Well, let me join the list of those who haven't read the paper.
Beyond that, I don't know what VAR is, although in electric power it
is a problem of Reactive Power, another thing I don't know what it is.
But I have long -- 40 - 50 years? -- believed that the FED's
essential function was to fight low unemployment. The FED and its
constituency, no more able to think outside its preconceptions than
we are, blamed inflation on workers demanding too much, hence the
mantra was "Let's throw another million out of work." They believed
in the aggregate U-shaped cost curve, despite all evidence that the
aggregate cost curve was flat -- flat until some as yet un-
experienced level. As an aside, I think Henwood has internalized
that belief which is why he always jumps into the fray on PEN=L at
the appropriate moment, pointing out that that the national capacity
utilization rate had reached some astonishingly high level of, say,
81.6 percent, or worse, 82.6 percent.
However: Whether it was because of the Supply-siders turning up or
for his own internal reasons, Greenspan in the late '80s and the '90s
decided to let the economy run, even when unemployment dipped to
levels like 6.5% below which horrible consequences would ensue. And
then below 6.0%, where even good liberals like Samuelson began to
shudder. And then, my God, below 5.6%, and so on. Of course
Greenspan was covered by the new supply coming from the blessed
sweatshops around the globe.
So, without reading the paper, and not sure I could read the paper,
with its VAR and all that, I wonder if there aren't two periods
involved in the span of years? Before and after the Greenspan
ascendency? Or, before and after the Supply Siders' PR glory?
Gene Coyle
On Sep 3, 2007, at 9:31 AM, Perelman, Michael wrote:
Of course, I'm skeptical about the VAR technique, but the paper
doesn't interesting job of showing that the data is more consistent
with a Fed policy of fighting low unemployment than inflation.
Michael Perelman
Economics Department
California State University
michael at ecst.csuchico.edu
Chico, CA 95929
530-898-5321
fax 530-898-5901
michaelperelman.wordpress.com
-----Original Message-----
From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Jim
Devine
Sent: Monday, September 03, 2007 7:39 AM
To: [email protected]
Subject: Re: [PEN-L] Galbraith's new paper
I haven't read that paper, but can VAR "prove" anything?
On 9/2/07, Perelman, Michael <[EMAIL PROTECTED]> wrote:
Has anyone looked at this? Jaimie uses a VAR model to show that
the Fed
targets low unemployment rather than inflation and that it acts
politically to promote Republicans and presidential elections.
Levy Working Paper No. 511
The Fed's Real Reaction Function
Monetary Policy, Inflation, Unemployment,
Inequality-and Presidential Politics*
James K. Galbraith
Olivier Giovannoni
Ann J. Russo
August 2007
Michael Perelman
Economics Department
California State University
michael at ecst.csuchico.edu
Chico, CA 95929
530-898-5321
fax 530-898-5901
www.michaelperelman.wordpress.com
--
Jim Devine / "In the years since the phrase became a cliché, I have
received any number of compliments for my supposed ability to 'think
outside the box.' Actually, it has been a struggle for me to perceive
just what these 'boxes' were - why they were there, why other people
regarded them as important, where their borderlines might be, how to
live safely within and without them." -- Tim Page (THE NEW YORKER,
August 20, 2007).
