E Scott Sumner And Friends Want Unbridled Growth-Chicago School Update

We know this is true, girls just want some fun. Cyndi Lauper had it right. But what does the new cabal of economists want? Seems like there is a not so secret cabal of them, maybe lead by Scott Sumner, and they come from the University of Chicago, or have friends from there, and study neo-Keynesian thought and Libertarian thought. So what do they want?

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Well, although they are complex thinkers, figuring out some of what they want it is doable. They want unlimited, or nearly unlimited, and unbridled economic growth. That is an oversimplification of course. They no doubt require a set of circumstances for this growth to happen, and they may even disagree on what those circumstances should be. They don't seem concerned with economic bubbles and even seem to deny they exist!

So, it is easy to look back and understand what conservative economists from the Chicago School of Economics wanted. They were supply side economists , or really, just classical economists.They sought unbridled growth with a minimum of governmental interference. Paul Douglas, who was an esteemed teacher at the Chicago School of Economics before returning after WW2 said this:

” . . . I was disconcerted to find that the economic and political conservatives had acquired almost complete dominance over my department and taught that market decisions were always right and profit values the supreme ones . . . The opinions of my colleagues would have confined government to the eighteenth-century functions of justice, police, and arms, which I thought had been insufficient even for that time and were certainly so for ours. These men would neither use statistical data to develop economic theory nor accept critical analysis of the economic system . . . (Frank) Knight was now openly hostile, and his disciples seemed to be everywhere. If I stayed, it would be in an unfriendly environment.”

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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James Charles 1 year ago Member's comment

"We know what happened to many borrowers who received toxic loans. Those loans caused massive familial instability and really bad stuff like abandoned pets, divorce and even murder! Some places crashed more than others."

Prof. R, Werner hasa 'solution'?

“Importantly for our disaggregated quantity equation, credit creation can be disaggregated, as we can obtain and analyse information about who obtains loans and what use they are put to. Sectoral loan data provide us with information about the direction of purchasing power - something deposit aggregates cannot tell us. By institutional analysis and the use of such disaggregated credit data it can be determined, at least approximately, what share of purchasing power is primarily spent on ‘real’ transactions that are part of GDP and which part is primarily used for financial transactions. Further, transactions contributing to GDP can be divided into ‘productive’ ones that have a lower risk, as they generate income streams to service them (they can thus be referred to as sustainable or productive), and those that do not increase productivity or the stock of goods and services. Data availability is dependant on central bank publication of such data. The identification of transactions that are part of GDP and those that are not is more straight-forward, simply following the NIA rules.”

P20

eprints.soton.ac.uk/.../Werner_IRFA_QTC_2012.pdf

Gary Anderson 1 year ago Author's comment

Nice, James. You saw my article on Dr Werner as well I hope.