The Long Short Run

We've run short of money.

Ah, we have run short of sugar.

Well, the short run, it's hunky dory, but the long run, it's humpty dumpty.

They still go up in the short run.

And the question is whether the short run will persist.

So GDP goes up a lot fantastic! That's the short run.

And the short run say, the first five to seven years is just great.

Those relations support the enterprise by allocating finance based on a company's long run prospects for sales revenues rather than on short run cash flow problems.

That may entail some expense in the short term, but with dividends in the long run.

Research I did with Gylfi Zoega a decade ago confirmed that cuts in taxes on labor boost employment in the short run. But what about the long run?

Even structural reforms that will eventually increase productivity growth can be recessionary in the short run. Increasing labor market flexibility by reducing the costs of shedding workers will lead in the short run to more layoffs in the public and private sector, exacerbating the fall in incomes and demand.

So we are 99 percent of the way there on this goal and we're about to run short of money.

And the reason we have to do that in the short term is because we have just run out of cash.

And what happens is that as we turn increasingly to rules, rules and incentives may make things better in the short run, but they create a downward spiral that makes them worse in the long run.

In other circumstances, these would be positive outcomes. Indeed, Europe does stand to reap significant benefits from fiscal consolidation and structural reform but in the long run, not in the short run, when the problem is deflation.

The short and long term stories are simplifications, but they nonetheless convey the essence of some critical drivers of price changes. America s biofuels policies inevitably lead to larger price responses to supply shocks in the short run.

You go up in the short run, but then most societies historically have ended up worse than if they'd had no booms at all.

But Prime Minister Matteo Renzi has the good sense to recognize that selling national assets at fire sale prices makes little sense. Long run considerations, not short run financial exigencies, should determine which activities occur in the private sector.

Short run economic policy should be left in the hands of the central bank, with the legislature and the executive focusing on the long run and keeping their noses out of year to year fluctuations in employment and prices

But one of Schumpeter s fundamental insights has held up well Conventional policies focusing on short run efficiency may not be desirable, once one takes a long run innovation learning perspective. This is especially true for developing countries and emerging markets.

California is an example of long run fiscal folly meeting short run national and global economic crisis, resulting in chaos. For many decades, Californians had rapidly rising living standards, great public K 12 and higher education systems, and unprecedented upward mobility.

Similarly, when we expect redistributive effects to even out in the long run, so that everyone eventually comes out ahead, we are more likely to overlook reshufflings of income. That is a key reason why we believe that technological progress should run its course, despite its short run destructive effects on some.

Even setting aside the question of whether more is always better, what can the Juncker plan do to have a positive short run impact on aggregate investment?

Nor is there any easy escape, at least in the short run, by joining the EU, which may well require an independent Scotland to apply for membership.

In a recent survey, Fiscal Policy for Economic Growth, I concluded that short run multipliers the total change in economic activity resulting from higher government spending could theoretically be as large as two when the central bank has reduced its target interest rate to zero. In other words, one dollar spent by the government could boost GDP by two dollars in the very short run.

In the short run, this means greater efficiency and more and speedier recycling, happening locally rather than centrally. In the long run, 3D printing will allow more efficient use of physical resources and faster diffusion of the best designs, boosting living standards around the world.

I can also understand (though I disagree with) opponents who believe that the short run stimulus effect of the plan will be small, while America s weak fiscal position implies a large long run drag on the economy from the costs of servicing the resulting debt.

We should adopt policies that benefit the economy in the short run at reasonable long run cost, and reject those that do not. That sounds simple, but it is a much higher hurdle than politicians in Europe and the US have set for themselves in recent years.

Run away. Run.

America faces long run and short run problems decaying infrastructure, weakening educational systems, and a dysfunctional health care system that produces sub standard outcomes at twice the cost of any other industrial country. Solving any of these three problems would go a long way toward resolving the long run financing imbalance between current tax rates and America s long run social insurance promises that the debt ceiling debate s instigators supposedly want to address.

Now, we know that refined grains and starches elevate your blood sugar in the short run, and there's even reason to believe that sugar may lead to insulin resistance directly.

In the short run, the invasion of Iraq has created an intensifying insurgency and incipient civil war. The presence of foreign troops creates a stimulus for nationalist and jihadist responses.

This, too, runs counter to the economic mainstream. Free market ideologues don t want governments to think at all and Keynesians want governments to think only about the short run, because they take to an extreme John Maynard Keynes famous quip, In the long run we are all dead.

Temporary Keynesian demand measures may help to sustain short run internal growth, but they will not solve France s long run competitiveness problems. At the same time, France and Germany must both come to terms with an approach that leads to far greater political union within a couple of decades.

Normally, short run and long run exchange rate trends point in the same direction. Indeed, a huge body of research shows that for most major currencies, the best forecast of next week s exchange rate, next month s exchange rate, or even next year s exchange rate is simply today s exchange rate.

Moderate inflation in the short run say, 6 for two years would not clear the books. But it would significantly ameliorate the problems, making other steps less costly and more effective.

In the short run, the non tradable sector is, by definition, subject to domestic demand constraints. A shortfall in non tradable demand inevitably limits growth on that side of the economy.

In the short run, the dialogue would aim to create an environment conducive to the holding of elections and to ensure that the country could be properly governed following the elections.

All of this is now revealed as wrong, at least for today, if not in the past or the future. Japan since the start of the 1990 s provides strong evidence that the short run can last for decades, and then be followed not by a return to the old normal, but by a transition to a new normal in which the Keynesian short run of economic depression casts a long shadow.

In the short term, time may be on Russia s side. In the long run economically, demographically, politically, strategically time is on our side, if we stick to our values and our principles.

Another, related, fallacy is the assumption that reforms can reap benefits only in the long run. This misconception reduces the short term solution to affected governments sharply higher borrowing costs to bailouts.

With flexible exchange rates, however, monetary policy contraction in a major economy would stimulate other economies in the short run, while monetary expansion would damage their performance. (To be sure, in the medium or long run, monetary expansion can facilitate increased domestic production and trade, thereby generating positive spillover effects.)

Recent evidence that deaths and injuries would have been greatly reduced had better body armor been provided to troops suggests how short run frugality can lead to long run costs. Certainly, when a war s timing is a matter of choice, as in this case, inadequate preparation is even less justifiable.

In the long run, agriculture should be fully incorporated into the WTO rules and treated similarly to industrial goods. In the short run, he called for the elimination of export subsidies and establishment of a credible deadline for that, as well as reduction of domestic support and serious market access barriers.