Friday, July 17, 2009
DeLong on the State of Macroeconomics
A rare post in which I agree wholeheartedly with Brad DeLong (HT2 Bob Roddis):
Yep. It would be hard to imagine a worse performance by professional economists during the last few years. Follow the link to the Economist pieces to see some examples of how badly the profession botched things.
I'll go even further, and say that I totally understand why DeLong (and Krugman) think Fama et al. are being crazy in their opposition to fiscal stimulus. They are trying to use accounting tautologies to "prove" that deficit spending can't reduce unemployment. But that doesn't work; it's not necessarily true that "every dollar the government borrows means one fewer dollar spent by the private sector."
Naturally, I oppose DeLong (and Krugman) in their call for greater fiscal stimulus; I think their recommendations are awful. But as I argued in this article, the real problem is that even if deficit spending (temporarily) reduced unemployment, it would simply delay the sectoral adjustments needed to restore the economy to a sustainable growth path.
Note that I'm not saying deficit spending will always reduce unemployment; I am rather saying that Fama et al. are wrong for claiming that it will necessarily have zero effect on it. In fact, some of the opponents of "stimulus" are trying to have it both ways. Before the plan passed, it seemed (many of them) were saying that government spending would be perfectly counterbalanced by private sector losses, and so the effect on employment should have been nil. And yet now that the stimulus passed and unemployment jumped higher than most were predicting, the critics are saying, "See? We told you this would destroy jobs!" (Of course, there was not a unified voice of criticism of the stimulus package; some people made arguments at the time saying it would "destroy jobs on net." So those critics could claim justification.)
A lot of people ask me if I think Krugman (and DeLong) are liars or just stupid. They're certainly not stupid, and I don't even think they're necessarily dishonest. After all, they each have thousands of fans who leave comments on their blogs, so presumably it's not a giant Keynesian conspiracy. Yes they will often make (in my opinion) unfair attacks on their opponents, or will conveniently overlook certain facts that hurt their cases, but there are people on "my" side who do the same thing from time to time.
The one thing that does bother me about these two guys is the ease with which they accuse their intellectual opponents of being stupid and/or evil. Ah well.
The Economist gives us economists too much credit...
I would like to draw a distinction between economics as a way of thinking--the way good economists think, at least--and academic economics as a profession. Economics as a way of thinking is, I believe, still very valuable. But academic economics as a profession has proven itself to be not valuable at all in this financial crisis.
Yep. It would be hard to imagine a worse performance by professional economists during the last few years. Follow the link to the Economist pieces to see some examples of how badly the profession botched things.
I'll go even further, and say that I totally understand why DeLong (and Krugman) think Fama et al. are being crazy in their opposition to fiscal stimulus. They are trying to use accounting tautologies to "prove" that deficit spending can't reduce unemployment. But that doesn't work; it's not necessarily true that "every dollar the government borrows means one fewer dollar spent by the private sector."
Naturally, I oppose DeLong (and Krugman) in their call for greater fiscal stimulus; I think their recommendations are awful. But as I argued in this article, the real problem is that even if deficit spending (temporarily) reduced unemployment, it would simply delay the sectoral adjustments needed to restore the economy to a sustainable growth path.
Note that I'm not saying deficit spending will always reduce unemployment; I am rather saying that Fama et al. are wrong for claiming that it will necessarily have zero effect on it. In fact, some of the opponents of "stimulus" are trying to have it both ways. Before the plan passed, it seemed (many of them) were saying that government spending would be perfectly counterbalanced by private sector losses, and so the effect on employment should have been nil. And yet now that the stimulus passed and unemployment jumped higher than most were predicting, the critics are saying, "See? We told you this would destroy jobs!" (Of course, there was not a unified voice of criticism of the stimulus package; some people made arguments at the time saying it would "destroy jobs on net." So those critics could claim justification.)
A lot of people ask me if I think Krugman (and DeLong) are liars or just stupid. They're certainly not stupid, and I don't even think they're necessarily dishonest. After all, they each have thousands of fans who leave comments on their blogs, so presumably it's not a giant Keynesian conspiracy. Yes they will often make (in my opinion) unfair attacks on their opponents, or will conveniently overlook certain facts that hurt their cases, but there are people on "my" side who do the same thing from time to time.
The one thing that does bother me about these two guys is the ease with which they accuse their intellectual opponents of being stupid and/or evil. Ah well.
Comments:
This is much, much too soft on the villainous krugman and delong.
I'm going over to lewrockwell.com to see if bill anderson has posted anything on krugman today. I know he wont let me down.
I'm going over to lewrockwell.com to see if bill anderson has posted anything on krugman today. I know he wont let me down.
Krugman and DeLong also share the characteristic of NEVER presenting the Austrian view fairly. NEVER. Probably because they don't understand it and don't want to.
Roger Garrison writes:
"DeLong blithely rejects the Austrian account. In his lecture delivered January 5, 2009 in Singapore, “The Financial Crisis of 2008-2009: Understanding the Causes, Consequences—and Possible Cures,” he fabricates a “Marx-Hoover-Hayek axis” (complete with adjoined photos of this unlikely trio) and then offers a brief and illinformed critique under the heading “The ‘Austrian’ Story in a Nutshell.”
http://tinyurl.com/m2zo2l
Roger Garrison writes:
"DeLong blithely rejects the Austrian account. In his lecture delivered January 5, 2009 in Singapore, “The Financial Crisis of 2008-2009: Understanding the Causes, Consequences—and Possible Cures,” he fabricates a “Marx-Hoover-Hayek axis” (complete with adjoined photos of this unlikely trio) and then offers a brief and illinformed critique under the heading “The ‘Austrian’ Story in a Nutshell.”
http://tinyurl.com/m2zo2l
# posted by 
: July 18, 2009 at 8:54 AM
: July 18, 2009 at 8:54 AM
Right guys, I understand why you say that, but by the same token, when commenters on DeLong or Krugman say, "Those self-styled 'libertarians' are a bunch of shills for corporations, we need more people like you to call it like it is" then they are mirroring your sentiments here.
So as mad as you are about Krugman and DeLong, that's as mad as their fans are about Cochrane and Fama. And when you say, "No but Krugman really did botch his critique of Austrian business cycle theory!" that's right, just like Cochrane and Fama really did botch their critique of Keynesianism.
So as mad as you are about Krugman and DeLong, that's as mad as their fans are about Cochrane and Fama. And when you say, "No but Krugman really did botch his critique of Austrian business cycle theory!" that's right, just like Cochrane and Fama really did botch their critique of Keynesianism.
Oh, and we also are (rightly) suspicious of Keynesians who have cushy jobs at big state-funded schools, get government money for research, etc. Just like Krugman pointed out a conservative think tank that was offering to sell its advocacy to the highest bidder in the FedEx/UPS lawsuit.
So to repeat myself, for all the reasons you (understandably) think Krugman is a liar and corrupt, by the same token Krugman's fans can point to analogous things that the "free market" people have done.
So to repeat myself, for all the reasons you (understandably) think Krugman is a liar and corrupt, by the same token Krugman's fans can point to analogous things that the "free market" people have done.
I think you're right.
Personally, I think there are three possibilities. They are either stupid, evil, or honestly mistaken.
The trouble is that people seem to believe that being honestly mistaken is necessarily equivalent to being "stupid". But, this is obviously not true. Plato and Aristotle weren't stupid - despite the fact that they honestly believed that the earth was flat and that the sun and stars revolved around it. They weren't stupid. They were just mistaken.
Personally, I think there are three possibilities. They are either stupid, evil, or honestly mistaken.
The trouble is that people seem to believe that being honestly mistaken is necessarily equivalent to being "stupid". But, this is obviously not true. Plato and Aristotle weren't stupid - despite the fact that they honestly believed that the earth was flat and that the sun and stars revolved around it. They weren't stupid. They were just mistaken.
Lucas,
Oh, of course, I think Krugman and DeLong are wrong. I'm just saying--as you point out--that somebody can offer horrible economic advice without necessarily hating economic growth.
There's a 4th possibility, that somebody could knowingly be unfair to his critics, but think it's not a big deal because "those people are wrong and evil." So that's pretty subtle, and that's what I think is probably true of Krugman. I.e. in some of his critiques or his responses, he HAS to know he's being a slippery son-of-a-gun. But I don't think he believes, "I just lied on that point, but my dumb readers won't catch it." I think it's more like, "That's actually a little oversimplified, and Lucas will go nuts when he reads it, but it would take too long and I'd lose the average reader if I dealt with that complication."
Oh, of course, I think Krugman and DeLong are wrong. I'm just saying--as you point out--that somebody can offer horrible economic advice without necessarily hating economic growth.
There's a 4th possibility, that somebody could knowingly be unfair to his critics, but think it's not a big deal because "those people are wrong and evil." So that's pretty subtle, and that's what I think is probably true of Krugman. I.e. in some of his critiques or his responses, he HAS to know he's being a slippery son-of-a-gun. But I don't think he believes, "I just lied on that point, but my dumb readers won't catch it." I think it's more like, "That's actually a little oversimplified, and Lucas will go nuts when he reads it, but it would take too long and I'd lose the average reader if I dealt with that complication."
Just to be clear, I support Prof. Murphy's own polite style when he disagrees with Krugman, DeLong and the rest. Some of us can be nice, others a bit less.
The division of labor and all that.
The division of labor and all that.
# posted by : July 18, 2009 at 1:03 PM
: July 18, 2009 at 1:03 PM
I'm suspicious of economists with lucrative consulting gigs for rent-seeking coal interests who espouse free market rhetoric but then ditch basic economics in order to say asinine things like "There is no scarcity in atmospheric resources."
Know anyone like that, Bob?
Know anyone like that, Bob?
I don't know anyone like that who works for "coal interests," Silas. And if I did, I wouldn't assume he was evil, just as I'm not assuming Krugman or DeLong are saying "moo hoo ha ha" when they type their blog posts.
Bob,
There are two ways you can look at Krugman and DeLong:
The academic way-- take what they say, including their "models," as theoretical abstractions and attempts to examine and debate the matter scientifically.
or
The honest way-- take what they say, including their "models," at face value, observe that they're discussing the best way to steal from other people and propounding a viewpoint which says theft = productivity, and call them stinkin' liars and dirty crooks.
Why do you give them the benefit of the doubt? Would you have given Capone the benefit of the doubt if he had had a degree from Princeton?
Methinks you respect these establishment types too much.
There are two ways you can look at Krugman and DeLong:
The academic way-- take what they say, including their "models," as theoretical abstractions and attempts to examine and debate the matter scientifically.
or
The honest way-- take what they say, including their "models," at face value, observe that they're discussing the best way to steal from other people and propounding a viewpoint which says theft = productivity, and call them stinkin' liars and dirty crooks.
Why do you give them the benefit of the doubt? Would you have given Capone the benefit of the doubt if he had had a degree from Princeton?
Methinks you respect these establishment types too much.
Bob Roddis, You are so right to point out the style issue. Thank you--it is very important. People will shut you out when they hear personal attacks, so better to stick to the facts. You don't want to feed into the 'nuts' label by adding an emotional element, I've learned. (Why is it even there? Why do people label Ron Paul nuts? I have never seen him speak in anything but a level headed, pleasant manner.)
I think with Krugman (et al) there has to be the personal/professional CYA going on, regardless of how his ideas may evolve. He's so high profile--can you imagine having to say in effect 'I was mistaken' or 'I learned something from so-and-so'. Not gonna happen. He's got to be a salesman for his product: he's got to gloss over the drawbacks of his vehicle. As the days wear on he will be spitting and polishing the hood like crazy as the rusty engine block drops out from underneath.
BTW, Dr. Murphy, I purchased your book last week (TPIG to the GD & ND) and am intrigued by the fact that most people (including myself) have been trained to look at history as events in time rather than as interlocking causes and effects. We should always ask how or why a certain event came about if we are to understand its essence. I'm really enjoying it, learning a lot, and find the writing style very flowing. I'm thinking of asking my book club to read it, but they always roll their eyes when I suggest a non-fiction. I have to say that in this case, though, truth really IS stranger than fiction!
I think with Krugman (et al) there has to be the personal/professional CYA going on, regardless of how his ideas may evolve. He's so high profile--can you imagine having to say in effect 'I was mistaken' or 'I learned something from so-and-so'. Not gonna happen. He's got to be a salesman for his product: he's got to gloss over the drawbacks of his vehicle. As the days wear on he will be spitting and polishing the hood like crazy as the rusty engine block drops out from underneath.
BTW, Dr. Murphy, I purchased your book last week (TPIG to the GD & ND) and am intrigued by the fact that most people (including myself) have been trained to look at history as events in time rather than as interlocking causes and effects. We should always ask how or why a certain event came about if we are to understand its essence. I'm really enjoying it, learning a lot, and find the writing style very flowing. I'm thinking of asking my book club to read it, but they always roll their eyes when I suggest a non-fiction. I have to say that in this case, though, truth really IS stranger than fiction!
# posted by : July 18, 2009 at 10:00 PM
: July 18, 2009 at 10:00 PM
Taylor, I think we've had this type of argument before. Krugman is certainly offering a better argument than sticking a gun in your back and saying, "Your money or your life." And as I said in the post, he's right when he claims that (many of) his critics are wrong. So to continue your analogy, if Capone said, "The government is calling me a crook?! And my specific crime is tax evasion, when they would just use that money to blow up foreign babies? This is outrageous!"
And he would have a point...
Thanks SonicNinja. BTW is that a reference to a video game or something?
And he would have a point...
Thanks SonicNinja. BTW is that a reference to a video game or something?
The genetic fallacy and lying have been part of the leftist play book for generations.
Wake up.
Krugman and DeLong are being true to type.
This is what they are.
This is what leftist do.
Don't be "shocked, shocked" that you have two leftist attacking people because of their motives ore who they are, while avoiding their actual arguments. And don't be "shocked, shocked" that Krugman and DeLong lie about the actual views and arguments of their emenmies.
IT'S WHAT LEFTIST DO.
Wake up.
Krugman and DeLong are being true to type.
This is what they are.
This is what leftist do.
Don't be "shocked, shocked" that you have two leftist attacking people because of their motives ore who they are, while avoiding their actual arguments. And don't be "shocked, shocked" that Krugman and DeLong lie about the actual views and arguments of their emenmies.
IT'S WHAT LEFTIST DO.
In an answer to some of the anti-left posts here. Perhaps if you took a look at the counterpunch.org website where the real leftist journalists hang out then you'd see the most popular columnist is the libertarian Paul Craig Roberts. In fact those real leftists and libertarians have been saying pretty much the same things for many years over a wide range of issues. You'd probably agree with most of what the excellent Alexander Cockburn writes. He was even invited to speak at libertarian conferences (it's on youtube).
As far as I can see the only real disagreements between both groups are :
a) universal health care is good/bad. I go with "good" based partly on results, partly on morals and partly on removing that burden from business.
b) government run business is good/bad. Again I look at results and see Statoil, Petrobras, EDF and SNCF making big profits, so clearly it's about good versus bad management. Again though leftists and libertarians can easily agree that effective private monopolies are the worst you can get.
So whatever Krugman, DeLong and the Obama/Clinton/Gore dems are - they sure as heck aren't leftist; just as the Bushite neocons are not demonstrably conservative. It seems to me that they are all at the same feeding trough.
By the way, apparently Keynes was a succesful businessman, Friedman wasn't and I don't believe Von Mises or Hayek were. On the stimulus - I just don't know and it seems to me that everyone is guessing based more on ideology than history. My question is - if that stimulus money doesn't even really exist, then what difference does it make?
All leftists and libertarians agree (Matt Taibbi + Glen Beck included) that Government Sachs and the Fed are putrid and that Cap and Trade is nothing but a corrupt vehicle for Wall Street.
Not that I'm leftist or libertarian - merely a non-partisan truth seeker. Partisanship (including Von Mises hero-worship) is an automatic anti-truth filter IMO.
As far as I can see the only real disagreements between both groups are :
a) universal health care is good/bad. I go with "good" based partly on results, partly on morals and partly on removing that burden from business.
b) government run business is good/bad. Again I look at results and see Statoil, Petrobras, EDF and SNCF making big profits, so clearly it's about good versus bad management. Again though leftists and libertarians can easily agree that effective private monopolies are the worst you can get.
So whatever Krugman, DeLong and the Obama/Clinton/Gore dems are - they sure as heck aren't leftist; just as the Bushite neocons are not demonstrably conservative. It seems to me that they are all at the same feeding trough.
By the way, apparently Keynes was a succesful businessman, Friedman wasn't and I don't believe Von Mises or Hayek were. On the stimulus - I just don't know and it seems to me that everyone is guessing based more on ideology than history. My question is - if that stimulus money doesn't even really exist, then what difference does it make?
All leftists and libertarians agree (Matt Taibbi + Glen Beck included) that Government Sachs and the Fed are putrid and that Cap and Trade is nothing but a corrupt vehicle for Wall Street.
Not that I'm leftist or libertarian - merely a non-partisan truth seeker. Partisanship (including Von Mises hero-worship) is an automatic anti-truth filter IMO.
On another tack, there seems to be an idea going around that Keynes was a socialist. That couldn't be further from the truth. While the word socialist means different things to different people*, Keynes doesn't fit any definition.
*To many Americans socialism seems to equate to Stalinism. They then go on to point out how government control has failed every time it was tried - thereby ignoring the current state-controlled success of China, who seem to hold most of the IOU's of the USA. Convenient logic - just ignore the bits that don't fit. Of course it's more complex than the basic, linear logic that people like to employ.
In fact, Socialism didn't start with Marx, it started with Robert Owen and other "Utopian" Socialists. The vast majority of European socialists and social democrats prefer Utopian rather than Marxist socialism (which they usually call Marxism).
You can get all this from the net now - there's no excuse any longer for believing the simplistic nonsense you learnt at your mothers teat. Life is complex! We aren't rational units of productivity, we are irrational, selfish followers of fashion who like to believe exactly what suits our personal agenda. That's why every economic system theory is bunk.
*To many Americans socialism seems to equate to Stalinism. They then go on to point out how government control has failed every time it was tried - thereby ignoring the current state-controlled success of China, who seem to hold most of the IOU's of the USA. Convenient logic - just ignore the bits that don't fit. Of course it's more complex than the basic, linear logic that people like to employ.
In fact, Socialism didn't start with Marx, it started with Robert Owen and other "Utopian" Socialists. The vast majority of European socialists and social democrats prefer Utopian rather than Marxist socialism (which they usually call Marxism).
You can get all this from the net now - there's no excuse any longer for believing the simplistic nonsense you learnt at your mothers teat. Life is complex! We aren't rational units of productivity, we are irrational, selfish followers of fashion who like to believe exactly what suits our personal agenda. That's why every economic system theory is bunk.
PrestoPundit wrote:
Krugman and DeLong are being true to type.
This is what they are.
This is what leftist do.
Don't be "shocked, shocked" that you have two leftist attacking people because of their motives ore who they are, while avoiding their actual arguments.
PP, do you see why the above excerpt is unintentionally funny?
Krugman and DeLong are being true to type.
This is what they are.
This is what leftist do.
Don't be "shocked, shocked" that you have two leftist attacking people because of their motives ore who they are, while avoiding their actual arguments.
PP, do you see why the above excerpt is unintentionally funny?
JamesGardiner,
How do you do it, fine sir? How do you manage to remain a committed non-partisan truth seeker while the rest of us give in to our baser human instincts and revel in our clouded, tribalistic partisan thought?!
My god man, you're right... all we need is "the right management" in power... and I nominate you, fine sir!
I believe this is a sound course of action, especially because it's definitely not "all over the net" that finding the "right" people to put in power is a fallacy. Hopefully no one ever does publish something refuting that idea, then I might have to give up my partisan non-truth seeking once again in the face of logic and fact...
Gee... I wonder why your beloved "profitable" state enterprises even need be run by the state? It couldn't possibly be for some political, partisan motive...
How do you do it, fine sir? How do you manage to remain a committed non-partisan truth seeker while the rest of us give in to our baser human instincts and revel in our clouded, tribalistic partisan thought?!
My god man, you're right... all we need is "the right management" in power... and I nominate you, fine sir!
I believe this is a sound course of action, especially because it's definitely not "all over the net" that finding the "right" people to put in power is a fallacy. Hopefully no one ever does publish something refuting that idea, then I might have to give up my partisan non-truth seeking once again in the face of logic and fact...
Gee... I wonder why your beloved "profitable" state enterprises even need be run by the state? It couldn't possibly be for some political, partisan motive...
Bob,
Krugman is certainly offering a better argument than sticking a gun in your back and saying, "Your money or your life." And as I said in the post, he's right when he claims that (many of) his critics are wrong. So to continue your analogy, if Capone said, "The government is calling me a crook?! And my specific crime is tax evasion, when they would just use that money to blow up foreign babies? This is outrageous!"
And he would have a point...
I honestly have no idea how you came to the conclusion that that was a response to what I said.
My point: dressing up naked aggression and robbery in fancy theoretical analysis does not change the nature of the point being argued, and that should be pointed out by people responding to these cranks, rather than addressing them on "their" level and thereby giving their wisecracks more respect than they deserve.
Your point: Yes, it does change the nature of what they're arguing.
I don't get your Capone example. I take no issue with Capone's tax evasion. I'm referring to his gangsterism in which he used violence against others to achieve his goals. That's the useful analogy here-- Krugman and DeLong, in supporting government deficit spending (or government spending of any kind), are advocating the use of violence to achieve their goals.
That's deplorable, not respectable.
We could argue all day with these people until we're blue in the face, trying to show everyone else why their utilitarian justifications for theft-as-a-means-of-production are wrong, but ultimately they'll be building their machine all the while. It doesn't have to become some big philosophical debate, either-- it's easy enough to get people to understand that government is not strictly "voluntary cooperation" by asking them why government must do things that people would've voluntarily acceded to themselves.
From there, the point is to explain that wealth is created through production, and production occurs through voluntary exchange, entrepreneurialism and the transformation of land and capital by labor.
Instead, people are relying more and more on the language of Keynesians in responding in terms of movements of lines on a graph. It's too technical, and the technicality is there to try to obscure what's really being discussed-- theft, on a massive scale.
Krugman is certainly offering a better argument than sticking a gun in your back and saying, "Your money or your life." And as I said in the post, he's right when he claims that (many of) his critics are wrong. So to continue your analogy, if Capone said, "The government is calling me a crook?! And my specific crime is tax evasion, when they would just use that money to blow up foreign babies? This is outrageous!"
And he would have a point...
I honestly have no idea how you came to the conclusion that that was a response to what I said.
My point: dressing up naked aggression and robbery in fancy theoretical analysis does not change the nature of the point being argued, and that should be pointed out by people responding to these cranks, rather than addressing them on "their" level and thereby giving their wisecracks more respect than they deserve.
Your point: Yes, it does change the nature of what they're arguing.
I don't get your Capone example. I take no issue with Capone's tax evasion. I'm referring to his gangsterism in which he used violence against others to achieve his goals. That's the useful analogy here-- Krugman and DeLong, in supporting government deficit spending (or government spending of any kind), are advocating the use of violence to achieve their goals.
That's deplorable, not respectable.
We could argue all day with these people until we're blue in the face, trying to show everyone else why their utilitarian justifications for theft-as-a-means-of-production are wrong, but ultimately they'll be building their machine all the while. It doesn't have to become some big philosophical debate, either-- it's easy enough to get people to understand that government is not strictly "voluntary cooperation" by asking them why government must do things that people would've voluntarily acceded to themselves.
From there, the point is to explain that wealth is created through production, and production occurs through voluntary exchange, entrepreneurialism and the transformation of land and capital by labor.
Instead, people are relying more and more on the language of Keynesians in responding in terms of movements of lines on a graph. It's too technical, and the technicality is there to try to obscure what's really being discussed-- theft, on a massive scale.
My name is a combo-take-off on my niece's favorite soap, Sonic Death Monkey (found at lush.com) and my kooky fun cat (I say "my" because hubby wants nothing to do with him, lol--got a pic of him on my blog). The idea was to be anonymous but not boring.
My kids play video games but I stink at them, which is totally uncool. I am addicted to reading and internet surfing, which I enjoy doing in between power-charged PTO events and high level suburban networking (aka chit chatting with neighbors). :)
Post a Comment
My kids play video games but I stink at them, which is totally uncool. I am addicted to reading and internet surfing, which I enjoy doing in between power-charged PTO events and high level suburban networking (aka chit chatting with neighbors). :)
# posted by : July 19, 2009 at 4:50 PM
: July 19, 2009 at 4:50 PM Subscribe to Post Comments [Atom]
<< Home
Subscribe to Posts [Atom]