Saturday, January 17, 2009


DeLong Draws a Line in the Sand

Commenting on Fama's critique of fiscal stimulus, Brad DeLong writes:
What is extraordinary is that these mistakes are being rederived today, at the end of the 2000s--without any consciousness of their past or of the refutations of them made by past theory and history.

I think it is time to draw a line in the sand: no more economists who know nothing about the economic history of the world or the history of economic thought.

I am in the process of writing my book chapter dealing with Herbert Hoover. Let's just say, if you wanted the poster child for a liberal Democratic response to the stock market crash, Hoover would have been your guy. (Seriously, I don't want to sound like Glenn Beck who couldn't shut up about his Christmas Sweater show for 6 months, but you loyal readers are going to be stunned at some of the stuff I'm digging up for my book.)

For now, just check out page 12 of this DeLong paper (HT2 Greg Ransom), and then go reread his quotation above.

I am very amused. It will be a fun year.

I might be amused if I weren't so stunned, angry, and befuddled. If I weren't so saddened by the fact that some people actually respect this man and listen to him and consider him scholarly, then it would certainly be amusing. Perhaps I am naive to this alternate reality, but I find this simply unbelievable!
Neither DeLong nor Krudman ever directly address the central precepts of the Austrian school. However, this is generally true of virtually everyone who opposes the Austrian school. One can only conclude that they are either too dumb to "get it" and/or they are simply dishonest in their relentless attempts to smear the advocates and work of an opposing school of economics. Perhaps they suspect and fear that a thorough review of Austrian principles would impair their own personal religious belief in the supernatural power of the State.

I suspect that both DeLong and Krugman are totally flummoxed by Austrian principles and I believe that their silly “responses” thereto are generally the result of sheer panic. It nevertheless remains important to study and refute them because, inexplicably, they have so many adherents.
On the same theme, Robert Higgs has written in April, 2008, quoting Paul Samuelson from 1952:

"[N]o a priori empirical truths can exist in any field. If a thing has a priori irrefutable truth, it must be empty of empirical content" (p. 62). He then affirms, with characteristic haughtiness, that "at the rough and ready level that concerns the scientist in his everyday work," this view is "widely recognized by scientists in every discipline. The only exceptions are to be found in certain backwaters of economics, and I shall not here do more than point the finger of scorn at those who carry into the twentieth century ideas that were not very good even in their earlier heyday" (p. 62).

Higgs then quotes Mises:

"The sciences of human action," properly construed, "start from the fact that man purposefully aims at ends he has chosen. It is precisely this that all brands of positivism, behaviorism, and panphysicalism want either to deny altogether or to pass over in silence" (p. 3) — or, as in Samuelson's case, to dismiss with ridicule and scorn as unworthy of economic scientists in the modern age.

Nothing has changed in 57 years.
In the paper that Bob linked to, DeLong said (seriously):

"The policies recommended did not turn out well. We can dispute what should have been done in the Great Depression, but hands-off was the wrong policy. The lesson of the Great Depression was reinforced by the experience of Japan in the 1990s, where governmental hesitancy in taking action in the hope that the market system would soon cure its own diseases was not rewarded."

What would he have preferred? A completely government-controlled economy like the Soviet Union's or China's? I mean, exactly how much more "hands-on" does DeLong imagine a government can get without turning into one of Stalin's five-year plans or Mao's Great Leap Forward?
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