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The case for an independent fiscal authority

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Comments

  • #32
    [Deleted User]
    Posts: 5,589 ✭✭✭ [Deleted User]


    BTW, if you want to read some proper research in applied free market economics, try;

    The Economics of Exchange Rates by Sarno and Taylor.

    A great read that does not require in-depth technical knowledge.


  • #33
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    bcurtis wrote: »
    my point here was that gold retains its purchasing power over long periods of time relative to real goods not fiat currencies.
    I disagree because the price of "real goods" change "over long periods", I'm reminded of Agatha Christie's thoughts that "she would ever be wealthy enough to own a car - nor so poor that she wouldn't have servants." But if you're talking about "long periods", why not just hold your wealth in gold? What's making you hold money? What right have you to stop me and everyone else using money when we don't stop you from using gold?
    There was massive inflation in america in the 70s due to an increase in money supply made possible of course by the closing of the gold window.
    There was massive inflation in the 50s, during the time of the Standard, too.
    this required federal reserve chairman paul volcker(79-87) to raise interest rates to 17% to try and bring inflation under control.
    Yes, and he lowered inflation using our current mechanism. Good to see you acknowledge that the Fed have combatted inflation using their current arsenal.
    this might explain the fluctuation in gold price when measured in dollars on your first graph.
    Paul Volcker retired twenty-five years ago. I don't think he's responsible for the fluctuations post-2000.
    as for your second graph the same applies. we've seen massive inflation of the euro since it was introduced.
    No, no we haven't. The Euro really went live in 2002. German inflation has been below 3% every year since. Inflation sums to 12.7% in Germany over that time period. (By the by, Irish inflation was -4% last year.) Gold has increased by 150% over the same period. If you want to talk about "massive inflation", it's not the Euro you should be looking at.
    sorry for getting off the subject a bit. i realize this is a thread about fiscal policy but my point was that we should let sound money curtail extravagant fiscal policies rather than more bureaucracy.
    There's nothing stopping a government hopping off the gold bandwagon when it see fit. If you can't trust a government with fiscal responsibility, there's little to reason to believe that you can trust it with a gold standard.

    I'll link to James Hamilton on that one again.


  • #34
    bcurtis
    Closed Accounts Posts: 7 ✭bcurtis


    Économiste Monétaire wrote: »
    Partial or general equilibrium?

    general i suppose. prices will obviously fluctuate according to market conditions but my point is they should be free to fluctuate.


  • #35
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    bcurtis wrote: »
    well one example is, propety prices were over infalted due to government intervention now free market forces are trying to correct this but governments and central banks keep intervening and proping up the price. this is just creating a false floor.

    Look, free markets regularly fail even when there are no externalities or informational asymmetries. This is not news. And it gets much more serious when either of these issues raise their head. Nobel Prizes were given out ten years for simple proofs of this. There's a reason why there was no street lighting in the 1500s, and it's not just because the bulb had yet to be invented.


  • #36
    [Deleted User]
    Posts: 5,589 ✭✭✭ [Deleted User]


    bcurtis wrote: »
    general i suppose. prices will obviously fluctuate according to market conditions but my point is they should be free to fluctuate.

    Do you understand the difference between partial and general equilibrium?


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  • #37
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    Deleted User wrote: »
    Do you understand the difference between partial and general equilibrium?

    Probably not, and he doesn't have to either.

    Bcurtis, partial equilibrium is where one market finds its equilibrium. General equilibrium is where every other market find its equilibrium as a result. Free market approaches to banking have pretty clearly be shown to be inappropriate because even if they find "equilibrium", the knock-on effects to other markets are extremely damaging. There are papers already which show that when there are spillovers like this, it can be better for the economy on the whole to regulate banking to prevent such booms and busts.

    And no, it wasn't just a case of the bubble being caused by government intervention. Bubbles happen regardless. When there are spillovers of these bubbles, there are problems.


  • #38
    [Deleted User]
    Posts: 5,589 ✭✭✭ [Deleted User]


    Time Magazine wrote: »
    Probably not, and he doesn't have to either.

    Bcurtis, partial equilibrium is where one market finds its equilibrium. General equilibrium is where every other market find its equilibrium as a result. Free market approaches to banking have pretty clearly be shown to be inappropriate because even if they find "equilibrium", the knock-on effects to other markets are extremely damaging. There are papers already which show that when there are spillovers like this, it can be better for the economy on the whole to regulate banking to prevent such booms and busts.

    And no, it wasn't just a case of the bubble being caused by government intervention. Bubbles happen regardless. When there are spillovers of these bubbles, there are problems.

    You beat me to it.
    I can't find the paper (I'll look for my own copy later) but it has been shown that in the absence of a general equilibrium approach (ie all markets are fully 'free', interconnected and with no informational inefficiencies) then the resulting partial equilibria are worse then equilibria obtained by markets guided by governments.
    The paper itself is reaching a bit and I wouldn't bet my house on its findings, but its an interesting read.


  • #39
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    Deleted User wrote: »
    You beat me to it.
    I can't find the paper (I'll look for my own copy later) but it has been shown that in the absence of a general equilibrium approach (ie all markets are fully 'free', interconnected and with no informational inefficiencies) then the resulting partial equilibria are worse then equilibria obtained by markets guided by governments.
    The paper itself is reaching a bit and I wouldn't bet my house on its findings, but its an interesting read.

    I suspect there are many papers that show it, but here's one.

    In 2006, less than 100k people were unemployed in Ireland. Today, it's closer to 300k. It doesn't take much convexity of the social welfare function to justify relatively costly regulation.


  • #40
    [Deleted User]
    Posts: 5,589 ✭✭✭ [Deleted User]


    Time Magazine wrote: »
    I suspect there are many papers that show it, but here's one.

    In 2006, less than 100k people were unemployed in Ireland. Today, it's closer to 300k. It doesn't take much convexity of the social welfare function to justify relatively costly regulation.

    http://www.levy.org/pubs/wp397.pdf is another paper. Its the one I was referring to and written for a non specialist.

    Levy Institute isn't exactly mainstream but its a good paper to start looking into this area.


  • #41
    bcurtis
    Closed Accounts Posts: 7 ✭bcurtis


    haa. im getting my ass handed to me here. fair play, uz obviously know your stuff.
    as you can tell I'm fairly new to the science of economics so i'm struggling with the finer details. I realize we're straying from the topic of the original post here but i would like to keep the discussion going if no one objects. its proving very useful for a future economics student.

    ps. is there no one else here who thinks the world would be a better place had colleges adopted the austrian school of economic thought instead of Keynesianism?


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  • #42
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    bcurtis wrote: »
    haa. im getting my ass handed to me here. fair play, uz obviously know your stuff.
    as you can tell I'm fairly new to the science of economics so i'm struggling with the finer details. I realize we're straying from the topic of the original post here but i would like to keep the discussion going if no one objects. its proving very useful for a future economics student.

    ps. is there no one else here who thinks the world would be a better place had colleges adopted the austrian school of economic thought instead of Keynesianism?

    I think the poster Silverharp2 is an Austrian school guy. A poster called SLUSK is, but he has no formal training in Economics.


  • #43
    Anonymous1987
    Closed Accounts Posts: 784 ✭✭✭Anonymous1987


    bcurtis wrote: »
    ps. is there no one else here who thinks the world would be a better place had colleges adopted the austrian school of economic thought instead of Keynesianism?

    Had a professor in UCC who was an Austrian School follower so you do find them in Irish academia. I've come to view Austrian economics as a counter to Marxism and in a way they are quite similar in some respects both idealistic, philosophical, light on empirical foundations and easily adopted by politicians.


  • #44
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    bcurtis wrote: »
    haa. im getting my ass handed to me here. fair play, uz obviously know your stuff.
    Ah, I think you just arrived at a bad time. There have been a few Austrians around here lately talking nonsense. You were the last straw :P
    as you can tell I'm fairly new to the science of economics so i'm struggling with the finer details. I realize we're straying from the topic of the original post here but i would like to keep the discussion going if no one objects. its proving very useful for a future economics student.
    Ah sure why not. Welcome aboard.
    ps. is there no one else here who thinks the world would be a better place had colleges adopted the austrian school of economic thought instead of Keynesianism?
    Well I would suggest that you're sort of treating economists' choice as exogenous. You'll find it hard to find an Austrian economist for a very good reason -- they're generally considered wrong. Certainly their canonical statements have very little empirical basis. As for Keynesianism, the world has moved on a lot since the 1930s. You'll find it very hard to find someone who considers themselves Keynesian, too. Why? Well even Keynes had accepted within about five years of The General Theory that he had under-appreciated the importance of monetarism. Unions aren't quick to mention that, but that's not academic economists' fault.


  • #45
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    Fine Gael seem to be suggesting something similar to this in their latest policy.
    Irish Times wrote:
    Fine Gael also promises to set up an "Independent Fiscal Council", accountable to the Oireachtas Finance Committee, that would advise on issues such as borrowing levels, debt reduction and taxation planning.


  • #46
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    I wonder if we've let a good crisis go to waste, here; would a new government really want a give a group of academics an official role to elucidate and criticise profligacy masquerading as "strategic investments"?


  • #47
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,368 Mod ✭✭✭✭andrew


    The amount of anger and venom directed toward an agency whose job it is to reign in fiscal spending would be enormous. It'd be painted as some elite organisation who doesn't understand Joe taxpayer and who just doesn't want him to have a job. Not that this isn't a reason to try for one; I just think it'd be a pretty difficult institution to have politically. Though maybe this crisis could shock people into accepting such an institution, at least for a little while.


  • #48
    Time Magazine
    Registered Users Posts: 8,452 ✭✭✭Time Magazine


    andrew wrote: »
    The amount of anger and venom directed toward an agency whose job it is to reign in fiscal spending would be enormous. It'd be painted as some elite organisation who doesn't understand Joe taxpayer and who just doesn't want him to have a job. Not that this isn't a reason to try for one; I just think it'd be a pretty difficult institution to have politically. Though maybe this crisis could shock people into accepting such an institution, at least for a little while.
    I take your point but it's not that outrageous - the ECB increases interest rates without that much problem.


  • #49
    Anonymous1987
    Closed Accounts Posts: 784 ✭✭✭Anonymous1987


    Économiste Monétaire wrote: »
    I wonder if we've let a good crisis go to waste, here; would a new government really want a give a group of academics an official role to elucidate and criticise profligacy masquerading as "strategic investments"?
    Some fiscally conservative politicians might see it as way to take the pressure off themselves but how many fiscally conservative politicians are there in Ireland?


  • #50
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    Anonymous1987 wrote: »
    Some fiscally conservative politicians might see it as way to take the pressure off themselves but how many fiscally conservative politicians are there in Ireland?
    That's a rhetorical question, right? :pac:


  • #51
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,368 Mod ✭✭✭✭andrew


    Time Magazine wrote: »
    I take your point but it's not that outrageous - the ECB increases interest rates without that much problem.

    I think it's a lot more difficult for people to see how an interest rate rise could lead to less jobs though. In comparison, I presume a fiscal authority would literally saying that the government can't spend money on x, or must tax y? In which case abolishing it and claiming it's not needed would be a pretty popular move. Maybe I'm just cynical.


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  • #52
    Anonymous1987
    Closed Accounts Posts: 784 ✭✭✭Anonymous1987


    Économiste Monétaire wrote: »
    That's a rhetorical question, right? :pac:
    Indeed, there are potholes waiting to be filled!


  • #53
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    A report by the Joint Oireachtas Committee on Finance on this topic, and other issues, has been released:

    http://www.oireachtas.ie/documents/committees30thdail/j-financepublicservice/reports/20101111.pdf

    Philip Lane's report begins at 49/94.


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