06 May 2011

Potpourri

Potpourri 12 Comments

* Casey Mulligan and I apparently are alone on this issue of New Keynesians (I’m a cricket in the comments)…

* I think this was the first Megan McArdle post (on the neat creation of a fake MLK quote) that didn’t annoy me for some reason.

* Speaking of pacifism, here’s Tyler Cowen criticizing Bryan Caplan in a way that is very typical in this debate: He points to regions that are racked by war, and then uses these examples to “prove” how awful pacifism would be. Tyler could very well be right, of course, I’m just pointing out the structure of his argument. He can recognize all too well how goofy it is when Keynesians point to the fate of the 2009 stimulus package as “proof” of the multiplier.

* Brandon Harnish has a post up about the relationship between Christianity, economics, and libertarianism. I haven’t read it carefully yet, but I thought Major Freedom (recently promoted from Captain) needed a good jab going into the weekend.

* Speaking of religion and politics, this is a funny t-shirt.

* Here’s Mario Rizzo thoughtfully criticizing George Soros’ talk on Hayek. Here’s Tom Woods being a meanie.

* I had to document my claim (for a forthcoming response to James Galbraith that will run in the American Conservative) that Christina Romer had said the Obama stimulus package would keep unemployment under 8 percent. My google search led me to this Krugman post made in early January 2009, which I don’t think I ever saw before. Check it out. I think I may have been far too willing to buy Krugman’s version of history on this. Yes, he thought the stimulus should have been bigger all along, but in this post, does it sound as if he’s disputing Romer et al.’s claims about the unemployment rate?

* In the interests of balance, let me admit that Krugman has indeed been fairly consistent over the years, though perhaps through luck (I’ll explain that in a second). A while ago he made a post where he said words to the effect, “I am only in favor of government deficits when we’re in a liquidity trap. In normal times, we just rely on the Fed to cut interest rates and boost aggregate demand that way. I haven’t changed my tune at all.” Both Bob Wenzel and I were surprised by Krugman’s claims. I did some digging, and I have to admit that I could find no smoking gun. In fact, in this article Krugman actually ridicules Dick Cheney for believing in vulgar Keynesian demand management. (!!) Now having admitted that, I think we can really only fail to convict Krugman, as opposed to declaring him innocent. After all, the beef against Krugman is that he’s partisan. So the fact that he was using “standard” economics to blow up Dick Cheney’s call for a tax cut is hardly surprising. A real test would be when a liberal Democrat were in the White House and wanted to increase government spending, while Republicans in Congress wanted to cut it, at a time when the federal funds rate was, say, 4 percent while the unemployment rate was 7 percent. Would Krugman in that scenario agree that the feds should slash the budget but have the drop in AD be offset by expansionary monetary policy? I still have a hard time visualizing that.

* David Kramer plays a great speech from Sir Thomas More that is obviously relevant to our times (and to the asteroid-hating economists amongst us):

12 Responses to “Potpourri”

  1. Desolation Jones says:

    yup, definately messed up. Le me try agin.

  2. Desolation Jones says:

    I’m surprised you’re surprised by that specific Krugman view this late in the recession. He’s been rather frustated that people don’t get his point that fiscal policy as an AD tool is only necessary in a liquidity trap. He has emphesized that point many times. I’m also surprised you missed your chance to nail him for being bit sloppy in a recent post of his . Andy Harless caught him on his
    twitter

    And if your blows your mind anymore, here’s Krugman arguing that savings aren’t bad!

  3. Jim says:

    No wonder Woods only taught at a community college for a few years.

    • Bob Roddis says:

      Soros’ ThinkProgress has repeatedly defamed Tom Woods and the Austrian School for years. To now learn that Soros hasn’t a clue about the nature of the Austrian School (a point I make in the ThinkProgress comments weekly) is astonishing.

      http://tinyurl.com/3try9j2

      • Jim says:

        I am not speaking of Soros, but of Woods and his distasteful manner of engaging with anyone that has the slightest .disagreement with him. He dissolves friendships out of the slightest ignorance or slight. And perceives anyone with a small disagreement as an eternal enemy and then treats others with vile ad hominem.

  4. Daniel Kuehn says:

    You’re not completely alone! I said the Mulligan post was fairly good – he’s certianly dumbing down New Keynesianism and Krugman was right that they still have a lot of the old Keynesianism he (and I for that matter) like, but with the caveat that he was simplifying he was certainly simplifying in a sensible way. DeLong also thought the post was good for the most part.

    The trick is, when price stickiness starts to look like an odd explanation for such a long downturn (how sticky are these prices supposed to be?!?!!?) You have two options:

    1. Say “oh well – forget about Keynesianism”, or
    2. Say “gee – maybe the New Keynesians shouldn’t have been quite so Pigovian and maybe this old Keynesianism and the stuff that Krugman does is more useful to consider”

  5. James Galbraith says:

    Did Krugman dispute Romer/Bernstein on the unemployment. I think the answer is that he clearly did. The quote on this is at the bottom:

    “One more point: the estimate of what would happen to the economy in the absence of a stimulus plan seems kind of optimistic. The chart above has unemployment ex-stimulus peaking at 9 percent in the first quarter of 2010 and coming down through the year; the CBO estimates an average unemployment rate of 9 percent for 2010, so the Obama people are more optimistic than the CBO, and a lot more optimistic than I am.”

    That said, it’s true, “kind of optimistic” is not a strong criticism. My view as published in March 2009 was that the CBO’s forecast optimism was “astonishing.” http://tinyurl.com/cwcevl

    JG

  6. Brandon says:

    I have been found worthy of linkage.

    *Dies happy*

  7. Blackadder says:

    Speaking of pacifism, here’s Tyler Cowen criticizing Bryan Caplan in a way that is very typical in this debate: He points to regions that are racked by war, and then uses these examples to “prove” how awful pacifism would be. Tyler could very well be right, of course, I’m just pointing out the structure of his argument. He can recognize all too well how goofy it is when Keynesians point to the fate of the 2009 stimulus package as “proof” of the multiplier.

    If you lived in a society with no violence, then adopting a pacifist stance would be indistinguishable from adopting the Snapping Turtle strategy. To judge between the two strategies, you have to look at cases where following them would lead to different courses of action, e.g. areas where there is a lot of violence.

    Renouncing violence doesn’t make it go away. Gandhi’s life, for example, was full of violence. It’s just that he was on the receiving end of all of it.

    • bobmurphy says:

      OK, so point to two similar countries, one that engaged in violence and one that didn’t. Don’t point to a war-torn region and speculate, “If they engaged in pacifism, things would be worse off.”

  8. Ash says:

    “As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan.” Figure 1 also shows that UE under the plan peaks at 8% by the end of 2010Q3, and without the plan would be just over 8.5%.

    http://www.politico.com/static/PPM116_obamadoc.html

    According to techonology, however, everything they said was wrong. And even though the paper was published Jan 10 2009, they were way off about UE in 2009Q1:

    http://research.stlouisfed.org/fred2/graph/?g=q7

    Romer admits to be totally confused last year:

    http://www.economicpolicyjournal.com/2010/09/administrayion-keynesian-speaks-of.html

  9. Ash says:

    Wow, so add my currently-awaiting-moderation comment to the pile for evidence that people don’t click links in blog posts. :s