Scott Sumner

External effects such as air pollution are often cited as an example of a problem that can be usefully addressed by public policy. In the real world, however, two factors cause externalities to be overemphasized as a justification for regulation:

Lars Svensson has argued that monetary policymakers should "target the forecast", which means they should set their policy at a position expected to lead to on-target inflation.Early in 2024, a few high inflation readings led to concern that we might not be on track for a soft landing. Inflation eased later in the year...

A throwaway comment at the end of my previous post may have been misunderstood. So today I'll provide a more complete interpretation of the market response to the recent election. There were a number of significant market responses to the election, including:1. Significantly higher stock prices2. A stronger dollar3. ...

An article on a highway project in the Pacific Northwest caught my eye: However, the shiny new document leaves out an essential consideration when it comes to projecting the future effects of I-5 expansion in this long-constrained corridor, an omission that would have been much less noticed in a decade ago but which...

There were a number of significant market responses to the election, including: 1. Significantly higher stock prices 2. A stronger dollar 3. Higher interest rates 4. Higher inflation expectations

In graduate school, I recall a professor suggesting that the rational expectations revolution would eventually lead to much better models of the macroeconomy. I was skeptical, and in my view, that didn't happen.This is not because there is anything wrong with the rational expectations approach to macro, which I strong ...

In September, 1938, British Prime Minister Neville Chamberlain struck a deal with Adolph Hitler. Britain (and France) would allow Germany to seize the parts of Czechoslovakia that were inhabited by ethnic Germans (the Sudetenland), in exchange for a promise not to make any further advances on the country. Upon returning home, he declared that he had insured “peace for our time.” A few months later, Hitler grabbed all of Czechoslovakia.

Given a choice between the rule of law and the law of rulers, I'd choose the former every time. That's even true if I happen to agree with the ideology of the people who are currently in change. Thus I've consistently opposed “court packing”, regardless of which party is in power at the time.

The media is full of analyses as to why Donald Trump defeated Kamala Harris in the recent election. At various times, I’ve mentioned factors like voter frustration over high inflation, illegal immigration, and woke excesses on college campuses. The more I think about the election, however, the less confidence I have in any single explanation. […]

Recent referenda on the minimum wage produced some striking results: The California proposal to raise the minimum wage to $18 an hour in steps by 2026 narrowly failed, 51%-49%. Opponents and backers amassed a combined $1.8 million war chest for the issue — the lowest amount of all the propositions on Californians�...