Monday, July 6, 2009


Monday Murphy Twin Spin

* If you have never really gotten into the economics of climate change, and want an accessible introduction, here you go.

* If you have been laying awake at night, worrying that the depression of 1937-38 proves the success of Keynesianism, here you go. An excerpt:
In any event, Hoover's last fiscal year was FY 1933, which ran from July 1, 1932, to June 30, 1933. (Roosevelt was sworn in on March 4, 1933.) Unemployment in 1933 averaged 25 percent. But, as Romer told us in the block quotation above, the unemployment rate fell rapidly once Roosevelt took over and cranked up the spending.

Yet look at the relatively insignificant increase in deficits. In the rock-bottom FY 1933, the deficit was 4.5 percent of GDP. In the first three years of the New Deal — when Romer says the economy illustrated the success of (modest) Keynesianism — the deficit averaged 5.1 percent of GDP.

Isn't that a rather subtle result? Romer and the other Keynesians are claiming that the timid 4.5 percent deficit under Hoover, allowed the economy to sink into the worst Depression in US history, with monthly unemployment rates above 25 percent. Yet by bumping up the deficit's share of the economy by a mere 60 basis points, FDR was able to achieve the most spectacular turnaround in US history.

Keynesians are really guilty of the post hoc ergo propter hoc fallacy.
They let you write the article about the economics of climate change? After getting scarcity so badly wrong?

Oh well, at least it looks like you were careful not to make any of the mistakes I criticized you for. Imagine how much more embarassing your piece would have been if not for my criticisms from the past year!
So my piece was flawless, Silas? Sweet.
Heh, sorry, should have said "embarassing mistakes". It's still loaded with flaws, just not howlers like, "Carbon permits can't reflect scarcity" or "Cap and trade is not a market solution, just because I disagree with it."
OK great. I can't improve unless you keep up the loving guidance.
Nice way of looking at it, Bob. Where'd you get your figures for deficits as a percentage of GDP, by the way?
Hey, you're suppose to send me a note when you publish something discussing Hayek.
Bob, there is much to praise in your summary.
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