Also, in macroeconomics there are no control groups or laboratory experiments. And there is a huge myriad of factors and things going on at once. So people can use "real world" examples to show almost anything, if they are dishonest. And then it takes an even bigger pool of real-world examples to prove them wrong. The most common outcome of anything with so many data points, is that you end up not really being able to conclude anything, not by simply running a mathematical analysis of the data.So before you crunch 10 million numbers, it is best to refine for some time whatever theory you might get around to testing with additional data. And this involves comparing the theory to anecdotes, refining it, and looking for events that can come out of left field and disprove your theory with no work at all.Another theory is that QE, or low interest rates in general, lead to what is known as "rationing by the hassle factor." In the US, you can get a free doctor visit by going to the emergency room. But since there are not unlimited doctors, these visits are rationed based on who is willing to sit for 10 hours waiting to see a doctor. From retail queues in the USSR, to gas lines in the US, we see that any time a price is fixed at a low level, some other method is used to select what subset of people who demand the good get it.It may be that low interest rates in Europe are rationing capital by economies of scale. There is low demand to borrow among small businesses, because the cost of applying for a loan is spread across a lower loan size. With a fixed amount of, for example, commercial real estate in the short term, it might be that raising interest rates would cause that real estate to be allocated to a different portfolio of businesses. That is when land is rationed based on ability to pay interest rates, rather than based on the man hours required to obtain the loan compared to the size of the loan.In the US, social welfare programs are free. But their use is dominated by people who have the cultural know-how, and the energy and intelligence, to fill out the applications and get approved. Probably a person who has such low social skills that he cannot even be taught how to pick up trash, will not know how to apply for welfare either. So we see that things which are low-cost or free, whether loans or anything else, are often consumed by a less diverse population than things with a higher cash cost.One time I was at the emergency room, and there was a whole row of seats taken up by gay hookers. They all knew each other, and acted like they owned the place, telling other people where to sit, calling the security guard by name, and such. One of them commented "we are here every day." It is possible that charging them even $10 to see a doctor would have raised the average health in the community served by that hospital. It is possible that having some interest rate, rather than no interest rate, can have a large impact on the types of borrowers who get loans, and on the health of the economy.
Last edited by farmer
on May 4th, 2014, 10:00 pm, edited 1 time in total.