Thursday, March 18, 2010

Formative Books

I have read so much that few books rise above the rest. While I have read my share of fiction which often has deeper and truer ideas than nonfiction, mostly I read nonfiction and more recent works often leave a more vivid memory.

1. The Foundation Trilogy, Isaac Asimov. Like Paul Krugman, I did find the conception of psychohistorians captivating.
2. Louis XIV, John Wolf. A tale of power, wealth, and the fragility of life. Puts life into context when the most powerful man on earth is succeeded by his great great grandson, faith restoring for me.
3. The American Class Structure in an Age of Growing Inequality, Dennis Gilbert. The distribution of income and wealth as a parade of midgets.
4. The Wealth of Nations, Adam Smith. Perceptive in observation, reasoned in analysis, careful in conclusions, pragmatic in application, a true philosopher at work.
5. General Theory of Employment, Interest, and Money, John Maynard Keynes. The sum can be more than its parts, economic relativity.
6. The Worldly Philosophers, the Lives, Times, and Ideas of the Great Economic Thinkers, Robert Heilbroner. A history of economic ideas and placement of them in context, revealing in scale and scope, there is progress.
7. Adam's Fallacy: A Guide to Economic Theology, Duncan Foley. Some of the problems of his followers.
8. Economics and Evolution, Geoffrey Hodgson. When action in self interest is in common interest.
9. Guns, Germs, and Steel, Jared Diamond. Human civilization.
10. Farewell to Alms, Gregory Clark. Economic archeology overturning theory with fact.

Some formative video series, I usually read the book afterwards.
1. Cosmos, Carl Sagan. The universe.
2. Life on Earth, David Attenborough. The evolution of life.
3. A Glorious Accident, Understanding Our Place in the Cosmic Puzzle, Wim Kayser. Human consciousness and thought.
4. The Power of Myth, Joseph Campbell. Human culture and eternal verities.
5. Guns, Germs, and Steel, Jared Diamond. Human civilization.

Tuesday, March 16, 2010

Ricardian Equivalence Holding

For Ricardian Equivalence to hold, fiscal policy must be exogeneous and that can only occur if it is unexpected; if it is expected then such policy actions will have already been anticipated and incorporated into actions. Ricardian Equivalence cannot hold for an event it is already holding for. The problem here is the government action is not exogeneous because it is anticipated, but rather than an argument against stimulus, it is an argument that the government has no choice but to stimulate because that is what is expected of it. If government starts raising taxes during a recession or cuts spending during a surplus, pays down debt during a recession, or increases borrowing during a boom, it may hold, otherwise there is nothing unexpected about such actions and they do not constitute an exogeneous event. After more than a half century of Keynesian stimulus, the idea fiscal stimulus can be unexpected is incredulous. Rather, lack of stimulus would be unexpected forcing people to modify their behavior accordingly if they are capable of doing so, which they may not be able to if they are credit constrained. The real surprise may be that combining state and federal spending, there has been no stimulus.