Problem solving

From the unposted archives. Written back in March 2016.

Economist's View links to A Cheaper Way to Battle Recession at Bloomberg View. It's a Noah Smith post -- not that there's anything wrong with that.

I liked the post. It's well-organized, well written, and interesting. But that's not why I'm writing.

I'm not writing because I liked it. I don't even want to talk about what Noah talked about. I want to talk about something else. I want to talk about problem solving -- in case you couldn't tell by the title of mine today.

But in order to talk about problem solving, I need an example. Noah is my guinea pig, Noah's post.

In order to say what I have to say, I have to talk about what Noah says in his post. That's a problem for me, because Noah's is interesting. I might even say very interesting. And I don't want you to be distracted by it.


The title of Noah's post -- A Cheaper Way to Battle Recession -- seems to offer a solution to a problem. And it does, it does. I'll get to it in a minute. But, because of his title, we approach the text with a particular thought in mind: that Noah will be talking about a possible solution to a problem that does seem to need solving.

Here's his first paragraph:

What should the U.S. government do to fight recessions? What should it do to fight slow growth? This is the eternal question of so-called countercyclical policy. The two mainstream ideas are fiscal and monetary stimulus. The fiscal version works by having the government borrow and spend money, either on useful things like infrastructure, or by simply mailing people checks. The typical monetary variety works by having the Federal Reserve swap money for financial assets, which lowers interest rates.

Six sentences, and we are already deep in theory. I gotta give it to Noah: This is well-written stuff.

His next three paragraphs move us along quickly:

Paragraph 2: "Unfortunately, both of these methods have major drawbacks." Noah describes the drawbacks. Basically, the mainstream solutions no longer work.

Paragraph 3: "Because of these limitations, macroeconomists have been trying to dream up alternate ways of stimulating the economy." Noah presents two: the helicopter drop, and negative interest rates. He doesn't list problems with these. But he doesn't have to. I have problems with them already. Maybe you do, too.

Paragraph 4: Noah introduces the cheaper way to battle recession: "A third new idea is to have the government lend people money at very low interest rates" -- Miles Kimball's idea. Noah spends a few paragraphs with this one, and actually makes it sound pretty good. You know: interesting. We'd get low interest rates, he says, and the economy would benefit whether we paid back the loans or not.

Noah doesn't get into what happens when the government can no longer borrow at "just a bit more than 0.25 percent". And he doesn't spend a lot of time wondering whether it is wise to build into policy the notion that not paying back one's loans can be good. But he does bring up a couple potential problems with the idea of "national lines of credit".

Noah's concluding paragraph:

So there are serious political problems with using national lines of credit. But the evidence shows that it can give a big boost to demand, so the challenge is to find ways to minimize the political problems. Not only are national lines of credit a potential tool for recession-fighting, but they might even be useful for boosting growth to higher levels in a sluggish economy like the one the U.S. now is experiencing.

As I said: Interesting stuff.


My turn.

We don't like recessions and slow growth, Noah says. And we have ways to fight them. But these solutions no longer work, Noah says. Then he looks at some other solutions.

Noah identifies a problem and goes immediately to solutions. He never gets to the part where he actually figures out the cause of the problem.

Nobody does. That's why our solutions don't work.