A roundup of economic news from around the Web.
- Fiscal Policies: Paul De Grauwe on voxeu looks at the difference in fiscal policy in normal and abnormal recessions. “Should governments continue with fiscal expansion or should it be cut back as soon as possible? This column compares different economic models and argues that the answer depends on the type of recession we are facing. In normal recessions the New Keynesian model is best, but in abnormal recessions it is the Keynesian model.”
- Debt: Antonio Fatas looks at the difference between gross debt and net debt. “It is clear that the difference between gross and net debt is very large for some countries. While Japan looks like an outlier in terms of gross debt, it is close to Italy and Greece when it comes to net debt. In principle, net debt is a more appropriate measure of government indebtedness. If governments have a significant amount of assets, they need to be considered when thinking about the solvency of their accounts. In some cases the government (at large) holds some of its own debt in pension funds for public employees or the social security fund (this is why in the US the most common measure of government debt is “debt held by the public” which is a measure very similar to the concept of net debt), this debt is not a liability for the government.”
- Education and Employment: Ed Glaeser on Economix notes that education affects employment in indirect ways. “The more than one-for-one relationship between metropolitan area unemployment and the rate predicted by educational composition is an example of what economists call social multipliers, which may exist when aggregate relationships are stronger than individual relationships. In this case, the aggregate or metropolitan area relationship between unemployment and education is stronger than the individual relationship between unemployment and education. Social multipliers may occur when one persons actions, like being unemployment or getting educated, influence everyone else. If one layoff reduces the demand for another persons work and that leads to another layoff, then the impact of anything that increases unemployment will be multiplied. This is a standard Keynesian argument, but there are reasons to suspect that this isnt the story behind the overly strong relationship between local unemployment and local education.”
Compiled by Phil Izzo