Confusões sobre a Estagnação Secular

Nos últimos tempos tem-se falado cada vez mais da Estagnação Secular, um conceito cunhado há quase 80 anos e ressuscitado em 2013 por Larry Summers. Nas suas linhas gerais, a ideia anuncia um futuro distópico para as economias desenvolvidas: pouco (ou nenhum) crescimento, níveis de vida estagnados e crises económicas recorrentes.

Summers argumenta que este é, ou pode provavelmente ser, o futuro da maior parte dos países ricos. Em parte porque é mais ou menos isto que vemos quando olhamos à volta – e em parte, suspeito, porque o nome da coisa se presta bem a manobras de marketing – a ideia cravou os dentes no debate público e agora aparece recorrentemente na comunicação social. Mas a forma como o tema é abordado, quer na sua formulação, quer nas suas implicações, deixa muito a desejar.

Em particular, tornou-se habitual dizer que a Estagnação Secular é uma teoria acerca do ‘fim do crescimento’, um facto da nossa vida económica ao qual temos de nos resignar. Na verdade, é precisamente o contrário.

A Estagnação Secular explica por que é que o amadurecimento das economias – tomado um facto exógeno – pode conduzir a falhas recorrentes e persistentes na procura global. De acordo com a teoria, os mecanismos de mercado que durante mais de dois séculos foram suficientes para estabelecer o pleno emprego podem tornar-se cada vez mais ineficazes, exigindo o apoio de outras forças para tapar essa lacuna. E isso tem um remédio.

Mas sobre esta questão o melhor que posso fazer é reencaminhar para o excelente A tale of two stagnations, de Noah Smith.  Vão lá ler tudo, porque aqui só incluí alguns trechos.

The term “secular stagnation” has become a catch-all description for long-term economic pessimism. But it’s gotten confused with a very different idea — the technological stagnation hypothesis, proposed by economist Robert Gordon (and by Bloomberg View’s Tyler Cowen). These are two very different ideas. Both would lead to slow growth in the long term, but they imply different causes and different remedies.

Summers’ secular stagnation is all about aggregate demand. Normally, economists think of demand as something that falls temporarily in a recession and then bounces back. But the failure of many economies to return to their previous trends after big slowdowns has made some economists worry if demand shortfalls could be very persistent.

Demand gaps usually emerge when everyone tries to save money at the same time. This could happen because people become more pessimistic about the future, for example, or because they suddenly decide they need more liquid assets. But when everyone tries to hold onto cash, they don’t spend, and so companies don’t produce things. Companies that don’t produce things lay off workers, and pretty soon there’s a recession.

Usually this process ends naturally. Eventually people need to replace their old cars and fix up their houses, or their temporary bout of pessimism ends, or some other force acts to restore demand. But under certain conditions, in some models, it’s possible for an economy to trap itself, so that low demand and slow growth become a self-reinforcing, self-perpetuating cycle.


Technological stagnation is a different beast. According to Gordon and others, humanity has simply picked most of the low-hanging fruit of science and technology. Airplanes and cars travel no faster today than they did 50 years ago. Electricity, air conditioning and household appliances have made our homes about as pleasant as they’re likely to get, and so on. That doesn’t mean advances stop, but it means that each one is less game-changing than the last.

A key piece of the tech stagnation hypothesis is that production of the things we want isn’t going to get much cheaper. Gordon points to slowing productivity as evidence that our economy is getting worse at finding new ways to do more with less. This trend is worldwide, which makes sense, since a decline in science and technology should be global in nature.

So technological stagnation is all about supply, while secular stagnation is about demand. The two are related — slower productivity growth tends to reduce interest rates, putting the economy closer to the zero lower bound that drives demand shortages. But the two types of stagnation are very different things, requiring very different policy responses.

If we’re in secular stagnation, the economy is wasting its potential. Workers are staying home — not counted as officially unemployed, but out of the labor force completely — playing video games while offices sit empty and unused. In that case, we need something like fiscal stimulus to raise demand and lift us back to full employment.

But if we’re in technological stagnation, there’s not much we can do. Yes, there are some things government can do to boost innovation at the margin, like reforming patent laws, lifting onerous regulations, and investing in research and development. But in the long term, the forces of progress are difficult to predict and control. If we’ve already exploited the biggest innovations, we need to reconcile ourselves to living lives not much better than those of our parents. That would be a disappointing outcome, but it might be the best we can do.

Perceber o Nobel de 2016

Infelizmente, o Nobel não foi exactamente para quem eu gostaria que tivesse ido. Os vencedores acabaram por ser Oliver Hart e Bengt Holmstrom, pelos seus contributos para a teoria dos contratos.

Eu tenho uma ideia do que é a teoria dos contratos, mas confesso que nem conhecia estes dois, tal como também não conhecia os vencedores de 2007 ou de 2012 – e do Jean Tirole, enfim, ‘já tinha ouvido falar’. Talvez a economia esteja a entrar rapidamente no território dos rendimentos marginais decrescentes, e a notoriedade dos vencedores acabe por reflectir isso mesmo. Ou talvez seja só de mim, que não ligo muito à microeconomia.

Em todo o caso, e para quem quer saber por que é que o Nobel foi para quem foi, o Economist’s view tem hoje uma excelente compilação de textos acerca do trabalho de Hart e Holmstrom. Há dois especialmente interessantes: o de Noah Smith, na Bloomberg – An Economics Nobel for examining reality – e The performance pay Nobel, no Marginal Revolution. Que explica de maneira simples o que é que tudo isto significa e de que forma é que a investigação de Hart e Holmstrom se liga a um dos grandes temas do nosso tempo: a remuneração dos CEO.

Holmstrom’s work has lot of implications for structuring executive pay. In particular, executive pay often violates the informativeness principle. In rewarding the CEO of Ford for example, an obvious piece of information that should used in addition to the price of Ford stock is the price of GM, Toyota and Chrysler stock. If the stock of most of the automaker’s is up then you should reward the CEO of Ford less because most of the gain in Ford is probably due to the economy wide factor rather than to the efforts Ford’s CEO. For the same reasons, if GM, Toyota, and Chrysler are down but Ford is down less then you might give the Ford CEO a large bonus even though Ford’s stock price is down. Oddly, however, performance pay for executives rarely works like a tournament. As a result, CEOs are often paid based on noise.

The basic framework has since been applied in many different circumstances because principal-agent can be interpreted in many different ways employer-worker, teacher-student, regulator-banker and so forth. Thus the basic insights have been reflected in a wealth of applications each of which adds to the body of theory.

A macro nos dias de hoje

Na blogosfera internacional corre um debate muito interessante sobre a metodologia da macroeconomia. O nível está muito lá em cima, com contributos de Olivier Blanchard, Wolfgang Munchau, Simon Wren-Lewis, Paul Krugman, David Andolfatto, Tony Yates e Noah Smith. O Brugel fez um apanhado aqui. As citações de baixo são de Noah Smith, mas leiam tudo (ou pelo menos os textos de Smith e Andolfatto), porque vale a pena.

Personally I think DSGE techniques haven’t  reaped dramatic benefits (yet). But what other alternative is better? When I ask angry “heterodox” people “what better alternative models are there?”, they usually either mention some models but fail to provide links and then quickly change the subject, or they link me to reports that are basically just chartblogging. Yeah, sure, if you put out hand-wavey reports saying “capitalism sux, there’s gonna be a crash!” every year or two, you’re eventually going to be able to say “see, I told you so”. But that’s no replacement for real modeling.

E Olivier Blanchard, no Vox: Rethinking macroeconomic policy:

Fiscal stimulus can help. Public debt can increase very quickly when the economy tanks, but even more so when contingent – explicit or implicit – liabilities become actual liabilities. The effects of fiscal consolidation have led to a flurry of research on multipliers, on whether and when the direct effects of fiscal consolidation can be partly offset by confidence effects, through decreasing worries about debt sustainability.

Admittedly, navigation by sight may be fine for the time being. The issue of what debt ratio to aim for in the long run is not of the essence when there is a large consensus that it is too large today and the adjustment will be slow in any case – although, even here, Brad DeLong has provocatively argued that current debt ratios are perhaps too low. But how to assess what the right goal is for each country? This remains to be done. It has become clear that there is no magic debt-to-GDP number. Depending on the distribution of future growth rates and interest rates, on the extent of implicit and explicit contingent liabilities, one country’s high debt may well be sustainable, while another’s low debt may not.

Juros baixos causam deflação?

O princípio básico da política monetária é simples: juros baixos estimulam a actividade económica e impulsionam os preços; juros altos retraem a procura e pressionam a inflação para baixo. Aliás, o princípio é tão simples que qualquer pessoa pode fazer de Janet Yellen (ou Mario Draghi) em simuladores deste género.

Mas e se as coisas forem mais complicadas do que isto? Parece estranho, mas há quem sugira que juros baixos podem, no longo prazo, acabar por conduzir à deflação. No centro do debate está a) a equação de Fisher, segundo a qual a taxa de juro nominal é igual à taxa de juros real mais a inflação; e b) a ideia de que o banco central só pode afectar a taxa de juro real no curto prazo. Juntando ambas as peças, chega-se à conclusão de que uma taxa directora de 0% acabará, pouco a pouco, por ’empurrar’ para baixo a inflação, de modo a que a equação de mantenha válida.

Na verdade, é um pouco mais complicado do que isto. Mas o debate entre estes neo-fisherites (intraduzível) e o resto da classe está aí: Monetary policy with interest on reserves (John Cochrane), A dirty little secret (David Andolfatto), Reality might topple a beloved theory (Noah Smith), On neo fisherianism and adaptative learning (Tony Yates). E um post mais antigo, que faz uma boa súmula do debate em meados de 2014: The Neo-fisherite rebellion (Noah Smith). O trecho de baixo é de Tony Yates.

1 I wonder if the debate isn’t gettting too hung up on models using rational expectations.  RE is just a convenient tool, probably a not very realistic one.  If we drop RE and use a version of the New Keynesian model with adaptive learning instead, we would arrive at answers that sound pretty much like what central banks already say.  And nothing like neo-Fisherianism.   Note ‘rational expectations’ refers to when agents in the model have forecasting rules for inflation that are the same as the rules you would have if you knew exactly how the model worked.  ‘Adaptive learning’ means here:  behaving like an econometrician, basing forecasts of the future on how inflation (and other things) have depended on past values of things you can see, and updating your forecasting rules as new data comes in, either validating or flouting the rule you used last time.

2 Relative to historically followed policy rules, a policy that cut rates to the zero bound and held them there, in the absence of any other shocks hitting the economy, would cause explosive upward movements in inflation.  The explosions would come from the initial upward movements in inflation causing private agents’ extrapolative forecasting rules to change, which would amplify the past movement, causing more forecast rule revisions, and so on.

3 The coincidence/comovment of falling interest rates and inflation could only come from policy responding to an inflation-depressing shock, and incompletely stabilising it.

4 If the Fed had shifted its preferences privately to deliver very low inflation, that would eventually deliver low interest rates and low inflation.  But, initially, it would have required an interest rate increase.  This seems a pretty implausible account of what happened recently.  For starters, interest rates did not increase since the onset of the crisis.  Second, FOMC members did not lower their inflation targets, or, at least if they did, they did it privately [and it didn’t even make the transcripts released] and contradicting what they had told us about their long term view of inflation.

5 In this model, although the Fisher equation will prevail in the long run, one can’t deliver a particular level of inflation with an interest rate peg worked out from this equation, unless one starts from steady state and there are no shocks.  In an economy buffeted with shocks, a fixed interest rate will cause explosive movements in inflation one way or the other, depending on the luck of the draw.

Bringing this together.  If you believe in a more realistic version of the popular New Keynesian model modified so that we have inflation expectations formed by adaptive learning, rather than rational expectations, then you can’t believe that low infaltion was caused by lowering nominal interest rates.  You’d believe things that sound pretty much like the received wisdom, the words coming out of the mouths of central bankers.

Civismo e educação

Um bocado off-topic, mas ainda assim uma troca de opiniões que vale a pena seguir. Don’t be rude, you loser, por Noah Smith, e Wild words, brain worms and civility, por Paul Krugman – dois metaposts acerca da importância (ou não) de escrever sem ostracizar os adversários.

Noah Smith:

Sometimes, one of the parties in a debate is simply dishonest and unethical, and doesn’t really care if he or she is right or wrong. But more often, both sides deeply believe in the positions they take. The person in the wrong might be your opponent — or it might be you. Or, more realistically, it might be both. Putting red-haired people in concentration camps is obviously horrible, but most of our arguments are over things like Obamacare, or antipoverty programs, or financial regulation– issues on which reasonable people can and do disagree.

If you’re uncivil in this sort of situation — if you call your opponent an idiot, or a liar, or a nastier name simply because you think his or her argument is bad — you’re basically being overconfident. You’re assuming that there’s essentially no chance that you’re in the wrong, so it’s in the public interest for you to rail against your opponent and score points with the crowd. If you do this, there’s no chance that you yourself will learn anything from the encounter. People usually argue to win, but many times it’s possible to argue to learn.

But even if you’re arguing to win, incivility might backfire. People are naturally defensive, and they take things personally, so if you’re uncivil, they will usually (though not always) harden their position. If you want to convince the world of the merit of your ideas, then one outcome to avoid is for your opponent to leave the discussion ready to promote a bad idea even more virulently.

A third danger of incivility is that you might give your “team” a bad name. If you’re pro-Obamacare, and you fling imprecations at anyone who criticizes it, then you might contribute to the stereotype that pro-Obamacare people are vile and offensive, thus ultimately hurting the cause of Obamacare. A good example of this is the “men’s rights” movement, which sometimes makes good points, but which is known for being so abusive and aggressive that most people ignore it.

I’m not arguing that civility should be universal, or that we should dismiss uncivil arguments on the grounds of style alone. But civility has definite advantages, and these advantages are magnified when the number of civil people grows. Many arguments are a bit like thePrisoner’s Dilemma – if both people explain their positions and examine others’ positions honestly and forthrightly, in a friendly and charitable manner, then everyone benefits. The discussion contributes to the world’s overall level of understanding, and to your own. But if one person chooses to be dishonest and use the tools of rhetoric in an attempt to score points in front of an audience, then the other person has no choice but to respond either in kind, or with incivility…and the whole thing becomes a big exasperating waste of time.

So although incivility is an important tool to keep in our toolboxes, we should be very cautious about pulling it out. It’s a tough call to decide whether an idea is so awful that the only proper response is to denounce it (and its proponents) with full vitriol. In general, these cases are a lot rarer than we think. People rarely lie, and all but the worst arguments contain some grain of valuable truth. If you can’t understand how your opponent could possibly believe what they believe, odds are that you could benefit from trying harder to understand. Not always, but usually.

Paul Krugman:

First, picturesque language, used right, serves an important purpose. “Words ought to be a little wild,” wrote John Maynard Keynes, “for they are the assaults of thoughts on the unthinking.” You could say, “I’m dubious about the case for expansionary austerity, which rests on questionable empirical evidence and zzzzzzzz…”; or you could accuse austerians of believing in the Confidence Fairy. Which do you think is more effective at challenging a really bad economic doctrine?

Beyond that, civility is a gesture of respect — and sure enough, the loudest demands for civility come from those who have done nothing to earn that respect. Noah felt (and was) justified in ridiculing the Austrians because they don’t argue in good faith; faced with a devastating failure of their prediction about inflation, they didn’t concede that they were wrong and try to explain why. Instead, they denied reality or tried to redefine the meaning of inflation.

And if you look at the uncivil remarks by people like, well, me, you’ll find that they are similarly aimed at people arguing in bad faith. I talk now and then about zombie and cockroach ideas. Zombies are ideas that should have been killed by evidence, but keep shambling along — e.g. the claim that all of Europe’s troubled debtors were fiscally irresponsible before the crisis; cockroaches are ideas that you thought we’d gotten rid of, but keep on coming back, like the claim that Keynes would never have called for fiscal stimulus in the face of current debt levels (Britain in the 1930s had much higher debt to GDP than it does now). Well, what I’m doing is going after bad-faith economics — economics that keeps trotting out claims that have already been discredited.

Nor are zombies and cockroaches the only kinds of bad faith; the worst, as far as I’m concerned, involves refusing to take responsibility for your actual statements. “The failure of high inflation to materialize doesn’t mean that I was wrong, because I only said that there was a risk of inflation”. “When I said that Obamacare spending adds a trillion dollars to the deficit, I wasn’t misleading readers, because I didn’t actually deny that the ACA as a whole reduces the deficit.” And of course, people who engage in that kind of bad faith screech loudly about civility when they’re caught at it.

When there’s an honest, good-faith economic debate — say, the ongoing controversy about the effects of quantitative easing — by all means let’s be civil. But in my experience demands for civility almost always come from people who have forfeited the right to the respect they demand.

DSGE e o teste do mercado

The most damning critique of DSGE, por Noah Smith.

So now let’s get to the point of this post. As far as I’m aware, private-sector firms don’t hire anyone to make DSGE models, implement DSGE models, or even scan the DSGE literature. There are a lot of firms that make macro bets in the finance industry – investment banks, macro hedge funds, bond funds. To my knowledge, none of these firms spends one thin dime on DSGE.

So maybe they’re just using the wrong DSGE models? Maybe they’re using Williamson (2012) instead of Williamson (2013). I mean, after all, there is a huge, vast, unending array of DSGE models out there, most of which purport to explain the entire macroeconomy, and most of which are thus mutually exclusive at any point in time. Maybe two or three of them are right at any given point in time, but maybe this set switches around as conditions change. Perhaps finance-industry people are simple unable to pick out the right DSGE model to use on any given day.

But if finance-industry people can’t know which DSGE model to use, how can policymakers or policy advisors?

In other words, DSGE models (not just “Freshwater” models, I mean the whole kit & caboodle) have failed a key test of usefulness. Their main selling point – satisfying the Lucas critique – should make them very valuable to industry. But industry shuns them.

Many economic technologies pass the industry test. Companies pay people lots of money to useauction theory. Companies pay people lots of money to use vector autoregressions. Companies pay people lots of money to use matching models. But companies do not, as far as I can tell, pay people lots of money to use DSGE to predict the effects of government policy. Maybe this will change someday, but it’s been 32 years, and no one’s touching these things.

Economia e matemática

Why is Math, and why we should use it in economics, por Noah Smith. Nem toda a gente consegue falar de metodologia económica, matemática e filosofia ao mesmo tempo. Vale a pena ler quem o consegue fazer de forma escorreita.

So why should we use math in economics? Well, I can think of a number of reasons:
1. We may want to make precise predictions about what will happen in a market.
2. We may want to make precise predictions about the conditions under which things will happen in a market.
3. Precise statements often help resolve debates, avoiding the phenomenon of “talking past each other”.
4. Precise statements often lead to unintuitive but logically inescapable results.
5. It is usually easier to check sets of precise statements for logical inconsistencies.
I think all of these reasons are good reasons sometimes and bad reasons sometimes (note how imprecise of a statement that is!). I have no hard-and-fast rule about how much precision to use, and when. But I do know that if you tried to implement a Shapley-Roth matching algorithm without mathematically precise statements about what happens when, it would be hopeless.
And I also know that in the blogosphere, many debates go on and on without being resolved, when both sides are really just talking past each other. Egos get bruised, grudges develop, and understanding is not advanced, even when the different sides’ positions are not mutually incompatible or even that far off. That’s why, when debates get really long and confusing, I think it’s time to whip out the math, define terms, and get really precise. (By the way: In my experience, defining terms is really the critical piece of this. It’s very very hard to make imprecise statements when all your words are precisely defined!)