Thoughts on the Co-op

In the spirit of revisiting topics we've discussed, I thought I would pose a few questions for Krugman, the Sweeneys, and all of the other monetarists who love to use the babysitting co-op as their golden egg for the efficacy of monetary policy.

1) Should age of your population factor into monetary policy decisions?

In our group discussion about the Japanese recession, we spoke about the "lurking" variable of age. It seems that economists (or at least the ones we've read) fail to put an emphasis on this fundamental feature of an economy. While you can quadruple the money supply and slash interest rates, if your economy consists of a bunch of old people who are looking to stay inside and watch TV, your policy moves will not help much.

Likewise, imagine a babysitting co-op where the average age is 50 with 2 kids. While this economy might suffer a recession, it could just be a reflection of preferences from market participants. Not saying my hypothetical and the actual co-op are apples and apples, but there is definitely some sort of relationship between preferences (ie, if you don't want to spend your money not because your trying to accumulate, but because you just don't like spending your money) and output.

This could just be a different way of thinking about marginal propensity to consume, but I'm sure there is a direct relationship between MPC and age.


2) Could there be some exogenous variable bias with the co-op example?
                                                 
This is pure conjecture, but I would be very interested in seeing when the 'monetary stimulus' for this co-op took place. If it happened right after an election period, well, no duh there would be an increase in activity--people can actually return to their lives in DC post election (my sister works in DC, she has no life right now).

Additionally, maybe some kids sports season ended right after the 'monetary stimulus', which meant parents did not have to attend their kids games at night anymore. Something like this also could have attributed to the 'boost' in activity.


Again, this is all conjecture, but I think it's worthy to question the pureness of the cause and effect relationship that Krugman and his disciples point towards. For me (I enjoy being a skeptic), it's always alarming when "experts" extrapolate their policy decisions from over-simplified, dumbed-down models.

all for now.