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Home / Brad Delong, Berkeley / Brad DeLong's Grasping Reality 2019-05-13 13:49:29

Brad DeLong's Grasping Reality 2019-05-13 13:49:29

Summary:
Comment of the Day: Robert Waldmann](https://www.bradford-delong.com/2019/04/us-economy-fed-needs-to-start-fighting-the-next-recession-now-bloomberg.html?cid=6a00e551f0800388340240a47cf85e200d#comment-6a00e551f0800388340240a47cf85e200d): "Also I don't like 'publicly commit'. This is based on the faith that such declarations are credited, and the prior assumption that if they are firmly and sincerely meant and therefore credible they shall be credited. The idea that agent's belief in a declaration is an aspect of the policy is the rational expectations hypothesis sneaking in the back door after having been tossed out the front door (effort to translate returning by the window after being tossed out the door for residents of a country where most windows aren't French windows). Why

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Comment of the Day: Robert Waldmann](https://www.bradford-delong.com/2019/04/us-economy-fed-needs-to-start-fighting-the-next-recession-now-bloomberg.html?cid=6a00e551f0800388340240a47cf85e200d#comment-6a00e551f0800388340240a47cf85e200d): "Also I don't like 'publicly commit'. This is based on the faith that such declarations are credited, and the prior assumption that if they are firmly and sincerely meant and therefore credible they shall be credited. The idea that agent's belief in a declaration is an aspect of the policy is the rational expectations hypothesis sneaking in the back door after having been tossed out the front door (effort to translate returning by the window after being tossed out the door for residents of a country where most windows aren't French windows). Why promise inflation after the recession rather than produce inflation now when monetary policy isn't at the zero lower bound. Is it really likely that people could be convinced that the Fed will accept inflation over 2% some years after then next time we are in the liquidity trap when it demonstrates that it won't accept it right now? They should walk the walk, not just pre-commit to possibly talking the talk at some time in the indefinite future. Still progress...

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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