................ 116
 使用法 ................................................................................................................................. 116

マンキュー(マクロ応用篇第4版)加筆は…


例えばピケティーを読む前に基礎教養としてマンキューマクロ応用篇を読んでいなければ、
議論についていけないだろう。ブランシャール上下はスッキリしているが物足りない。
齋藤他マクロは膨大、煩瑣すぎてポイントがわからない。
>>で引用した目次は9edではなくもうすぐ(2018/9/21)刊行される原書10edのものでした
個人的に注目したいのは、
9edでは第8章に
2008~2009年の金融危機に関して,誰に責任があるのか」(邦訳308~310頁)
“CASE STUDY  Who Should Be Blamed for the Financial Crisis of  2008–2009?  ” 593-594
なる原書で2頁に渡るケース・スタディが追加されたこと
[原書8ed(2012)ですでに追加されていた…
(3年ごとに改訂されるので翻訳が追いつかない)。
原書7ed(2009) =邦訳第3版の原書、
にはまだない]

マンキューの書き方だと金融危機の責任者の候補リスト
(連邦準備、住宅の買い手、住宅ローン会社、投資銀行、格付会社、規制機関、政策決定者)
に経済学者がいないので
ブランシャールのように反省しているとは思えない
ただし、マクロ・プルーデンス規制(319頁)が必要だという結論は両者同じ





参考: 

マンキューの論文及びそれへの(日本語)批判的記事

22 Mankiw, "Reincarnation of Keynesian Economics." 
http://www.nber.org/papers/w3885.pdf
http://d.hatena.ne.jp/himaginary/20110604/The_reincarnation_of_keynesian_economics

ブランシャールのリーマンショックへの反省?論文

Blanchard, Dell'Ariccia, and Mauro,"Rethinking Macroeconomic Policy," 
https://www.imf.org/~/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/spn/2010/_spn1003.ashx
2010年 全19頁

邦訳はオリヴィエ・ブランシャール他 「マクロ経済政策を再考する」 — 経済学101 で検索


応用篇第2章の加筆は大したことないから第6章、第8章の加筆(#8:2金融危機302~322頁)だけチェックすれば良い

興味深い最新追加参考論文は

第6章233(ケーススタディ 政策不確実性は,経済にどう影響するだろうか),236頁

4)Scott R.  Baker,  Nicholas Bloom,  and Steven J.  Davis, “Measuring Economic Policy Uncertainty,” Working Paper,  2013. Available at http://www.policyuncertainty.com/.

(新聞記事で使われる単語を指数に加えたというが)分野としては計量経済学だと思う


ボールディング源流のジョークも健在だった

A  chemist, a  physicist, and  an  economist  are  all  trapped  on  a  desert  island, trying to figure 
out how to open a can of food.
  “Let’s heat the can over the fire until it explodes,”  says the chemist.
  “No,  no,”  says the physicist, “let’s drop the can onto the rocks from the top of a high tree.”
  “I have an idea,”  says the economist. “First,  we assume a can opener .  .  .”

This old joke takes aim at how economists use assumptions to simplify—and sometimes oversimplify
—the problems they face.  
[邦訳は70~1頁]


どうでもいいが以下の図は原書のように三色刷りではないと意味が分からない

Dissaving:貯蓄取崩し#4:169

マンキューマクロ応用篇第4版169頁
図4-12.ライフサイクルにおける消費,所得,富

 金額|               _
   |           富 _ー \
   |           _ー    \
   |         _ー       \
   |  所得   _ー          \
   |_____ ー________     \
   |____ー__貯蓄______|_____\__
   | _ー  消費        |貯蓄取崩し \ |
   |ー _____________|_______\|__
                 退職期の      人生の
                  開始        終焉

(水平な消費の線で示されるように) もし消費者が生涯を通じて消費を

平準化するとすれば,働いている時代に貯蓄をして富を蓄積し,退職後に

貯蓄を取り崩して富を減らす.







どうでもいいが以下の図は原書のように三色刷りではないと(初見では)意味が分かりにくい
マンキューマクロ応用篇第4版169頁
図4-12.ライフサイクルにおける消費,所得,富

 金額|               _
   |           富 _ー \
   |           _ー    \
   |         _ー       \
   |  所得   _ー          \
   |..... ー.........    \
   |____ー__貯蓄______:_____\__
   | _ー  消費        :貯蓄取崩し \ |
   |ー _____________:.......\|_
                 退職期の      人生の
                  開始        終焉

(水平な消費の線で示されるように) もし消費者が生涯を通じて消費を

平準化するとすれば,働いている時代に貯蓄をして富を蓄積し,退職後に

貯蓄を取り崩して富を減らす.


https://lh3.googleusercontent.com/-1pbTeLsAlAY/W3JwASuw1PI/AAAAAAABeCE/gohZrYZXvOkpO8qPbS7-Y-j-Rdi4RX3FACHMYCw/s640/blogger-image-148616640.jpg


Dissaving:貯蓄取崩し#4:169


日曜日, 8月 12, 2018

マンキューとブランシャール



先に引用した目次は9edではなくもうすぐ刊行される10edのものでした
個人的に注目したいのは、
9edでは
2008-2009の金融危機のために誰が批判されるべきか? 
CASE STUDY  Who Should Be Blamed for the Financial Crisis of  2008–2009?    593-601
なる原書で9頁に渡るケーススタディが追加されたこと
ブランシャールのように反省しているとは思えないが

参考:


Who Should Be Blamed for the Financial Crisis of 2008–2009?




Who Should Be Blamed for the Financial Crisis of 2008–2009?

 “Victory has a thousand fathers,  but defeat is an orphan.”  This famous quotation from  John  F.  Kennedy  contains  a  perennial  truth.  Everyone  is  eager  take  credit for success,  but no one wants to accept blame for failure.  In the aftermath of the financial  crisis of  2008–2009,  many people  wondered who was to blame. Not  surprisingly,  no one stepped forward to accept responsibility. Nonetheless,  economic observers have pointed their fingers at many possible culprits.  The accused include the following: nThe Federal Reserve. The nation’s central bank kept interest rates low in the aftermath of the 2001 recession. This policy helped promote the recovery,  but it also encouraged households to borrow and buy housing. Some economists believe by keeping interest rates too low for too long, the Fed contributed to the housing bubble that eventually led to the f inancial crisis. nHome-buyers.  Many people were reckless in borrowing more than they could afford to repay.  Others bought houses as a gamble,  hoping that housing prices would continue their rapid increase. When housing prices fell instead,  many of these homeowners defaulted on their debts. nMortgage brokers.  Many providers of home loans encouraged households to borrow excessively.  Sometimes they pushed complicated mortgage products with payments that were low initially but exploded later.  Some offered what were called NINJA loans (an acronym for  “no income, no job or assets”) to households that should not have qualified for a mortgage. The brokers did not hold these risky loans,  but instead sold them for a fee after they were issued. nInvestment banks.  Many of these financial institutions packaged bundles of risky mortgages into mortgage-backed securities and then sold them to buyers (such as pension funds) that were not fully aware of the risks they were taking on. nRating agencies. The agencies that evaluated the riskiness of debt instruments gave high ratings to various mortgage-backed securities 

that later turned out to be highly risky. With the benefit of hindsight,  it is clear that the models the agencies used to evaluate the risks were based on dubious assumptions. nRegulators.  Regulators of banks and other financial institutions are supposed to ensure that these firms do not take undue risks. Yet the regulators failed to appreciate that a substantial decline in housing prices might occur and that,  if it did,  it could have implications for the entire f inancial system. nGovernment policymakers.  For many years,  political leaders have pursued policies to encourage homeownership.  Such policies include the tax deductibility of mortgage interest and the establishment of Fannie Mae and Freddie Mac,  the government-sponsored enterprises that promoted mortgage lending.  Households with shaky finances,  however,  might have been better off renting. In the end,  it seems that each of these groups (and perhaps a few others as well) bear some of the blame. As  The Economist  magazine once put it,  the problem was one of “layered irresponsibility.” Finally,  keep in mind that this financial crisis was not the first one in history. Such events,  though fortunately rare,  do occur from time to time.  Rather than looking for a culprit to blame for this singular event,  perhaps we should view speculative excess and its ramifications as an inherent feature of market economies. Policymakers can respond to financial crises as they happen, and they can  take  steps  to  reduce  the  likelihood  and  severity  of  such  crises,  but  preventing them entirely may be too much to ask given our current knowledge.4  n Policy Responses to a Crisis Because financial  crises  are both severe and multifaceted,  macroeconomic policymakers use various tools,  often simultaneously,  to try to control the damage. Here we discuss three broad categories of policy responses. Conventional  Monetary and  Fiscal Policy  As we have seen,  financial crises raise unemployment and lower incomes because they lead to a contraction in the aggregate demand for goods and services.  Policymakers can mitigate these effects by using the tools of monetary and fiscal policy to expand aggregate demand. The central bank can increase the money supply and lower interest rates. The government can increase government spending and cut taxes. That is,  a financial crisis can be seen as a shock to the aggregate demand curve,  which  can,  to  some  degree,  be  offset by appropriate  monetary and fiscal policy. 4

____

To read more about the history of financial crises,  see Charles P.  Kindleberger and Robert Z.  Aliber,  Manias,  Panics,  and Crashes:  A History of Financial Crises,  2nd ed.  (New  York:  Palgrave Macmillan,  2011);  and Carmen M.  Reinhart and Kenneth S.  Rogoff,  This  Time Is Different:  Eight Centuries of Financial Folly  (Princeton,  NJ:  Princeton University Press,  2009).

Policymakers  did  precisely  this  during  the  financial  crisis  of  2008–2009. To  expand  aggregate  demand,  the  Federal  Reserve cut  its  target  for the  federal funds rate from 5.25 percent in September 2007 to approximately zero in December 2008. It then stayed at that low level for the next six years. In February 2008 President Bush signed into law a $168 billion dollar stimulus package, which funded tax rebates of $300 to $1,200 for every taxpayer. In 2009 President Obama signed into law a $787 billion stimulus,  which included some tax reductions but also significant increases in government spending.  All of these moves were aimed at propping up aggregate demand. There are limits,  however,  to how much conventional monetary and fiscal policy can do. A central bank cannot cut its target for the interest rate below zero. (Recall the discussion of the  liquidity trap  in Chapter 12.) Fiscal policy is limited as well.  Stimulus packages add to the government budget deficit, which is already enlarged because economic downturns automatically increase unemploymentinsurance payments and decrease tax revenue.  Increases in government debt are a concern because they place a burden on future generations of taxpayers and call into  question  the  government’s  own  solvency.  In  the  aftermath  of  the financial crisis of 2008–2009,  the federal government’s budget deficit reached levels not seen  since  World  War  II.  As  noted  in  Chapter  19,  in  August  2011,  Standard  & Poor’s responded to the fiscal imbalance by reducing its rating on U.S.  government  debt  below  the top  AAA level  for  the  first  time  in  the nation’s  history,  a decision that made additional fiscal stimulus more difficult. The limits of monetary and fiscal policy during a financial crisis naturally lead policymakers to consider other,  and sometimes unusual,  alternatives. These other types of policy are of a fundamentally  different nature.  Rather than addressing the symptom of a financial crisis (a decline in aggregate demand),  they aim to f ix the financial system itself.  If the normal process of financial intermediation can be restored,  consumers and businesses will be able to borrow again,  and the economy’s aggregate demand will recover. The economy can then return to full employment and rising incomes.  The next two categories describe the major policies aimed directly at fixing the financial system. Lender of Last Resort  When the public starts to lose confidence in a bank, they withdraw their  deposits.  In  a system  of fractional-reserve  banking,  large and sudden withdrawals can be a problem.  Even if the bank is solvent (meaning that the value of its assets exceeds the value of its liabilities),  it may have trouble satisfying all its depositors’  requests.  Many of the bank’s assets are illiquid—that is,  they cannot be easily sold and turned into cash.  A business loan to a local restaurant,  a car loan to a local family,  and a student loan to your roommate,  for example,  may be valuable assets to the bank,  but they cannot be easily used to satisfy depositors who are demanding their money back immediately. A situation in which a solvent bank has insufficient funds to satisfy its depositors’ withdrawals is called a  liquidity crisis. The central bank can remedy this problem by lending money directly to the bank. As we discussed in Chapter 4,  the central bank can create money out of thin  air by,  in effect,  printing it.  (Or,  more realistically  in our electronic era, it  creates  a  bookkeeping  entry  for  itself  that  represents  those  monetary  units.) 

It  can then lend this newly created money to the bank experiencing greaterthan-normal withdrawals  and accept  the bank’s illiquid  assets as collateral. When a  central  bank  lends  to  a  bank  in  the  midst  of  a  liquidity  crisis,  it  is  said  to  act  as a  lender of last resort. 
 The goal of such a policy is to allow a bank experiencing unusually high withdrawals to weather the storm of reduced confidence. Without such a loan, the bank might be forced to sell its illiquid assets at fire-sale prices.  If such a fire sale  were to occur,  the  value of the  bank’s  assets  would decline,  and a  liquidity crisis could then threaten the bank’s solvency.  By acting as a lender of last resort, the central bank stems the problem of bank insolvency and helps restore the public’s confidence in the banking system. 
 During 2008 and 2009,  the Federal Reserve was extraordinarily active as a lender of last resort. As we discussed in Chapter 4,  such activity traditionally takes place  at  the  Fed’s  discount  window,  through  which  the  Fed  lends  to  banks  at  its discount rate.  During this crisis,  however,  the Fed set up a variety of new ways to lend to financial institutions. The financial institutions included were not only traditional commercial banks but also so-called shadow banks.  Shadow banks are a diverse set of financial institutions that perform some functions similar to those of banks but do so outside the regulatory system that applies to traditional banking. Because the shadow banks were experiencing difficulties similar to those of commercial banks,  the Fed was concerned about these institutions as well. 
 For example, from October 2008 to October 2009, the Fed was willing to make loans to money market mutual funds. Money market funds are not banks, and they do not offer insured deposits.  But they are in some ways similar to banks:  they take in deposits,  invest the proceeds in short-term loans such as commercial paper issued by corporations,  and assure depositors that they can obtain their deposits on demand with interest.  In the midst of the financial crisis,  depositors worried about the value of the assets the money market funds had purchased,  so these funds were experiencing substantial withdrawals.  The shrinking deposits in money market funds meant that there were fewer buyers of commercial paper,  which in turn made  it  hard  for  firms  that  needed the  proceeds  from  these  loans  to  finance  their continuing business operations.  By its willingness to lend to money market funds, the Fed helped maintain this particular form of financial intermediation.
    It is not crucial to learn the details of the many new lending facilities the Fed established during the crisis.  Indeed,  many of these programs were closed down as the economy started to recover because they were no longer needed. What is important to understand is that these programs,  both old and new,  have one purpose:  to ensure that the financial system remains liquid. That is,  as long as a f inancial institution had assets that could serve as reliable collateral,  the Fed stood ready to lend it money so that its depositors could withdraw their funds. 

Injections of Government Funds  The final category of policy responses to a financial crisis involves the government’s use of public funds to prop up the f inancial system. The most direct action of this sort is a giveaway of public funds to those who have experienced losses.  Deposit  insurance  is  one example. Through  the  Federal Deposit Insurance Corporation (FDIC),  the federal government promises to 

make  up for  losses  that a  depositor  experiences  when  a  bank becomes insolvent. In 2008, the FDIC increased the maximum deposit it would cover from $100,000 to $250,000 to reassure bank depositors that their funds were safe.  (This increase in the  maximum insured deposit  was originally announced  as temporary,  but it was later made permanent.) Giveaways of public funds can also occur on a more discretionary basis.  For example,  in 1984 a large bank called  Continental Illinois  found itself on the brink  of  insolvency.  Because  Continental  Illinois  had  so  many  relationships  with other banks,  regulators feared that allowing it to fail would threaten the entire f inancial  system.  As  a  result,  the  FDIC  promised  to  protect  all  of  its  depositors, not just those under the insurance limit.  Eventually,  it bought the bank from shareholders,  added capital,  and sold it to Bank of  America. This policy operation cost taxpayers about $1 billion.  It was during this episode that a congressman coined  the  phrase  “too  big  to  fail”  to  describe  a  firm  so  central  to  the  financial system that policymakers would not allow it to enter bankruptcy. Another way for the government to inject public funds is to make risky loans. Normally,  when the Federal Reserve acts as lender of last resort,  it does so by lending to a financial institution that can pledge good collateral.  But if the government  makes loans  that might not  be repaid,  it is  putting public funds at risk. If the borrowers do indeed default,  taxpayers end up losing. During the financial crisis of 2008–2009,  the Fed engaged in a variety of risky lending.  In March 2008,  it made a $29 billion loan to JPMorgan Chase to facilitate its purchase of the nearly insolvent Bear Stearns. The only collateral the Fed  received  was  Bear’s  holdings  of  mortgage-backed  securities,  which  were  of dubious value.  Similarly,  in September 2008,  the Fed loaned $85 billion to prop up the insurance giant  AIG,  which faced large losses from having insured the value of some mortgage-backed securities (through an agreement called a  credit default swap). The Fed took these actions to prevent Bear Stearns and  AIG from entering a long bankruptcy process, which could have further threatened the financial system. A final way for the government to use public funds to address a financial crisis is for the government itself to inject capital into financial institutions.  In this case, rather than being just a creditor,  the government gets an ownership stake in the companies. The  AIG loans in 2008 had significant elements of this:  as part of the loan deal,  the government got warrants (options to buy stock) and so eventually owned most of the company.  (The shares were sold several years later.)  Another example is the capital injections organized by the U.S.  Treasury in 2008 and 2009. As part of the Troubled  Asset Relief Program (TARP), the government put hundreds of billions of dollars into various banks in exchange for equity shares in those banks. The goal of the program was to maintain the banks’  solvency and keep the process of financial intermediation intact. Not surprisingly,  the use of public funds to prop up the financial  system, whether done with giveaways, risky lending, or capital injections, is controversial. Critics assert that it is unfair to taxpayers to use their resources to rescue financial market participants from their own mistakes.  Moreover,  the prospect of such f inancial bailouts may increase moral hazard because when people believe the government will cover their losses,  they are more likely to take excessive risks. Financial risk taking becomes  “heads I win,  tails the taxpayers lose.” Advocates of 

these policies acknowledge these problems,  but they point out that risky lending and capital injections could actually make money for taxpayers if the economy recovers.  (Indeed,  in December 2014,  the federal government estimated that TARP ended up yielding a $15 billion profit.) More important,  they believe that the costs  of these policies are more than offset by the benefits of averting a deeper crisis and more severe economic downturn. Policies to Prevent Crises In addition to the question of how policymakers should respond when facing a financial crisis,  there is another key policy debate:  How should policymakers prevent future financial crises? Unfortunately,  there is no easy answer.  But here are five  areas where policymakers have  been considering  their options and,  in some cases,  revising their policies. Focusing on Shadow Banks  Traditional commercial banks are heavily regulated.  One justification is that the government insures some of their deposits through the FDIC.  Policymakers have long understood that deposit insurance produces a moral hazard problem. Because of deposit insurance, depositors have no incentive to monitor the riskiness of banks in which they make their deposits;  as a result,  bankers have an incentive to make excessively risky loans,  knowing they will reap any gains while the deposit insurance system will cover any losses.  In response to this moral hazard problem,  the government regulates the risks that banks take. Much  of  the  crisis  of  2008–2009,  however,  concerned  not  traditional  banks but rather  shadow banks—financial institutions that (like banks) are at the center of financial intermediation but (unlike banks) do not take in deposits insured by the FDIC.  Bear Sterns and Lehman Brothers,  for example,  were investment banks and,  therefore,  subject to less regulation.  Similarly,  hedge funds,  insurance companies,  and private equity firms can be considered shadow banks.  These institutions do not suffer from the traditional problem of moral hazard arising from  deposit  insurance,  but  the  risks  they  take  may  nonetheless  be  a  concern  of public policy because their failure can have macroeconomic ramifications. Many policymakers have suggested that these shadow banks should be limited in how much risk they take.  One way to do that would be to require that they hold more  capital,  which would  in turn limit  these  firms’  ability to  use leverage. Advocates of this idea say it would enhance financial stability. Critics say it would limit these institutions’  ability to do their job of financial intermediation. Another issue concerns what happens when a shadow bank runs into trouble and nears insolvency.  Legislation  passed  in  2010,  the so-called Dodd-Frank  Act, gave  the FDIC  resolution authority  over shadow banks,  much as it already had over traditional commercial banks. That is, the FDIC can now take over and close a nonbank financial institution if the institution is having trouble and the FDIC believes it could create systemic risk for the economy. Advocates of this new law believe it will allow a more orderly process when a shadow bank fails and thereby prevent a more general loss of confidence in the financial system.  Critics fear it will make bailouts of these institutions with taxpayer funds more common and exacerbate moral hazard.

Restricting Size The financial crisis of 2008–2009 centered on a few very large financial institutions. Some economists have suggested that the problem would have been averted, or at least would have been less severe, if the financial system had been less concentrated. When a small institution fails, bankruptcy law can take over as it usually does, adjudicating the claims of the various stakehold-ers, without resulting in economy-wide problems. These economists argue that if a financial institution is too big to fail, it is too big.Various ideas have been proposed to limit the size of financial firms. One would be to restrict mergers among banks. (Over the past half century, the banking industry has become vastly more concentrated, largely through bank mergers.) Another idea is to impose higher capital requirements on larger banks. Advocates of these ideas say that a financial system with smaller firms would be more stable. Critics say that such a policy would prevent banks from taking advantage of economies of scale and that the higher costs would eventually be passed on to the banks’ customers.

Reducing Excessive Risk Taking  The financial firms that failed during the f inancial crisis of 2008–2009 did so because they took risks that resulted in the loss of large sums of money.  Some observers believe that one way to reduce the risk of future crises is to limit excessive risk taking. Yet because risk taking is at the heart of what many financial institutions do,  there is no easy way to draw the line between appropriate and excessive risks. Nonetheless,  the Dodd-Frank  Act included several provisions aimed at limiting risk taking.  Perhaps the best known is the so-called Volcker rule,  named after Paul Volcker,  the former Federal Reserve chairman who first proposed it.  Under the  Volcker rule,  commercial banks are restricted from making certain kinds of speculative  investments. Advocates  say the  rule  will  help  protect banks. Critics  say that by restricting the banks’  trading activities,  it will make the market for those speculative financial instruments less liquid. Making  Regulation  Work  Better  The financial system is diverse, with many different types of firms performing various functions and having developed at different stages of history.  As a result,  the regulatory apparatus overseeing these f irms is highly fragmented. The Federal Reserve,  the Office of the Comptroller of the Currency, and the FDIC all regulate commercial banks. The Securities and Exchange  Commission  regulates  investment  banks  and  mutual  funds.  Individual state agencies regulate insurance companies. After the financial crisis of 2008–2009, policymakers tried to improve the system of regulation.  The Dodd-Frank  Act created a new Financial Services Oversight Council,  chaired by the Secretary of the Treasury,  to coordinate the various regulatory agencies.  It also created a new Office of Credit Ratings to oversee the private credit rating agencies,  which were blamed for failing to anticipate the great risk in many mortgage-backed securities.  The law also established a new Consumer Financial Protection Bureau,  with the goal of ensuring fairness and transparency in how  financial firms  market  their  products to consumers. Because financial  crises are infrequent events,  often occurring many decades apart,  it will take a long time to tell whether this new regulatory structure works better than the old one. Taking a Macro View of Regulation  Policymakers have increasingly taken the view that the regulation of financial institutions requires more of a macroeconomic perspective. Traditionally,  financial regulation has been  microprudential: its goal has been to reduce the risk of distress in individual financial institutions, thereby protecting the depositors and other stakeholders in those institutions. Today,  financial regulation is also  macroprudential:  its goal is also to reduce the risk of system-wide distress,  thereby protecting the overall economy against declines in production and employment.  Microprudential regulation takes a bottom-up approach by focusing on individual institutions and assessing the risks that each of them faces.  By contrast,  macroprudential regulation takes a top-down approach by focusing on the big picture and assessing the risks that can affect many financial institutions at the same time. For example,  macroprudential regulation could have addressed the boom and bust in the housing market that were the catalysts for the 2008–2009 financial crisis. Advocates of such regulation argue that as house prices increased,  policymakers should have required larger down payments when homebuyers    purchased a house 

with a mortgage. This policy might have slowed the speculative bubble in house prices,  and it would have led to fewer mortgage defaults when house prices later declined.  Fewer mortgage defaults,  in turn,  would have helped protect many f inancial institutions that had acquired stakes in various housing-related securities. Critics of such a policy question whether government regulators are sufficiently knowledgeable  and  adept  to  identify  and  remedy  economy-wide  risks.  They worry that attempts to do so would add to the regulatory burden;  an increase in required down payments,  for instance,  makes it harder for less wealthy families to buy their own homes. Without doubt,  in light of what was learned during and after the financial crisis,  financial  regulators  will  pay  renewed  attention  to  macroeconomic  stability as one of their goals.  In this sense,  macroprudential regulation takes its place alongside the traditional tools of monetary and fiscal policy.  Yet how active policymakers should be in using this tool remains open to debate.5

5For more on macroprudential policy,  see Stijn Claessens,  “An Overview of Macroprudential Policy  Tools,”  IMF  Working Paper,  December 2014.


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Tenth Edition ©2019 Macroeconomics N. Gregory Mankiw




Tenth Edition   ©2019

Macroeconomics

N. Gregory Mankiw (Harvard University)


Contents

Prelude: Celebrating the 10th Edition

Preface

Media and Resources

Part I Introduction

Chapter 1 The Science of Macroeconomics

    1. What Macroeconomist Study
    2. Case Study The Historical Performance of the U.S. Economy

    3. How Economist Think
    4. Theory as Model Building

      FYI Using Functions to Express Relationships Among Variables

      The Use of Multiple Models

      Prices: Flexible Versus Sticky

      Microeconomic Thinking and Macroeconomic Models

      FYI The Early Lives of Macroeconomists

    5. How this Book Proceeds

Chapter 2

The Data of Macroeconomics

2-1 Measuring the Value of Economic Activity: Gross Domestic Product

Income, Expenditure, and the Circular Flow

FYI Stocks and Flows

Rules for Computing GDP

Real GDP Versus Nominal GDP

The GDP Deflator

Chain-Weighted Measures of Real GDP

FYI Two Helpful Hints for Working with Percentage Changes

The Components of Expenditure

FYI What is Investment?

Case Study GDP and Its Components

Other Measures of Income

Seasonal Adjustment

2-2 Measuring the Cost of Living: The Consumer Price Index

The Price of a Basket of Goods

How the CPI Compares to the GDP and PCE Deflators

Does the CPI Overstate Inflation?

2-3 Measuring Joblessness: The Unemployment Rate

The Household Survey

Case Study Men, Women, and Labor-Force Participation

The Establishment Survey

2-4 Conclusion: From Economic Statistics to Economic Models

Part II Classical Theory: The Economy in the Long Run

Chapter 3 National Income: Where it Comes From and Where It Goes

3-1 What Determines the Total Production of Goods and Services?

The Factors of Production

The Production Function

The Supply of Goods and Services

3-2 How Is National Income Distributed to the Factors of Production?

Factor Prices

The Decisions Facing a Competitive Firm

The Firm’s Demand for Factors

The Division of National Income

Case Study The Black Death and Factor Prices

The Cobb–Douglas Production Function

Case Study Labor Productivity as the Key Determinant of Real Wages

FYI The Growing Gap Between Rich and Poor

3-3 What Determines the Demand for Goods and Services?

Consumption

Investment

FYI The Many Different Interest Rates

Government Purchases

3-4 What Brings the Supply and Demand for Goods and Services into Equilibrium?

Equilibrium in the Market for Goods and Services: The Supply and Demand for the Economy’s Output

Equilibrium in the Financial Markets: The Supply and Demand for Loanable Funds

Changes in Saving: The Effects of Fiscal Policy

Changes in Investment Demand

3-5 Conclusion

Chapter 4 The Monetary System: What It Is and How It Works

4-1 What Is Money?

The Functions of Money

The Types of Money

Case Study Money in a POW Camp

The Development of Fiat Money

Case Study Money and Social Conventions on the Island of Yap

FYI Bitcoin: The Strange Case of Digital Money

How the Quantity of Money Is Controlled

How the Quantity of Money Is Measured

FYI How Do Credit Cards and Debit Cards Fit into the Monetary System?

4-2 The Role of Banks in the Monetary System

100-Percent-Reserve Banking

Fractional-Reserve Banking

Bank Capital, Leverage, and Capital Requirements

4-3 How Central Banks Influence the Money Supply

A Model of the Money Supply

The Instruments of Monetary Policy

Case Study Quantitative Easing and the Exploding Monetary Base

Problems in Monetary Control

Case Study Bank Failures and the Money Supply in the 1930s

4-4 Conclusion

Chapter 5 Inflation: Its Causes, Effects, and Social Costs

5-1 The Quantity Theory of Money

Transactions and the Quantity Equation

From Transactions to Income

The Money Demand Function and the Quantity Equation

The Assumption of Constant Velocity

Money, Prices, and Inflation

Case Study Inflation and Money Growth

5-2 Seigniorage: The Revenue from Printing Money

Case Study Paying for the American Revolution

5-3 Inflation and Interest Rates

Two Interest Rates: Real and Nominal

The Fisher Effect

Case Study Inflation and Nominal Interest Rates

Two Real Interest Rates: Ex Ante and Ex Post

5-4 The Nominal Interest Rate and the Demand for Money

The Cost of Holding Money

Future Money and Current Prices

5-5 The Social Costs of Inflation

The Layman’s View and the Classical Response

Case Study What Economists and the Public Say About Inflation

The Costs of Expected Inflation

The Costs of Unexpected Inflation

Case Study The Free Silver Movement, the Election of 1896, and The Wizard of Oz

One Benefit of Inflation

5-6 Hyperinflation

The Costs of Hyperinflation

The Causes of Hyperinflation

Case Study Hyperinflation in Interwar Germany

Case Study Hyperinflation in Zimbabwe

5-7 Conclusion: The Classical Dichotomy

Chapter 6 The Open Economy

6-1 The International Flows of Capital and Goods

The Role of Net Exports

International Capital Flows and the Trade Balance

International Flows of Goods and Capital: An Example

The Irrelevance of Bilateral Trade Balances

6-2 Saving and Investment in a Small Open Economy

Capital Mobility and the World Interest Rate

Why Assume a Small Open Economy?

The Model

How Policies Influence the Trade Balance

Evaluating Economic Policy

Case Study The U.S. Trade Deficit

Case Study Why Doesn’t Capital Flow to Poor Countries?

6-3 Exchange Rates

Nominal and Real Exchange Rates

The Real Exchange Rate and the Trade Balance

The Determinants of the Real Exchange Rate

How Policies Influence the Real Exchange Rate

The Effects of Trade Policies

The Determinants of the Nominal Exchange Rate

Case Study Inflation and Nominal Exchange Rates

The Special Case of Purchasing-Power Parity

Case Study The Big Mac Around the World

6-4 Conclusion: The United States as a Large Open Economy

Appendix: The Large Open Economy

Chapter 7 Unemployment and the Labor Market

7-1 Job Loss, Job Finding, and the Natural Rate of Unemployment

7-2 Job Search and Frictional Unemployment

Causes of Frictional Unemployment

Public Policy and Frictional Unemployment

Case Study Unemployment Insurance and the Rate of Job Finding

7-3 Real-Wage Rigidity and Structural Unemployment

Minimum-Wage Laws

Unions and Collective Bargaining

Efficiency Wages

Case Study Henry Ford’s $5 Workday

7-4 Labor-Market Experience: The United States

The Duration of Unemployment

Case Study The Increase in U.S. Long-Term Unemployment and the Debate Over Unemployment Insurance

Variation in the Unemployment Rate Across Demographic Groups

Transitions Into and Out of the Labor Force

Case Study The Decline in Labor-Force Participation: 2007 to 2017

7-5 Labor-Market Experience: Europe

The Rise in European Unemployment

Unemployment Variation Within Europe

The Rise of European Leisure

7-6 Conclusion

Part III Growth Theory: The Economy in the Very Long Run

Chapter 8 Economic Growth I: Capital Accumulation and Population Growth

8-1 The Accumulation of Capital

The Supply and Demand for Goods

Growth in the Capital Stock and the Steady State

Approaching the Steady State: A Numerical Example

Case Study The Miracle of Japanese and German Growth

How Saving Affects Growth

8-2 The Golden Rule Level of Capital

Comparing Steady States

Finding the Golden Rule Steady State: A Numerical Example

The Transition to the Golden Rule Steady State

8-3 Population Growth

The Steady State With Population Growth

The Effects of Population Growth

Case Study Investment and Population Growth Around the World

Alternative Perspectives on Population Growth

8-4 Conclusion

Chapter 9 Economic Growth II: Technology, Empirics, and Policy

9-1 Technological Progress in the Solow Model

The Efficiency of Labor

The Steady State With Technological Progress

The Effects of Technological Progress

9-2 From Growth Theory to Growth Empirics

Balanced Growth

Convergence

Factor Accumulation Versus Production Efficiency

Case Study Good Management as a Source of Productivity

9-3 Policies to Promote Growth

Evaluating the Rate of Saving

Changing the Rate of Saving

Allocating the Economy’s Investment

Case Study Industrial Policy in Practice

Establishing the Right Institutions

Case Study The Colonial Origins of Modern Institutions

Supporting a Pro-growth Culture

Encouraging Technological Progress

Case Study Is Free Trade Good for Economic Growth?

9-4 Beyond the Solow Model: Endogenous Growth Theory

The Basic Model

A Two-Sector Model

The Microeconomics of Research and Development

The Process of Creative Destruction

9-5 Conclusion

Appendix: Accounting for the Sources of Economic Growth

Part IV Business Cycle Theory: The Economy in the Short Run

Chapter 10 Introduction to Economic Fluctuations

10-1 The Facts About the Business Cycle

GDP and Its Components

Unemployment and Okun’s Law

Leading Economic Indicators

10-2 Time Horizons in Macroeconomics

How the Short Run and the Long Run Differ

Case Study If You Want to Know Why Firms Have Sticky Prices, Ask Them

The Model of Aggregate Supply and Aggregate Demand

10-3 Aggregate Demand

The Quantity Equation as Aggregate Demand

Why the Aggregate Demand Curve Slopes Downward

Shifts in the Aggregate Demand Curve

10-4 Aggregate Supply

The Long Run: The Vertical Aggregate Supply Curve

The Short Run: The Horizontal Aggregate Supply Curve

From the Short Run to the Long Run

Case Study A Monetary Lesson from French History

10-5 Stabilization Policy

Shocks to Aggregate Demand

Shocks to Aggregate Supply

Case Study How OPEC Helped Cause Stagflation in the 1970s and Euphoria in the 1980s

10-6 Conclusion

Chapter 11 Aggregate Demand I: Building the IS–LM Model

11-1 The Goods Market and the IS Curve

The Keynesian Cross

Case Study Cutting Taxes to Stimulate the Economy: The Kennedy and Bush Tax Cuts

Case Study Increasing Government Purchases to Stimulate the Economy: The Obama Stimulus

Case Study Using Regional Data to Estimate Multipliers

The Interest Rate, Investment, and the IS Curve

How Fiscal Policy Shifts the IS Curve

11-2 The Money Market and the LM Curve

The Theory of Liquidity Preference

Case Study Does a Monetary Tightening Raise or Lower Interest Rates?

Income, Money Demand, and the LM Curve

How Monetary Policy Shifts the LM Curve

11-3 Conclusion: The Short-Run Equilibrium

Chapter 12 Aggregate Demand II: Applying the ISLM Model

12-1 Explaining Fluctuations With the ISLM Model

How Fiscal Policy Shifts the IS Curve and Changes the Short-Run Equilibrium

How Monetary Policy Shifts the LM Curve and Changes the Short-Run Equilibrium

The Interaction Between Monetary and Fiscal Policy

Shocks in the ISLM Model

Case Study The U.S. Recession of 2001

What Is the Fed’s Policy Instrument—The Money Supply or the Interest Rate?

12-2 IS–LM as a Theory of Aggregate Demand

From the IS–LM Model to the Aggregate Demand Curve

The IS–LM Model in the Short Run and Long Run

12-3 The Great Depression

The Spending Hypothesis: Shocks to the IS Curve

The Money Hypothesis: A Shock to the LM Curve

The Money Hypothesis Again: The Effects of Falling Prices

Could the Depression Happen Again?

Case Study The Financial Crisis and Great Recession of 2008 and 2009

The Liquidity Trap (Also Known as the Zero Lower Bound)

FYI The Curious Case of Negative Interest Rates

12-4 Conclusion

Chapter 13 The Open Economy Revisited: The Mundell–Fleming Model and the Exchange-Rate Regime

13-1 The Mundell–Fleming Model

The Key Assumption: Small Open Economy with Perfect Capital Mobility

The Goods Market and the IS* Curve

The Money Market and the LM* Curve

Putting the Pieces Together

13-2 The Small Open Economy under Floating Exchange Rates

Fiscal Policy

Monetary Policy

Trade Policy

13-1 The Small Open Economy under Fixed Exchange Rates

How a Fixed-Exchange-Rate System Works

Case Study The International Gold Standard

Fiscal Policy

Monetary Policy

Case Study Devaluation and the Recovery from the Great Depression

Trade Policy

Policy in the Mundell–Fleming Model: A Summary

13-4 Interest Rate Differentials

Country Risk and Exchange-Rate Expectations

Differentials in the Mundell–Fleming Model

Case Study International Financial Crisis: Mexico 1994–1995

Case Study International Financial Crisis: Asia 1997–1998

13-5 Should Exchange Rates Be Floating or Fixed?

Pros and Cons of Different Exchange-Rate Systems

Case Study The Debate Over the Euro

Speculative Attacks, Currency Boards, and Dollarization

The Impossible Trinity

Case Study The Chinese Currency Controversy

13-6 From the Short Run to the Long Run:The Mundell–Fleming Model With a Changing Price Level

13-7 A Concluding Reminder

Appendix: A Short-Run Model of the Large Open Economy

Chapter 14 Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

14-1 The Basic Theory of Aggregate Supply

The Sticky-Price Model

An Alternative Theory: The Imperfect-Information Model

Case Study International Differences in the Aggregate Supply Curve

Implications

14-2 Inflation, Unemployment, and the Phillips Curve

Deriving the Phillips Curve from the Aggregate Supply Curve

FYI The History of the Modern Phillips Curve

Adaptive Expectations and Inflation Inertia

Two Causes of Rising and Falling Inflation

Case Study Inflation and Unemployment in the United States

The Short-Run Tradeoff between Inflation and Unemployment

FYI How Precise Are Estimates of the Natural Rate of Unemployment?

Disinflation and the Sacrifice Ratio

Rational Expectations and the Possibility of Painless Disinflation

Case Study The Sacrifice Ratio in Practice

Hysteresis and the Challenge to the Natural-Rate Hypothesis

14-3 Conclusion

Appendix: The Mother of All Models

Part V Topics in Macroeconomic Theory and Policy

Chapter 15 A Dynamic Model of Economic Fluctuations

15-1 Elements of the Model

Output: The Demand for Goods and Services

The Real Interest Rate: The Fisher Equation

Inflation: The Phillips Curve

Expected Inflation: Adaptive Expectations

The Nominal Interest Rate: The Monetary-Policy Rule

Case Study The Taylor Rule

15-2 Solving the Model

The Long-Run Equilibrium

The Dynamic Aggregate Supply Curve

The Dynamic Aggregate Demand Curve

The Short-Run Equilibrium

15-3 Using the Model

Long-Run Growth

FYI The Numerical Calibration and Simulation

A Shock to Aggregate Supply

A Shock to Aggregate Demand

A Shift in Monetary Policy

15-4 Two Applications: Lessons for Monetary Policy

The Tradeoff Between Output Variability and Inflation Variability

Case Study Different Mandates, Different Realities: The Fed Versus the ECB

The Taylor Principle

Case Study What Caused the Great Inflation?

15-5 Conclusion: Toward DSGE Models

Chapter 16 Alternative Perspectives on Stabilization Policy

16-1 Should Policy Be Active or Passive?

Lags in the Implementation and Effects of Policies

The Difficult Job of Economic Forecasting

Case Study Mistakes in Forecasting

Ignorance, Expectations, and the Lucas Critique

The Historical Record

Case Study Is the Stabilization of the Economy a Figment of the Data?

Case Study How Does Policy Uncertainty Affect the Economy?

16-2 Should Policy Be Conducted by Rule or Discretion?

Distrust of Policymakers and the Political Process

The Time Inconsistency of Discretionary Policy

Case Study Alexander Hamilton Versus Time Inconsistency

Rules for Monetary Policy

Case Study Inflation Targeting: Rule or Constrained Discretion?

Case Study Central-Bank Independence

16-3 Conclusion

Appendix: Time Inconsistency and the Tradeoff Between Inflation and Unemployment

Chapter 17 Government Debt and Budget Deficits

17-1 The Size of the Government Debt

Case Study The Troubling Long-Term Outlook for Fiscal Policy

17-2 Measurement Problems

Problem 1: Inflation

Problem 2: Capital Assets

Problem 3: Uncounted Liabilities

Problem 4: The Business Cycle

Summing Up

17-3 The Traditional View of Government Debt

FYI Taxes and Incentives

17-4 The Ricardian View of Government Debt

The Basic Logic of Ricardian Equivalence

Consumers and Future Taxes

Case Study George H. W. Bush’s Withholding Experiment

Making a Choice

FYI Ricardo on Ricardian Equivalence

17-5 Other Perspectives on Government Debt

Balanced Budgets versus Optimal Fiscal Policy

Fiscal Effects on Monetary Policy

Debt and the Political Process

International Dimensions

17-6 Conclusion

Chapter 18 The Financial System: Opportunities and Dangers

18-1 What Does the Financial System Do?

Financing Investment

Sharing Risk

Dealing with Asymmetric Information

Fostering Economic Growth

FYI The Efficient Markets Hypothesis Versus Keynes’s Beauty Contest

18-2 Financial Crises

The Anatomy of a Crisis

FYI The TED Spread

Case Study Who Should Be Blamed for the Financial Crisis of 2008–2009?

Policy Responses to a Crisis

Policies to Prevent Crises

Case Study The European Sovereign Debt Crisis

18-3 Conclusion

Chapter 19 The Microfoundations of Consumption and Investment

19-1 What Determines Consumer Spending?

John Maynard Keynes and the Consumption Function

Franco Modigliani and the Life-Cycle Hypothesis

Milton Friedman and the Permanent-Income Hypothesis

Case Study The 1964 Tax Cut and the 1968 Tax Surcharge

Case Study The Tax Rebates of 2008

Robert Hall and the Random-Walk Hypothesis

Case Study Do Predictable Changes in Income Lead to Predictable Changes in Consumption?

David Laibson and the Pull of Instant Gratification

Case Study How to Get People to Save More

The Bottom Line on Consumption

19-2 What Determines Investment Spending?

The Rental Price of Capital

The Cost of Capital

The Cost-Benefit Calculus of Investment

Taxes and Investment

The Stock Market and Tobin’s q

Case Study The Stock Market as an Economic Indicator

Financing Constraints

The Bottom Line on Investment

19-3 Conclusion: The Key Role of Expectations

Epilogue What We Know, What We Don’t

The Four Most Important Lessons of Macroeconomics

Lesson 1: In the long run, a country’s capacity to produce goods and services determines the standard of living of its citizens.

Lesson 2: In the short run, aggregate demand influences the amount of goods and services that a country produces.

Lesson 3: In the long run, the rate of money growth determines the rate of inflation, but it does not affect the rate of unemployment.

Lesson 4: In the short run, policymakers who control monetary and fiscal policy face a tradeoff between inflation and unemployment.

The Four Most Important Unresolved Questions of Macroeconomics

Question 1: How should policymakers try to promote growth in the economy’s natural level of output?

Question 2: Should policymakers try to stabilize the economy? If so, how?

Question 3: How costly is inflation, and how costly is reducing inflation?

Question 4: How big a problem are government budget deficits?

Conclusion

Glossary

Index