Macroeconomics 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.

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.

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.

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.

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.

... 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.

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.

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.

Peacetime in business means those times when a company has a large advantage over the competition in its core market, and its market is growing. In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths. In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources, including competition, dramatic macroeconomic change, market change, supply chain change, and so forth.

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.

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.

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.

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.

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.

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.

He moved instead to an investment strategy that required no great macroeconomic insight. Instead, he explained, “As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.

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.

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.

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