Tag Archives: economics

The Conservative Approach to Recessions

Related to my last post, but on the other side of the aisle, Republicans have no policies to help:

[C]onservatives favor the same set of economic policies when the economy is weak and when it is strong; when unemployment is high and when it is low; when few homeowners are facing foreclosure and when many are. The implication is that conservatives believe there is nothing in particular the government should do about economic cycles.

This is a big problem. Recessions are terrible. They create enormous misery by throwing people out of work and out of their homes. How can a political ideology have nothing to say about how to address recessions?

I’d actually go farther than this. The austerity policies that conservatives champion are not neutral toward unemployment and economic cycles. Europe’s experience with austerity is a large piece of evidence that austerity doesn’t help.

If there is a bright side for Greece, Spain and the like, it’s going to come with a huge amount of suffering attached. Let’s not copy the mistakes they’ve made.

Neat Yellen profile

A good profile on Janet Yellen, and how her journal could change Washington. The most important part, I think, lies here:

By a number of accounts, no one feels this more intensely than Yellen, who understands not just the human cost to individual lives and families but also the damage that a demoralized workforce can do to the economy as a whole. One of her most important papers, written with her husband, Nobel Prize winner George Akerlof, showed that workers who feel underpaid will be less productive. “She does see long-term unemployment, massive unemployment, as not only an economic problem or in terms of wasted resources but also as a human being,” says John Williams, president of the San Francisco Fed, who was Yellen’s research chief when she ran it. “It is very destructive to families.… This is passionate with her. Among economists, you don’t often see that human side. With her, it’s not just an abstraction, and if you try to treat it too much as an abstraction, she’ll react.”

There is a human cost to policy. What the Fed does affects the lives of millions of people, and the fact that five years after the financial crisis we’re still not near full employment is a huge loss of well-being.

I know there are downsides to pushing too hard, but I can’t believe that it outweighs the suffering that 5 years of a terrible labor market have created.