Oct 16, 2015
In the latest Milken Institute Review:
Brad DeLong, a Former Clinton Administration Economist, Challenges the Conventional Wisdom That the Rich Market Economies Can Thrive Without Aggressive Government Intervention
LOS ANGELES – Brad DeLong, of the University of California, Berkeley, offers an analysis of Former Treasury Secretary Larry Summers’ controversial claim that the United States and Europe face a bleak economic future unless government provides an ongoing boost. “The debate over secular stagnation is, I believe, the most important policy-relevant debate in economics since John Maynard Keynes’s debate with himself in the 1930s, which transformed him from a monetarist to the apostle of active fiscal policy,” DeLong writes.
Also in this issue:
Staci Warden, of the Milken Institute, concurs with the mainstream view that “Bitcoin’s core value proposition as a substitute for regular currencies is, frankly, questionable.” On the other hand, the underlying technology threatens to disrupt the huge financial services industry – and save investors and consumers hundreds of billions.
Barry Eichengreen, another economist at Berkeley, steps back from the speculation about the prospects for the Chinese renminbi as a global currency to ask why it matters. “The big question – well, really, questions – are what the Chinese government is prepared to do to make the RMB a true world currency that can readily serve as a substitute for dollars in international transactions, why the slew of reforms that must precede full internationalization are probably more important to China at home than abroad, and how internationalization will affect global financial markets now largely tied to the dollar (and to its regulators in Washington).”
Charles Castaldi, a former NPR journalist, takes a trip back to his native Italy to assay the country’s prospects in the midst of Europe’s financial agonies. “Italians certainly don’t lack survival skills,” he explains, “surviving in style is a well-honed tradition. The problem is that Italy’s success depends in large part on the kindness – or at least the exercise of enlightened self-interest – on the part of northern Europeans.”
William Gale, Aaron Krupkin and Kim Rueben of the Brookings-Urban Institute Tax Policy Center in Washington examine state governments’ obsession with supply-side tax policy. “The states have no good reasons to believe that tax cuts will bring the desired manna,” the economists conclude. “Yet they continue to erode their tax bases in the name of business growth in an era in which few states can afford to cut critical services (that businesses care about) ranging from education to infrastructure repair.”
Alvin Roth, a Nobel economist who is the author of the new book, Who Gets What – and Why, explores “matching markets,” in which price alone can’t balance supply and demand – think of markets for everything from marriage to college admissions to donated kidneys. “Part of making a market ‘thick’ involves finding a time at which lots of people will participate at the same time. But gaming the system when the system is ‘first come, first served’ can mean contriving to be earlier than your competitors. That’s why, for example, the recruitment of college freshmen to join fraternities and sororities is called rush… and the reason that Oklahomans are called Sooners.”
Thomas Krause, a consultant on workplace safety, argues that the first step in reducing unnecessary hospital deaths is to measure the horrific toll accurately. “The sheer size, degree of interest-group conflict and decentralization of the health care establishment make virtually any change exceptionally difficult,” he acknowledges. “But, by the same token, the potential rewards have never been greater.”
Find the latest Milken Institute Review here: http://www.milkeninstitute.org/publications/view/742
The Milken Institute is a nonprofit, nonpartisan think tank determined to increase global prosperity by advancing collaborative solutions that widen access to capital, create jobs and improve health. It conducts data-driven research, convenes action-oriented meetings and promotes meaningful policy initiatives.