On Mon, Aug 12, 2013 at 11:39 AM, Jim Devine <[email protected]> wrote:
> Rajan wrote: > > More than any other policy action, monetary policy suffers from the sense > > that there is a free lunch to be had. > > This, like so much of the stuff that economists assert, assumes that > macro-economic scarcity prevails, so that increasing the production of > one item must lead to falling production of other things (assuming the > supplies of tangible and intangible resources to be given). I think you are over analyzing Rajan's reasoning. I think Rajan, like a lot of Austerians are driven not by any coherent ideological constructs, but by a primal Puritanical impulse: a belief in the virtue of (other people's) suffering. I think Krugman has Rajan nailed here: http://krugman.blogs.nytimes.com/2010/06/12/strange-arguments-for-higher-rates/ -----------------snip So Raghuram Rajan has posted a further explanation<http://forums.chicagobooth.edu/faultlines?entry=14>of his case for raising interest rates in the face of very high unemployment, presumably a response to Mark Thoma. <http://economistsview.typepad.com/economistsview/2010/06/the-fed-should-raise-rates-because-brazil-has-low-unemployment.html>It’s good to see Rajan put his cards on the table — but what he says only further confirms my sense that we’re talking about some kind ofpsychological desire to be tough<http://krugman.blogs.nytimes.com/2010/06/09/the-seductiveness-of-demands-for-pain/>, rather than the kind of analysis one would expect from a highly trained economist. [...] So why does Rajan feel that there must be something wrong with low rates (and he’s not alone)? I think his language, with its odd moral tone, is the giveaway: it’s the sense that economic policy is supposed to involve being tough on people, not giving money away cheap. -raghu.
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