I've been swamped lately with job market stuff, but was able to attend the Atlanta Fed's Quarterly Public Affairs Symposium last week. The featured speaker was Larry Kotlikoff. The focus was fiscal policy.
Here are some highlights:
Here are some highlights:
1) It's good to see economists disagree on policy. Kotlikoff showed support for the TARP as originally conceived and as its being carried out now. He preferred a gov't plan to insure the assets instead of purchasing them outright (this would not require gov't expenditures right now and would help with the solvency/liquidity issues). He also supports a national no-sales tax day to spur consumers and help with the real side of the recession. Many at the round table disagreed and all had good ideas grounded in economic theory. It's too bad there is not a Fed-like institution for fiscal policy. Imagine monetary policy in the hands of Congress?
2) Kotlikoff mentioned a paper that looks interesting: "On the General Relativity of Fiscal Language".
3) The national debt at $10.5 trillion is, literally, not the half of it. As Kotlikoff says, if the gov't had to use standard accounting practicies, unfunded liabilities are more like $40 trillion.
4) Kotlikoff is a pragmatist. His policy proposals, for the economic crisis and fiscal policy, involve a mix of proposals from the left and right. Vouchers for medical care, but with a cap (as a fraction of gdp) on these vouchers, a flat tax, retirement accounts invested in the stock market. I'm not with him on all of these, but like his thinking in general (see point 1).
5) Its really nice to have a solid, computable general equilbrium model that allows you to do all these policy experiments. Not only does this help you crank out publications, but it would just be fun to play with some of the more unique policy proposals and see what happens.
6) Kotlikoff said that in chaotic times, often the best thing to do is have radical changes in policy. Is there a model that suggests this? Its not what I would think, but I guess it depends upon what you mean by chaotic times. Is uncertainty high or are we just far from the state we want to be in and know how to get there?
2) Kotlikoff mentioned a paper that looks interesting: "On the General Relativity of Fiscal Language".
3) The national debt at $10.5 trillion is, literally, not the half of it. As Kotlikoff says, if the gov't had to use standard accounting practicies, unfunded liabilities are more like $40 trillion.
4) Kotlikoff is a pragmatist. His policy proposals, for the economic crisis and fiscal policy, involve a mix of proposals from the left and right. Vouchers for medical care, but with a cap (as a fraction of gdp) on these vouchers, a flat tax, retirement accounts invested in the stock market. I'm not with him on all of these, but like his thinking in general (see point 1).
5) Its really nice to have a solid, computable general equilbrium model that allows you to do all these policy experiments. Not only does this help you crank out publications, but it would just be fun to play with some of the more unique policy proposals and see what happens.
6) Kotlikoff said that in chaotic times, often the best thing to do is have radical changes in policy. Is there a model that suggests this? Its not what I would think, but I guess it depends upon what you mean by chaotic times. Is uncertainty high or are we just far from the state we want to be in and know how to get there?
Wow. This post was surprising to me in that Jason was pretty mild and accepting of what sound like very activist and distortionary policies. However, I do like Kotlikoff's modeling approach (OLG life cycle models).
I would be very curious to see what the economic justification is for radical changes in policy (point 6). It would have to be some sticky policy argument. For example, maybe there is some fixed cost to changing policy so that it takes big shocks to get policy to change.