Scott Sumner

1 week ago | econlib.org | Bryan Cutsinger |Pierre Lemieux |Scott Sumner

Question: Some economists have argued that the Fed should raise its inflation target from 2 percent to 3 or even 4 percent. Why might the effect of a higher inflation target on the quantity of real money balances demanded be larger in the long run than in the short run? Solution:Economists often treat price theory and monetary theory as conceptually distinct. Milton Friedman, for example, called this the major division in economics.

1 week ago | econlib.org | Pierre Lemieux |Scott Sumner |Justin Callais

What motivates President Donald Trump’s chaotic, stop-and-go, incoherent tariff moves? On April 9, a few days after his “reciprocal tariffs” had come into force and after worrying cracks appeared in financial markets including the market for Treasurys, he announced a 90-day pause for most “reciprocal tariffs” over 10%. He explained that people were “getting … a little bit afraid.” “I thought that people were jumping a little bit out of line.

1 week ago | econlib.org | Jon Murphy |Pierre Lemieux |Scott Sumner

Mercy has long been a hallmark of a just legal system. Judges are often given considerable leeway in determining punishment for a crime (except in cases like mandatory minimums or “three-strike” legislation) for exactly this reason. Extenuating circumstances can result in a lower punishment for some criminals than others who commit certain crimes, and so on.  Some claim that mercy is a weakness, however. They want no mercy, at least for certain crimes.

3 weeks ago | econlib.org | Kevin Corcoran |Pierre Lemieux |Scott Sumner

It’s often said that after people are wealthy enough to meet their basic needs, they are more concerned about their relative rather than absolute level of well-being. If Smith sees his real income increase by 10% this year, but everyone else around Smith has their real income increase by 20%, Smith doesn’t feel glad that his standard of living has gotten objectively better. Instead, Smith feels despondent that he’s falling behind compared to others.

3 weeks ago | econlib.org | Pierre Lemieux |Scott Sumner |David Henderson

The student of economics and especially of public choice theory should expect politicians to lie—and he is certainly not disappointed in America these days. Politicians are ordinary individuals. An ordinary individual is tempted to lie when he considers it is in his interest to do so. I take lying to mean intentionally conveying a statement that one knows to be false. A milder form of lying would be conveying a statement that one suspects would be revealed false if a low-cost verification were done.