Macroeconomic Quotes

Microeconomics is about money you don't have, and macroeconomics is about money the government is out of.

Hell, if we learned anything from “The Phantom Menace” it’s this: Never start a sci-fi story with a description of complex macroeconomics.

Macroeconomics people...are often wrong because of extreme complexity in the system they wish to understand

While microeconomics has focused on transactions between individuals, and macroeconomics on the role of government in the economy, the reality is that the most important economic decisions to any individual's well-being are the ones they conduct in their trade-offs with their future self.

Because it’s boring. Hell, if we learned anything from “The Phantom Menace” it’s this: Never start a sci-fi story with a description of complex macroeconomics.

Hayek scoffed at the use of mathematics in macroeconomics to “impress politicians … which is the nearest thing to the practice of magic that occurs among professional economists.

Out of the 7 billion people in the world, how many really understand quantum mechanics, cell biology or macroeconomics?

A lot of companies across the globe are going to die over the next few years, not because of macroeconomic stress but because there is an entire emerging generation of customers who hate doing business with them.

... confidence, fairness, corruption, money illusion, and stories. These are real motivations for real people. They are ubiquitous. The presumption of mainstream macroeconomics that they have no important role strikes us as absurd.

While microeconomics has focused on transactions between individuals, and macroeconomics on the role of government in the economy, the reality is that the most important economic decisions to any individual's well‐being are the ones they conduct in their trade‐offs with their future self.

This illustrates an important point: then as now, Americans tend to think about issues like macroeconomic policy or foreign affairs only when things go wrong. The rest of the time, they remain happily unaware of the policies and processes that function well everyday while the nation goes about its business.

If one sentence were to sum up the mechanism driving the Great Stagnation, it is this: Recent and current innovation is more geared to private goods than to public goods. That simple observation ties together the three major macroeconomic events of our time: growing income inequality, stagnant median income, and the financial crisis.

Today most of the debate on the cutting edge in macroeconomics would not call itself “Keynesian” or “monetarist” or any other label relating to a school of thought. The data are considered the ruling principle, and it is considered suspect to have too strong a loyalty to any particular model about the underlying structure of the economy.

The only solution was to tie the hands of macroeconomic policy makers.7 Instead of giving the Federal Reserve discretion to trade lower unemployment for higher inflation, the central bank should be forced to accept the fact that a certain amount of unemployment was necessary to keep inflation stable. As we will see, MMT contests this framework.

I never believed in the virtue of fiscal stimulation of the economy; I was strongly focused on longer-term growth and thus on supply-side reforms. The whole transformation after socialism was about the supply side. (This is why conventional Western macroeconomics, with its focus on the demand side, was ill prepared to deal with the reforms after socialism.)

The central lesson of the COVID-19 fiscal response is that money is not scarce. Without delay, governments around the world appropriated budgets that dwarfed any other post-war crisis policy.

[O]ne macroeconomic study of the FairTax—a study that assumed that the employer’s share of the payroll tax is the only tax savings that will be used to lower prices—estimated that prices would rise by 24.8 percent but wages would increase by 27.4 percent, more than compensating for the increase in prices. By these calculations, disposable income is expected to increase by 1.7 percent.

The evidence is plain to see all around us: in an era of multiple pandemics that threaten the continued existence of human life on planet earth, we are stymied by imaginary constraints concocted by economists.

The problems that I saw at the tile warehouse run far deeper than macroeconomic trends and policy. Too many young men immune to hard work. Good jobs impossible to fill for any length of time. And a young man with every reason to work—a wife-to-be to support and a baby on the way—carelessly tossing aside a good job with excellent health insurance. More troublingly, when it was all over, he thought something had been done to him.

…95 percent of political commentary, whether spoken or written, is now polluted by the very politics it’s supposed to be about. Meaning it’s become totally ideological and reductive: The writer/speaker has certain political convictions or affiliations, and proceeds to filter all reality and spin all assertion according to those convictions and loyalties. Everybody’s pissed off and exasperated and impervious to argument from any other side. Opposing viewpoints are not just incorrect but contemptible, corrupt, evil […] Political discourse is now a formulaic matter of preaching to one’s own choir and demonizing the opposition. Everything’s relentlessly black-and-whitened…. Since the truth is way, way more gray and complicated than any one ideology can capture, the whole thing seems to me not just stupid but stupefying… How can any of this possibly help me, the average citizen, deliberate about whom to choose to decide my country’s macroeconomic policy, or how even to conceive for myself what that policy’s outlines should be, or how to minimize the chances of North Korea nuking the DMZ and pulling us into a ghastly foreign war, or how to balance domestic security concerns with civil liberties? Questions like these are all massively complicated, and much of the complication is not sexy, and well over 90 percent of political commentary now simply abets the uncomplicatedly sexy delusion that one side is Right and Just and the other Wrong and Dangerous. Which is of course a pleasant delusion, in a way—as is the belief that every last person you’re in conflict with is an asshole—but it’s childish, and totally unconducive to hard thought, give and take, compromise, or the ability of grown-ups to function as any kind of community.

THE BRANCH OF ECONOMICS concerned with issues like inflation, recessions, and financial shocks is known as macroeconomics. When the economy is going well, macroeconomists are lauded as heroes; when it turns sour, as it did recently, they catch a lot of the blame. In either case, the headlines go to the macroeconomists. We hope that after reading this book, you’ll realize there is a whole different breed of economist out there—microeconomists—lurking in the shadows. They seek to understand the choices that individuals make, not just in terms of what they buy but also how often they wash their hands and whether they become terrorists.

It would no doubt be shocking to reckon the macroeconomic price of all our time spent with the attention merchants, if only to alert us to the drag on our own productivity quotient, the economist’s measure of all our efforts. At bottom, whether we acknowledge it or not, the attention merchants have come to play an important part in setting the course of our lives and consequently the future of the human race, insofar as that future will be nothing more than the running total of our individual mental states. Does that sound like exaggeration? It was William James, the fount of American Pragmatism, who, having lived and died before the flowering of the attention industry, held that our life experience would ultimately amount to whatever we had paid attention to. At stake, then, is something akin to how one’s life is lived. That, if nothing else, ought to compel a greater scrutiny of the countless bargains to which we routinely submit, and, even more important, lead us to consider the necessity, at times, of not dealing at all. If we desire a future that avoids the enslavement of the propaganda state as well as the narcosis of the consumer and celebrity culture, we must first acknowledge the preciousness of our attention and resolve not to part with it as cheaply or unthinkingly as we so often have. And then we must act, individually and collectively, to make our attention our own again, and so reclaim ownership of the very experience of living.

From this failure to expunge the microeconomic foundations of neoclassical economics from post-Great Depression theory arose the "microfoundations of macroeconomics" debate, which ultimately led to a model in which the economy is viewed as a single utility-maximizing individual blessed with perfect knowledge of the future. Fortunately, behavioral economics provides the beginnings of an alternative vision of how individuals operate in a market environment, while multi-agent modelling and network theory give us foundations for understanding group dynamics in a complex society. These approaches explicitly emphasize what neoclassical economics has evaded: that aggregation of heterogeneous individuals results in emergent properties of the group, which cannot be reduced to the behavior of any "representative individual." These approaches should replace neoclassical microeconomics completely.

From the moneyless economics of the classical school there evolved modern, orthodox macroeconomics: the science of monetary society taught in universities and deployed by central banks. From the practitioners’ economics of Bagehot, meanwhile, there evolved the academic discipline of finance—the tools of the trade taught in business schools, used by bankers and bond traders. One was an intellectual framework for understanding the economy without money, banks, and finance. The other was a framework for understanding money, banks, and finance, without the rest of the economy. The result of this intellectual apartheid was that when in 2008 a crisis in the financial sector caused the biggest macroeconomic crash in history, and when the economy failed to recover afterwards because the banking sector was broken, neither modern macroeconomics nor modern finance could make head nor tail of it.

But this book is about something else: what goes on in the lives of real people when the industrial economy goes south. It’s about reacting to bad circumstances in the worst way possible. It’s about a culture that increasingly encourages social decay instead of counteracting it. The problems that I saw at the tile warehouse run far deeper than macroeconomic trends and policy. too many young men immune to hard work. Good jobs impossible to fill for any length of time. And a young man [one of Vance’s co-workers] with every reason to work — a wife-to-be to support and a baby on the way — carelessly tossing aside a good job with excellent health insurance. More troublingly, when it was all over, he thought something had been done to him. There is a lack of agency here — a feeling that you have little control over your life and a willingness to blame everyone but yourself. This is distinct from the larger economic landscape of modern America.

governments budgeted anywhere from one-tenth to more than one-half of their economies to fight the pandemic. No taxpayers were called upon to foot the bill, no creditors were asked to lend them money. Governments voted for the budgets they considered to be necessary and their central banks made the payments. The size of the response was all the evidence one needed to grasp the monetary reality. Governments which issue and control their own currencies face no financing constraints and no threat of insolvency or default.

Excerpt from page 113 [On Malaysia's Prime Minster's anti-capitalism and anti-globalization policies in September 1997] "Ah, excuse me, Mahathir, but what planet are you living on? You talk about participating in globalization as if it were a choice you had. Globalization isn't a choice. It's a reality. There is just one global market today, and the only way you can grown at the speed your people want to grow is by tapping into the global stock and bond markets, by seeking out multinationals to invest in your country and by selling into the global trading systems what your factories produce. And the most basic truth about globalization is: No one is in charge. You keep looking for someone to complain to, someone to take the heat off your markets, someone to blame. Well, guess what, Mahathir, there's no one on the other end of the phone!" "The Electronic Heard cuts no one any slack... The herd is not infallible. It makes mistakes too. It overreacts and it overshoots. But if your fundamentals are basically sound, the herd will eventually recognize this and come back. They herd is never stupid for too long. In the end, it always responds to good governance and good economic management.

Inequalities at the bottom of the US wage distribution have closely followed the evolution of thee minimum wage: the gap between the bottom 10 percent of the wage distribution and the overall average wage widened significantly in the 1980s, then narrowed in the 1990s, and finally increased again in the 2000s. Nevertheless, inequalities at the top of the distribution - for example, the share of total wages going to the top 10 percent -- increased steadily throughout this period. Clearly, the minimum wage has an impact at the bottom of the distribution but much less influence at the top, where other forces are at work.

Thomas Malthus (1766–1834) had a growth schema with only two factors of production—natural resources and labour—with no allowance for technical progress, capital formation, or gains from international specialization. In 1798, he portrayed the general situation of humanity as one where population pressure put such strains on the ability of natural resources to produce subsistence that equilibrium would be attained only by various catastrophes. His influence has been strong and persistent, largely because of his forceful rhetoric and primitive scaremongering…He would have been very surprised to discover that Britain in 2003 would have only 1.2 per cent of its working population in agriculture and a life expectation of 78 years.

Yet, during the last forty years, its contributions have been obscured by the rise of ‘macro-economics’, which seeks causal connections between hypothetically measurable entities or statistical aggregates. These may sometimes, I concede, indicate some vague probabilities, but they certainly do not explain the processes involved in generating them. But because of the delusion that macro-economics is both viable and useful (a delusion encouraged by its extensive use of mathematics, which must always impress politicians lacking any mathematical education, and which is really the nearest thing to the practice of magic that occurs among professional economists) many opinions ruling contemporary government and politics are still based on naive explanations of such economic phenomena as value and prices, explanations that vainly endeavour to account for them as ‘objective’ occurrences independent of human knowledge and aims.

if consumption by the one billion people in the developed countries declined, it is certainly nowhere close to doing so where the other six billion of us are concerned. If the rest of the world bought cars and trucks at the same per capita rate as in the United States, the world’s population of cars and trucks would be 5.5 billion. The production of global warming pollution and the consumption of oil would increase dramatically over and above today’s unsustainable levels. With the increasing population and rising living standards in developing countries, the pressure on resource constraints will continue, even as robosourcing and outsourcing reduce macroeconomic demand in developed countries. Around the same time that The Limits to Growth was published, peak oil production was passed in the United States. Years earlier, a respected geologist named M. King Hubbert collected voluminous data on oil production in the United States and calculated that an immutable peak would be reached shortly after 1970. Although his predictions were widely dismissed, peak production did occur exactly when he predicted it would. Exploration, drilling, and recovery technologies have since advanced significantly and U.S. oil production may soon edge back slightly above the 1970 peak, but the new supplies are far more expensive. The balance of geopolitical power shifted slightly after the 1970 milestone. Less than a year after peak oil production in the U.S., the Organization of Petroleum Exporting Countries (OPEC) began to flex its muscles, and two years later, in the fall of 1973, the Arab members of OPEC implemented the first oil embargo. Since those tumultuous years when peak oil was reached in the United States, energy consumption worldwide has doubled, and the growth rates in China and other emerging markets portend further significant increases. Although the use of coal is declining in the U.S., and coal-fired generating plants are being phased out in many other developed countries as well, China’s coal imports have already increased 60-fold over the past decade—and will double again by 2015. The burning of coal in much of the rest of the developing world has also continued to increase significantly. According to the International Energy Agency, developing and emerging markets will account for all of the net global increase in both coal and oil consumption through the next two decades. The prediction of global peak oil is fraught with

Many models are constructed to account for regularly observed phenomena. By design, their direct implications are consistent with reality. But others are built up from first principles, using the profession’s preferred building blocks. They may be mathematically elegant and match up well with the prevailing modeling conventions of the day. However, this does not make them necessarily more useful, especially when their conclusions have a tenuous relationship with reality. Macroeconomists have been particularly prone to this problem. In recent decades they have put considerable effort into developing macro models that require sophisticated mathematical tools, populated by fully rational, infinitely lived individuals solving complicated dynamic optimization problems under uncertainty. These are models that are “microfounded,” in the profession’s parlance: The macro-level implications are derived from the behavior of individuals, rather than simply postulated. This is a good thing, in principle. For example, aggregate saving behavior derives from the optimization problem in which a representative consumer maximizes his consumption while adhering to a lifetime (intertemporal) budget constraint.† Keynesian models, by contrast, take a shortcut, assuming a fixed relationship between saving and national income. However, these models shed limited light on the classical questions of macroeconomics: Why are there economic booms and recessions? What generates unemployment? What roles can fiscal and monetary policy play in stabilizing the economy? In trying to render their models tractable, economists neglected many important aspects of the real world. In particular, they assumed away imperfections and frictions in markets for labor, capital, and goods. The ups and downs of the economy were ascribed to exogenous and vague “shocks” to technology and consumer preferences. The unemployed weren’t looking for jobs they couldn’t find; they represented a worker’s optimal trade-off between leisure and labor. Perhaps unsurprisingly, these models were poor forecasters of major macroeconomic variables such as inflation and growth.8 As long as the economy hummed along at a steady clip and unemployment was low, these shortcomings were not particularly evident. But their failures become more apparent and costly in the aftermath of the financial crisis of 2008–9. These newfangled models simply could not explain the magnitude and duration of the recession that followed. They needed, at the very least, to incorporate more realism about financial-market imperfections. Traditional Keynesian models, despite their lack of microfoundations, could explain how economies can get stuck with high unemployment and seemed more relevant than ever. Yet the advocates of the new models were reluctant to give up on them—not because these models did a better job of tracking reality, but because they were what models were supposed to look like. Their modeling strategy trumped the realism of conclusions. Economists’ attachment to particular modeling conventions—rational, forward-looking individuals, well-functioning markets, and so on—often leads them to overlook obvious conflicts with the world around them.

Social capital It is only in the past 25 years that economists have looked seriously at the role of trust in shaping economic outcomes – microeconomic as well as macroeconomic outcomes. The resulting research has revealed that high levels of trust within and between firms, and the prevailing level of trust among people in the broader society, have positive implications for their relative economic performance. Trust, therefore, is a form of social capital for societies, and for firms, on a par with other economic assets.

Organizations seeking to commercialize open source software realized this, of course, and deliberately incorporated it as part of their market approach. In a 2013 piece on Pando Daily, venture capitalist Danny Rimer quotes then-MySQL CEO Mårten Mickos as saying, “The relational database market is a $9 billion a year market. I want to shrink it to $3 billion and take a third of the market.” While MySQL may not have succeeded in shrinking the market to three billion, it is interesting to note that growing usage of MySQL was concurrent with a declining ability of Oracle to sell new licenses. Which may explain both why Sun valued MySQL at one third of a $3 billion dollar market and why Oracle later acquired Sun and MySQL. The downward price pressure imposed by open source alternatives have become sufficiently visible, in fact, as to begin raising alarm bells among financial analysts. The legacy providers of data management systems have all fallen on hard times over the last year or two, and while many are quick to dismiss legacy vendor revenue shortfalls to macroeconomic issues, we argue that these macroeconomic issues are actually accelerating a technology transition from legacy products to alternative data management systems like Hadoop and NoSQL that typically sell for dimes on the dollar. We believe these macro issues are real, and rather than just causing delays in big deals for the legacy vendors, enterprises are struggling to control costs and are increasingly looking at lower cost solutions as alternatives to traditional products. — Peter Goldmacher Cowen and Company

I wouldn’t expect a press secretary to be part of this.” Andrea nodded slightly. “I can see how the title might give that impression, Mr. Weir. However, I’m a senior policy adviser to President Aguirre, I have some background in macroeconomics, and I’ve served two terms in the Archangel Senate.” She offered a tight-lipped smile and added, “I also bake when the mood strikes me.” Weir

If Cole successfully analyzes an opportunity for the hedge fund and it invests slightly more effectively, that will be a win for the fund’s managers and its investors. But there will very likely be an equivalent loss on the other side of the investment (whoever sold it to them makes out slightly less well for having undervalued the asset). It’s not clear what the macroeconomic benefit is, unless you either favor the hedge fund’s investors over others or have a very abstract view toward capital markets working efficiently.

Injustice becomes a matter of uncertainty, justice a matter of contractual predictability. Redistribution plays a minor part in his social philosophy, and then only as part of the machinery of macroeconomic stabilization, not as a means to an ideal goal such as equality.

When Walter and Edwin were asked in 1989 by Outstanding Investors Digest, “How would you summarize your approach?” Edwin replied, “We try to buy stocks cheap.” So much for Modern Portfolio Theory, technical analysis, macroeconomic thoughts and complex algorithms.

One recurrent question relates to the conditions required to make governments implement an employment guarantee programme? How high would the unemployment rate have to be? How high would poverty have to be? And the answer in Argentina: until the protests were unbearable! When this happened, policymakers worked with real urgency to solve the problem.

MMT recognizes that finance is not a limited resource. It is manufactured and created in the act of spending. In the modern world, the exclusive monopoly to issue the currency endows governments with unparalleled spending power. For MMT, that the issuer can spend without technical constraints is a rather trivial observation. What MMT stresses is that taxes and borrowing cannot pre-fund the issuer of the currency, as the currency must be provided before it can be used for tax collections or bond purchases. The substantive question for MMT then is how to deploy this spending power for achieving the two central macroeconomic goals: full employment and price stability.

While export spending boosts national income, we consider exports to be a cost in the sense that they deprive the domestic population of the use of the real resources that are used up in the production of the goods and services sold abroad.

when there is a line outside the Job Guarantee Office, you know you need to spend more; when there is not, you do not. And once in place as a programme, there is no need for new legislation in the face of every downturn.

Given the differences in pandemic-related job losses across the globe, the second lesson of the pandemic was that unemployment is a policy choice.

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period

Taxation policy has to be framed with the end goal in mind, which is to release real resources the public sector wishes to buy in the current period.

Nations do not exist in isolation. Peoples have always roamed the globe in search of different opportunities. Nations principally trade to expand their consumption possibilities. In a world where we produce to consume, receiving goods and services is better in material terms than sending them elsewhere.

The state sets the terms of exchange for its currency with the prices it pays when it spends, and not per se by the quantity of currency that it spends.

A half century of neoliberalism has brought the world to the brink of collapse. Only concerted effort and cooperation by the world’s governments provides any chance of survival. Understanding MMT does not make this easy. But it helps us to recognize what the true constraints are: resources, initiative, politics, imagination.

An MMT understanding allows us to appreciate that there would be no financial impediment for a government building national industries, funding research and development, providing first-class universities and apprenticeship training and the rest. If a nation with its own currency slides into oblivion by closing its manufacturing sector, cutting career public sector jobs and relying on low-paid and precarious service sector jobs for employment creation, then that has little to do with running external deficits, and everything to do with political choices.

An MMT understanding allows us to appreciate that there would be no financial impediment for a government building national industries, funding research and development, providing first-class universities and apprenticeship training and the rest. If a nation with its own currency slides into oblivion by closing its manufacturing sector, cutting career public sector jobs and relying on low-paid and precarious service sector jobs for employment creation, then that has little to do with running external deficits, and everything to do with political choices.

A once-and-for-all increase in prices due to low-end workers finally seeing their wages catch up to historical productivity increases is a desired policy outcome, not something to be avoided. Thereafter, the goal would be for wages to stay roughly par with productivity, thereby creating price stability.

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period.

Taxes reduce the demand for physical resources from the non-government sectors. Resources which then become available for purchase by the government in pursuit of the socio-economic programme it was elected to provide.

Tax avoidance is nature’s way of telling you your tax code is too complicated. Simplify the code and the problem will go away.

Functional analysis of the taxation mechanisms via the MMT lens leads to a fundamentally different view of taxation.

For those with an open mind, it has become increasingly clear that MMT provides a sound basis for developing an understanding of the operation of a monetary economy, enabling economists and political analysts to better understand the nature of the opportunities that are available for policy.

We believe that an understanding of the insights of MMT is a vital base for the creation of a world where people have the opportunity to live lives free from poverty and hunger and also to have the ability to contribute to their communities. MMT is the starting point for improvements to our lives, the seed from where good policy can grow and flourish.

Demand originates with the state. Without state spending, the value of the currency is unspecified and there is no aggregate demand. Only subsequent to state spending can the currency obtain absolute value and non-government spending take place.

MMT insists that full employment need not be sacrificed for price stability and that there are many tools available to the policymaker to start thinking about the things that matter – not budgets and accounting ratios, but public health, jobs, and the environment.

While export spending boosts national income, we consider exports to be a cost in the sense that they deprive the domestic population of the use of the real resources that are used up in the production of the goods and services sold abroad.

The multilateral institutions that were introduced in the Post World War II period to coordinate international aid – the IMF and the World Bank – have failed in their respective missions. They became agents for the ‘free market’ ideology and through their structural adjustment packages and related policies have made it harder for a nation to develop.

inflation is a zero-sum game: there are always winners and losers, not just losers. The idea that it is only the latter has been encouraged by neoliberal scholars in order to justify policies that lead to economic contraction every time upward pressure is placed on wages by low unemployment rates.

I don’t mean to imply that no one is minding the store to stop bubbles from getting too big. On the contrary, many smart people are trying to do just that. It’s an immense challenge. The problem is not inattention, ill intention, or negligence. It’s the fact that every decision in the macroeconomic sphere has gigantic stakes attached. The wrong call can cause a lot of damage. To mitigate damage, a welter of rules and regulations has emerged since the global financial crisis. The traditional focus on maintaining sound individual financial institutions has turned by necessity to a larger realm. “Keeping individual financial institutions sound is not enough,” the International Monetary Fund has warned. “Policy makers need a broader approach to safeguard the financial system as a whole. They can use macro-prudential policy to achieve this goal.” That’s a fancy way to say, let’s think about the aggregate picture, not just the moving parts.

Many Russians had supported macroeconomic stabilization because they believed it was a necessary foundation for economic progress. Kudrin counseled continued caution. But many Russians believed that, because the country had sorted out its finances, it was time to reap the benefits of growth.

Slavery still exists, and it is now in the form of the United Nations International Monetary Fund instead of the East India Company. Although the IMF supports the achievement of macroeconomic stability and poverty reduction in developing countries, the conditions the IMF imposes differ from its context; and cause more instability and poverty in developed countries. Factually, the IMF focuses on its particular interests, not on its monopolistic and awkward conditions that turn into civilized slavery and a biting economic burden on the public and their republic. These realities mirror the UN-IMF.

The problems of European auto-and steelmakers relate primarily to a fall in demand as opposed to any recent overbuilding of domestic capacity in more favourable macroeconomic conditions. Other industries have suffered from disruptive new technologies or business models which have left legacy companies struggling to cope. Flag-carrier airlines, saddled with outdated employment contracts and national champion status, have suffered greatly from the growth of unencumbered low cost carriers. The CEO of struggling SAS in Scandinavia recently bemoaned the lack of a Chapter 11 process in Europe. Perhaps he is jealous of a system which in the US has led to the anti-Darwinian outcome of the survival of the least fit!

This history shows the enormous incentive you create if you give a guy a trademark [he can protect]. And this incentive is very useful to the wider civilization. As you see, Carnation got so that it was protecting products that it didn't even own.That sort of outcome is very, very desirable [for society]. So there are some very fundamental macroeconomic reasons why even communist countries should protect trademarks. They don't all do it, but there are very powerful reasons why they should. And, by and large, averaged out around the world, trademark protection been pretty good.

The RBI Governor influences a wide range of microeconomic and macroeconomic issues in the country. His signature appears on currency notes and he controls the country's monetary, currency, and credit systems. His actions influence not only the entire banking system, but also stock markets, the economy, and people's lives at large. It is said that if he sneezes, markets tend to catch a cold!

Being Self Made is a lie if it's crafted as a story sold to people. It is an illusion for those who sincerely believe they are self-made. No one is self-made. You didn't choose the family you were born in, the economic class you were born in, the country you were born in, the era you were born in, the intelligence level you have, the special talent you are born with, the early education you got, the mentoring you received, your level of ambition, your macro-economic environment, being at the right place at the right time or generally having unexpected things turn in your favor. I will argue that even if you say you came from an extremely poor background and have worked extremely hard to achieve your success and you deserve 100 percent credit, even that is a partially false statement, as you have been lucky to see your hard work pay off (in some cases, exponentially)

Byron Wien, for decades one of the most influential voices on Wall Street, taught Israel how to understand macroeconomic questions like the difference between gross national product and gross domestic product. The government had switched the leading economic indicator from GNP to GDP, Wien explained to Israel, as a way to make it seem that the economy was growing faster—official sleight of hand understood by very few.

GDP statistics and Keynesian macroeconomic policy were mutually reinforcing.

Supply-side economists argue that because lower tax rates allow everyone in the private sector to keep more of what they earn, tax relief provides citizens with strong incentives to work longer hours (thus increasing labor), to save and invest more of their income (thus increasing capital), and to devote more attention to innovation of all kinds (thus increasing efficiency, or TFP).

Many accounts, for example Morici (2013) and Krugman (2013), indicate that an overwhelming majority of the economic gains generated in this Not-So-Great Recovery have gone to a very small percentage of the population.

Jim Cramer’s Mad Money is one of the most popular shows on CNBC, a cable TV network that specializes in business and financial news. Cramer, who mostly offers investment advice, is known for his sense of showmanship. But few viewers were prepared for his outburst on August 3, 2007, when he began screaming about what he saw as inadequate action from the Federal Reserve: “Bernanke is being an academic! It is no time to be an academic. . . . He has no idea how bad it is out there. He has no idea! He has no idea! . . . and Bill Poole? Has no idea what it’s like out there! . . . They’re nuts! They know nothing! . . . The Fed is asleep! Bill Poole is a shame! He’s shameful!!” Who are Bernanke and Bill Poole? In the previous chapter we described the role of the Federal Reserve System, the U.S. central bank. At the time of Cramer’s tirade, Ben Bernanke, a former Princeton professor of economics, was the chair of the Fed’s Board of Governors, and William Poole, also a former economics professor, was the president of the Federal Reserve Bank of St. Louis. Both men, because of their positions, are members of the Federal Open Market Committee, which meets eight times a year to set monetary policy. In August 2007, Cramerwas crying outforthe Fed to change monetary policy in order to address what he perceived to be a growing financial crisis. Why was Cramer screaming at the Federal Reserve rather than, say, the U.S. Treasury—or, for that matter, the president? The answer is that the Fed’s control of monetary policy makes it the first line of response to macroeconomic difficulties—very much including the financial crisis that had Cramer so upset. Indeed, within a few weeks the Fed swung into action with a dramatic reversal of its previous policies. In Section 4, we developed the aggregate demand and supply model and introduced the use of fiscal policy to stabilize the economy. In Section 5, we introduced money, banking, and the Federal Reserve System, and began to look at how monetary policy is used to stabilize the economy. In this section, we use the models introduced in Sections 4 and 5 to further develop our understanding of stabilization policies (both fiscal and monetary), including their long-run effects on the economy. In addition, we introduce the Phillips curve—a short-run trade-off between unexpected inflation and unemployment—and investigate the role of expectations in the economy. We end the section with a brief summary of the history of macroeconomic thought and how the modern consensus view of stabilization policy has developed.

The biggest error made by advocates of government planning, from Marx to Keynes to Obama, is the assumption that bureaucrats and elected officials possess both the detailed knowledge and right motives to be able to solve the economic problems of a nation. While microeconomics correctly assumes that individuals act in their own self-interest, every macroeconomic proposal for government intervention implicitly assumes that public officials act in the public interest, somehow suppressing their individual interests to the greater interests of society.

People do not necessarily know what they are doing, because our ability to comprehend even matters that concern us directly is limited – or, in the jargon, we have ‘bounded rationality’. The world is very complex and our ability to deal with it is severely limited. Therefore, we need to, and usually do, deliberately restrict our freedom of choice in order to reduce the complexity of problems we have to face. Often, government regulation works, especially in complex areas like the modern financial market, not because the government has superior knowledge but because it restricts choices and thus the complexity of the problems at hand, thereby reducing the possibility that things may go wrong.

less inequality is associated with greater macroeconomic stability and more sustainable growth.

Changes in other factors such as changes in interest rates, changes in consumption plans, changes in businesses’ purchases of machinery, changes in government spending, changes in exchange rates, and changes in income taxes have their main impact (if not the sole impact) on aggregate demand.

There are few occasions in any argument where one side is completely right and the other comprehensively wrong. This is one of them. Jack Lew’s Treasury was spot on and the German response utterly ludicrous. The US Treasury Department’s underlying analysis was founded on basic macroeconomics that Berlin, and the Eurogroup (as I have personally witnessed), refuses to acknowledge.

how to engineer prosperity. These engineering attempts come in two flavors. The first, often advocated by international organizations such as the International Monetary Fund, recognizes that poor development is caused by bad economic policies and institutions, and then proposes a list of improvements these international organizations attempt to induce poor countries to adopt. (The Washington consensus makes up one such list.) These improvements focus on sensible things such as macroeconomic stability and seemingly attractive macroeconomic goals such as a reduction in the size of the government sector, flexible exchange rates, and capital account liberalization. They also focus on more microeconomic goals, such as privatization, improvements in the efficiency of public service provision, and perhaps also suggestions as to how to improve the functioning of the state itself by emphasizing anticorruption measures.

learning—we have learned how to increase productivity, the outputs that can be produced with any inputs. There are two aspects of learning that we can distinguish: an improvement in best practices, reflected in increases in productivity of firms that marshal all available knowledge and technology, and improvements in the productivity of firms as they catch up to best practices. In fact, the distinction may be somewhat artificial; there may be no firm that has employed best practices in every aspect of its activities. One firm may be catching up with another in some dimension, but the second firm may be catching up with the first in others. In developing countries, almost all firms may be catching up with global best practices; but the real difference between developing and developed countries is the larger fraction of firms that are significantly below global best practices and the larger gap between their productivity and that of the best-performing firms. While we are concerned in this book with both aspects of learning, it is especially the learning associated with catching up that we believe has been given short shrift in the economics literature, and which is central to improvements in standards of living, especially in developing countries. But as we noted in chapter 1, the two are closely related; because of the improvements in best practices by the most innovative firms, most other firms are always engaged in a process of catching up. While the evidence of Solow and the work that followed demonstrated (what to many seems obvious) the importance of learning for increases in standards of living, to further explicate the role of learning, the first three sections of this chapter marshal other macro- and microeconomic evidence. In particular, we stress the pervasive gap between best practices and the productivity of most firms. We argue that this gap is far more important than the traditional allocative inefficiencies upon which most of economics has focused and is related to learning—or more accurately, the lack of learning. The final section provides a theoretical context within which to think about the sources of sustained increases in standards of living, employing the familiar distinction of movements of the production possibilities curve and movements toward the production possibilities curve. Using this framework, we explain why it is that we ascribe such importance to learning. Macroeconomic Perspectives There are several empirical arguments that can be brought to bear to support our conclusion concerning the importance of learning. The first is a simple argument: In theory, leading-edge technology is globally available. Thus, with sufficient capital and trained labor (or sufficient mobility for capital and trained labor), all countries should enjoy comparable standards of living. The only difference would be the rents associated with ownership of intellectual property rights and factor supplies. Yet there is an enormous divergence in economic performance and standards of living across national economies, far greater than can be explained by differences in factor supplies.1 And this includes many low-performing economies with high levels of capital intensity (especially among formerly socialist economies) and highly trained labor forces. Table 2.1 presents a comparison of formerly socialist countries with similar nonsocialist economies in the immediate aftermath of the collapse of the state-controlled model of economic activity. TABLE 2.1 Quality of Life Comparisons, 1992–1994 (U.S. $) Source: Greenwald and Khan (2009), p. 30. In most of these cases, at the time communism was imposed after World War II, the subsequently socialist economies enjoyed higher levels of economic development than

These events have not been the first to change my views on economics since I started studying the subject at Oxford University in 1967.9 Over the subsequent forty-five years I have learned a great deal and, unsurprisingly, changed my mind from time to time. In the late 1960s and early 1970s, for example, I came to the view that a bigger role for markets and a macroeconomic policy dedicated to monetary stability were essential, in both high-income and developing countries. I participated, therefore, in the move towards more market-oriented economic perspectives that took place at that time. I was particularly impressed with the Austrian view of the market economy as a system for encouraging the search for profitable opportunities, in contrast to the neoclassical fixation with equilibrium: the writings of Joseph Schumpeter and Hayek were (and remain) powerful influences. The present crisis has underlined my scepticism about equilibrium,

to grasp macroeconomics, zealots like Luther saw the new urban poor masses as “indifferent idlers” who should be punished with toil for their original sin of laziness.

If you don’t know the answer, it is probably where the sticks cross.

Thus microeconomics of the financial sector—bad incentives and externalities—was the root cause of the macroeconomic effects—loss of output and high unemployment.

The Fed targets inflation. Everything else is determined by the economic forces that accompany its 2-percent inflation target.

Chávez was radicalized by the private sector’s repeated betrayals . . . He came to understand socialism as political socialism. He started talking about the new man and creating a new society.” He shook his head. “It was a historic opportunity that was wasted. This is all Chávez’s fault. He doesn’t understand economics.” One never heard a senior Chavista so bluntly criticize the comandante. Sansó was just getting warmed up. “It’s a pity no one took twenty minutes to explain macroeconomics to him with a pen and paper. Chávez doesn’t know how to manage. As a manager he’s a disaster. I’m fed up with Chávez . . . I’m not a Chávez fan.” Coming from a member of the revolution’s economic elite, this was heresy.

Health,1 emphasised this idea of health as an investment rather than an expenditure. The 2001 report of the Commission on Macroeconomics and Health2 took this idea further, showing that a 10% improvement in life expectancy at birth is associated with annual economic growth increases of 0·3–0·4%.

Economics also has to become a fundamentally monetary discipline—from the consideration of how individuals make market decisions through to our understanding of macroeconomics. The myth of "the money illusion" (which can only be true in a world without debt) has to be immediately dispelled, while our macroeconomics have to reflect a monetary economy in which nominal magnitudes matter, precisely because they are the link between the value of current output and the financing of accumulated debt. The dangers of excessive debt and deflation simply cannot be comprehended from a neoclassical perspective. The discipline must also become fundamentally empirical, in contrast to the faux empiricism of econometrics. By this I mean basing itself on the economic and financial data first and foremost—the collection and interpretation of which has been the hallmark of contributions by econophysicists—and by respecting economic history, a topic which has been systematically expunged from economics departments around the world.

Microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things economists are wrong about generally. P. J. O’ROURKE, Eat the Rich

For most people, wages are the most important source of income. Macroeconomic and monetary policies that result in higher unemployment—and lower wages for ordinary citizens—are a major source of inequality in our society today. Over the past quarter century macroeconomic and monetary policies and institutions have failed to produce stability; they failed to produce sustainable growth; and, most importantly, they failed to produce growth that benefited most citizens in our society. In

In truth the macroeconomic models placed too little attention on inequality and the consequences of policies for distribution. Policies have been based on these flawed models both helped create the crisis and have proven ineffective in dealing with it. They may even be contributing to ensuring that when the recovery occurs, it will be jobless. Most importantly, for the purposes of this book, macroeconomic policies have contributed to the high level of inequality in America and elsewhere. While the advocates of these policies may claim that they are the best policies for all, this is not the case. There is no single, best policy. As I have stressed in this book, policies have distributive effects, so there are trade-offs between the interests of bondholders and debtors, young and old, financial sectors and other sectors, and so on. I have also stressed, however, that there are alternative policies that would have led to better overall economic performance—especially so if we judge economic performance by what is happening to the well-being of most citizens. But if these alternatives are to be implemented, the institutional arrangements through which the decisions are made will have to change. We cannot have a monetary system that is run by people whose thinking is captured by the bankers and that is effectively run for the benefit of the those at the top.

Other new institutions, such as the National Recovery Administration, did damage. The NRA’s mandate mistook macroeconomic problems for micro problems—it sought to solve the monetary challenge through price setting. NRA rules were so stringent they perversely hurt businesses. They frightened away capital, and they discouraged employers from hiring workers. Another problem was that laws like that which created the NRA—and Roosevelt signed a number of them—were so broad that no one knew how they would be interpreted. The resulting hesitation in itself arrested growth.

If you want to learn macroeconomics, first read Adam Smith, read von Mises, or read Hayek. Start with the original philosophers of the economy. If you’re into communist or socialist ideas (which I’m personally not), start by reading Karl Marx. Don’t read the current interpretation someone is feeding you about how things should be done and run.

Borio cast aside the money veil to reveal a world of asset price bubbles, financial cycles, and credit booms and busts: ‘Think monetary! Modelling the financial cycle correctly … requires recognising fully the fundamental monetary nature of our economies,’ was Borio’s clarion call.7 The financial system, he asserted, doesn’t just allocate resources, it generates purchasing power. It has a life of its own. Finance and macroeconomics are ‘inextricably linked’. We inhabit a looking-glass world. Finance does not mirror reality, but acts upon it.fn2 Economics without finance, said Borio, is like Hamlet without the prince.

In modern parlance, the Morgan partners were sympathetic to macroeconomic management of the overall economy, even if they deplored microeconomic regulation of specific industries.

Your best estimates for the future will not match up to the actual numbers for several reasons. First, even if your information sources are impeccable, you must convert raw information into forecasts, and any mistakes that you make at this stage will cause estimation error. Next, the path that you envision for a firm can prove to be hopelessly off. The firm may do much better or much worse than you expected it to perform, and the resulting earnings and cash flows will be different from your estimates; consider this firm-specific uncertainty. When valuing Cisco in 2001, for instance, we seriously underestimated how difficult it would be for the company to maintain its acquisition-driven growth in the future, and we overvalued the company as a consequence. Finally, even if a firm evolves exactly the way you expected it to, the macroeconomic environment can change in unpredictable ways. Interest rates can go up or down, and the economy can do much better or worse than expected. Our valuation of Marriott from November 2019 looks hopelessly optimistic, in hindsight, because we did not foresee the global pandemic in 2020 and the economic consequences for the hospitality business.

But nativism, populism, protectionism, and isolationism are making a comeback. Globalization lifted millions of people out of poverty and benefited millions of others through macroeconomic growth. Still, there were losers

Macroeconomics deals with aggregate economic quantities, such as national output and national income. Macroeconomics has its roots in microeconomics, which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics.

macroeconomics was no longer so very clear on the ultimate effects of quantitative easing, given that the evidence from the past half century could be interpreted either way. That this debate was a clear sign that macroeconomics as a field was ideological to the point of astrology was often asserted by people in all the other social sciences, but economists were still very skilled at ignoring outside criticisms of their field, and now they forged on contradicting themselves as confidently as ever.