----- Original Message -----
Sent: Wednesday, June 11, 2003 5:14
PM
Subject: Re: [PEN-L] Stiglitz on central
banks
I should correct myself: in addition to not wanting the WS
bubble to pop, Greenspan seems to have been taken over by the "new economy"
propaganda during the late 1990s, so he assumed that the rise in labor
productivity growth then was a long-lasting change (something that might still
turn out to be true) so that his estimates of the Non-Accelerating Inflation
Rate of Unemployment (the so-called natural rate) fell.
BTW, this interpretation of rising productivity growth rates
allowing a falling NAIRU only works if we assume that wages don't speed up
their rise, too. Of course, the growing prevalence of neo-liberal policies of
the last 30 years (including Greenspan's contributions) ensured that
assumption worked.
------------------------
Jim Devine
jdevine@xxxxxxx & http://bellarmine.lmu.edu/~jdevine
> -----Original Message-----
>
From: Doug Henwood [mailto:dhenwood@xxxxxxxxx]
> Sent: Wednesday, June 11, 2003 11:53 AM
> To: PEN-L@xxxxxxxxxxxxxxxx
> Subject:
Re: [PEN-L] Stiglitz on central banks
>
>
> Devine, James
wrote:
>
> >there's
another story here, one that I believe that pen-l alumnus
> >Brad deLong tells, i.e., that Alan Greenspan was willing to
take the
> >risk of lower unemployment rates
(perhaps because he didn't want to
> >pop the
growing Wall Street bubble after 1995 or so). But Stiglitz
> >gives credit to his former employer, the Clinton CEA -- while
saying
> >that the Fed's model was wrong.
> >
> >Which view is
accurate? To my mind, Stiglitz seems wrong, since
>
>fiscal policy (the province of the Clinton administration) was
> >_contractionary_ during the late 1990s and monetary
policy
> >definitely let the boom and bubble
occur.
>
> Further,
Greenspan started worrying about deflation early on, and
> resisted pressure from Wall Street and his colleagues to
tighten
> around 1996.
>
> Another odd thing about Stiggy's argument is that
he implicitly buys
> the crowding out argument,
which liberal Keynesians aren't supposed
> to
do.
>
> Doug
>