Advancing a Free Society

Another Round on Investment and Unemployment

Sunday, April 3, 2011

Paul Krugman responded to my reply (March 31) to his two critiques (afternoon and evening of March 30) of my post (January 14) on the negative correlation between investment and unemployment. He now says that Taylor “professes himself baffled.” Of course I didn’t profess any such thing. I simply showed that that Krugman was wrong.

My original post showed that there is a negative correlation between total fixed investment (the sum of residential and nonresidential investment) as a share of GDP and the rate of unemployment over the past two decades. In his March 30 afternoon critique Krugman said that “It’s mostly the housing bust!” and continued that “The rest”—the business fixed investment part—“is just politically motivated mythology.”

Continue reading John Taylor at his blog Economics One