It's worth also noting that being an expert in a field doesn't make you a good forecaster! This is most famously written about in Tetlock's "Superforecasting" -- who would make a fascinating guest!
I buy that that the ARP exacerbated the inflation problem, but it seems like inflation is becoming a problem all over the world (including in countries with far less generous fiscal responses to COVID) while US inflation is still mostly being blamed on US stimulus. Has anyone studied how much inflation can be attributed to the ARP?
Inflation is quite a bit higher in the US than in Europe, where the fiscal responses were smaller. Or at least, as Matt notes, this was the case until the Ukraine crisis, which has larger effects on energy prices in Europe than here.
Until Putin's invasion of Ukraine, inflation was running significantly higher in the US than in comparable developed countries. Jason Furman has written extensively on this topic, including his Nov 2021 pieces, "Inflation has risen much more in the US than the euro area despite similar pandemic experiences." [1]
> The euro area and the United States both adopted highly expansionary fiscal and monetary policies to mitigate the economic impact of the pandemic and support workers affected by business closures. But the United States is now recording much higher inflation than the euro area. In October 2021, the United States recorded 24-month inflation at an annualized rate of 4.0 percent, around 2 percentage points higher than in the euro area.
Here's a twitter thread where Furman highlights the differences in fiscal response and inflation in Europe vs. the US; chiefly the US fiscal policy substantially increased personal income above pre-pandemic levels whereas Europe kept it at or slightly below. https://twitter.com/jasonfurman/status/1469404167215144963
Josh, I think your criticism of yourself is far too harsh. I'm coming to your defense.
My first problem with this analysis is it is an example of the "That thing you did that didn't work out, you shouldn't have done that" 20/20-hindsight fallacy. Your prediction was no more likely to be wrong than anyone else's, the question is whether you followed a reasonable process to get there and I think you did.
My second problem with this analysis is that you discount the important work of "balancers." I like the fact that you acted as a balancer and that your observations clashed with those of others. It's my job to read you and others and make my own balance.
But I don't think it's your job to pre-balance. If you try to pre-balance we get into a funhouse mirror problem where nobody knows what's going on because everyone is second-guessing themselves.
As a cautionary tale, I'd point to Christian Science Magazine, which replaced the daily Christian Science Monitor newspaper. I gave up on that magazine because all the articles were so balanced that I felt they taught me nothing.
It's good to be wrong as long as we are sincerely wrong.
As for me, I say that it is too early to discount supply-chain problems when it comes to inflation.
I always appreciate your ability to be introspective and still maintain objectivity. Good points Mr.Barro, I'll have to listen to the Very Serious podcast this week
I really enjoyed this podcast and it pushed me to read Demsas' subsequent "Don't Listen to the Community" in the Atlantic, which was excellent and timely. So glad someone is coming out and saying this, I'm a city planner and in my experience the "engagement" process, in many cases and contexts, has become counterproductive and often toxic. Thanks!
Hi Josh - your segment on splitting land and improvement property taxes caught my attention. I've been talking for it a while in NJ but, it takes a lot of study and interest to start a discussion. You (and interested others) may want to look at a recent report from the Lincoln Institute of Land Policy that covered an ongoing discussion of the concept in DetroitL https://www.lincolninst.edu/publications/articles/2022-04-report-taxing-land-detroit-homeowners-development
I think it interesting that you weren't wrong, just didn't have the whole picture. But who did.?Seems to me it was both. Not a normal situation. Supply-side caused by pandemic disruption, coupled with Demand-side of caused by intervention payouts causing "too much cash chasing too few products".
It's worth also noting that being an expert in a field doesn't make you a good forecaster! This is most famously written about in Tetlock's "Superforecasting" -- who would make a fascinating guest!
I buy that that the ARP exacerbated the inflation problem, but it seems like inflation is becoming a problem all over the world (including in countries with far less generous fiscal responses to COVID) while US inflation is still mostly being blamed on US stimulus. Has anyone studied how much inflation can be attributed to the ARP?
Inflation is quite a bit higher in the US than in Europe, where the fiscal responses were smaller. Or at least, as Matt notes, this was the case until the Ukraine crisis, which has larger effects on energy prices in Europe than here.
Until Putin's invasion of Ukraine, inflation was running significantly higher in the US than in comparable developed countries. Jason Furman has written extensively on this topic, including his Nov 2021 pieces, "Inflation has risen much more in the US than the euro area despite similar pandemic experiences." [1]
> The euro area and the United States both adopted highly expansionary fiscal and monetary policies to mitigate the economic impact of the pandemic and support workers affected by business closures. But the United States is now recording much higher inflation than the euro area. In October 2021, the United States recorded 24-month inflation at an annualized rate of 4.0 percent, around 2 percentage points higher than in the euro area.
Here's a twitter thread where Furman highlights the differences in fiscal response and inflation in Europe vs. the US; chiefly the US fiscal policy substantially increased personal income above pre-pandemic levels whereas Europe kept it at or slightly below. https://twitter.com/jasonfurman/status/1469404167215144963
[1] https://www.piie.com/research/piie-charts/inflation-has-risen-much-more-us-euro-area-despite-similar-pandemic-experiences
Josh, I think your criticism of yourself is far too harsh. I'm coming to your defense.
My first problem with this analysis is it is an example of the "That thing you did that didn't work out, you shouldn't have done that" 20/20-hindsight fallacy. Your prediction was no more likely to be wrong than anyone else's, the question is whether you followed a reasonable process to get there and I think you did.
My second problem with this analysis is that you discount the important work of "balancers." I like the fact that you acted as a balancer and that your observations clashed with those of others. It's my job to read you and others and make my own balance.
But I don't think it's your job to pre-balance. If you try to pre-balance we get into a funhouse mirror problem where nobody knows what's going on because everyone is second-guessing themselves.
As a cautionary tale, I'd point to Christian Science Magazine, which replaced the daily Christian Science Monitor newspaper. I gave up on that magazine because all the articles were so balanced that I felt they taught me nothing.
It's good to be wrong as long as we are sincerely wrong.
As for me, I say that it is too early to discount supply-chain problems when it comes to inflation.
But maybe I'm wrong.
I always appreciate your ability to be introspective and still maintain objectivity. Good points Mr.Barro, I'll have to listen to the Very Serious podcast this week
I really enjoyed this podcast and it pushed me to read Demsas' subsequent "Don't Listen to the Community" in the Atlantic, which was excellent and timely. So glad someone is coming out and saying this, I'm a city planner and in my experience the "engagement" process, in many cases and contexts, has become counterproductive and often toxic. Thanks!
Hi Josh - your segment on splitting land and improvement property taxes caught my attention. I've been talking for it a while in NJ but, it takes a lot of study and interest to start a discussion. You (and interested others) may want to look at a recent report from the Lincoln Institute of Land Policy that covered an ongoing discussion of the concept in DetroitL https://www.lincolninst.edu/publications/articles/2022-04-report-taxing-land-detroit-homeowners-development
I think it interesting that you weren't wrong, just didn't have the whole picture. But who did.?Seems to me it was both. Not a normal situation. Supply-side caused by pandemic disruption, coupled with Demand-side of caused by intervention payouts causing "too much cash chasing too few products".
Great podcast!