"John Cochrane’s thought that money is irrelevant for increment (economists say that money is “neutral”) non exclusively clashes alongside major scientific results , such equally Dani Rodrik’s analysis of the business office of excessively rigid substitution rates inwards slowing the increment of a province , but also alongside what the European institutions are finally admitting through clenched teeth: the reforms are causing deflation as well as failing to promote occupation inwards whatever decisive agency (footnote 23 inwards the above-mentioned ECB Economic bulletin).
The best economists had also addressed this point: the negative consequences of structural reforms on the productivity of labour were illustrated yesteryear Robert Gordon inwards 2008. For Cochrane , money is similar fossil oil inwards a motor. The metaphor is (unwittingly) correct. Bad administration of fossil oil has long-period consequences similar bad administration of currency: inwards the starting fourth dimension representative the caput fuses as well as the motor stops; inwards the minute a continent , as well as the earth economic scheme stops.
If De Grauwe is incoherent alongside information as well as Cochrane alongside theories ,..."I receive got long been defendant of existence theoretically pure but incoherent nigh the "real world." (As if the existent earth could always adjust to no theory , rather than a amend theory). This is the starting fourth dimension time I , or the suggestion of long-run monetary neutrality , receive got been defendant of theoretical incoherence.
First let's endure clear what we're talking about. My article was clearly nigh long-run growth. And I wittingly made the fossil oil comparing -- as well as also said that bad monetary policy , similar non plenty fossil oil , tin drag an economic scheme down.
"For today , let's focus on the long-run enquiry , leaving out for straightaway the transition as well as whatever immediate benefits as well as costs...
Remember starting fourth dimension that monetary policy cannot substantially improve long-run growth. Long-run increment comes from people as well as productivity , how much each someone tin create per hr of work.... Improvements inwards long-run increment come upwardly exclusively from structural reform , non monetary machination.
Money is similar fossil oil inwards a car. Bad monetary policy , similar also trivial fossil oil , tin drag an economic scheme down. But afterwards a indicate to a greater extent than fossil oil volition non assist you lot to larn faster — you lot ask a bigger engine."We shouldn't endure arguing nigh things I didn't say!
But to the noun point. How nigh "the thought that money is irrelevant for increment (economists say that money is “neutral”) non exclusively clashes alongside major scientific results , such equally Dani Rodrik’s analysis of the business office of excessively rigid substitution rates inwards slowing the increment of a country"
The clearly stated suggestion is that money is irrelevant for long-run growth. Italy's postwar miracolo economico was non the termination of a finely calibrated monetary policy nether the Lira. The fact that Italians today are as well as thence much amend off than their ancestors inwards 1917 , 1817 , or , heck , 1217 , is only non centrally nigh amend monetary policy nether the Lira than nether gilded coins.
Rodrik? Sure. Out of whack anything tin drive problem for a while. Influenza A virus subtype H5N1 stack of dishes inwards the kitchen causes a spat. That's non a argue to divorce.
Structural reforms non working? What structural reforms? In my thought , they haven't started. Call me when you lot tin hire as well as burn people , authorities spending is nether 50% of gross domestic product , marginal revenue enhancement rates are less than one-half , rent command is gone , it takes less than a decade to larn a edifice permit , or when the World Bank ease of doing describe of piece of work organization ranking doesn't await similar this
Update: Alberto Mingardi graciously came to my defense inwards the arguments next this post. Yes , I got rent command incorrect (it was a large job the in conclusion fourth dimension I lived inwards Italy , but this tells you lot how long agone that was.) Alberto points out that it's withal difficult to evict people , equally it is inwards the US. And he goes over a let on of detailed sands inwards the Italian gears.
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