The Fairest Keynesian in the Land
When I look upon my mirror and ask it to name me the fairest Keynesian in the land, he says Mecha Lekka Hi Mecha Hiney Ho. But when prompted again, he says it’s Karl Smith. For example, in a recent post Karl put a picture of Ron Paul’s End the Fed and then said this:
I have been a staunch supporter of an independent central bank technocratically solving the problem of macroeconomic management
Yet, now I must watch as one of the most powerful Central Bank in the world, the Federal Reserve, can’t come to consensus on what it wants to do and has decided that perhaps Rome should burn just a little bit more while it has additional meetings on the relative merits of bucket brigades versus opening the aqueducts.
Its counterpart the European Central Bank, has apparently decided that what the fire really needs is a bit more oil, lest the people think the bank is more committed to putting out fires than lecturing people on fire prevention.
Let us not even speak of the Bank of Japan which perhaps should be disbanded out of mercy for the central bankers if nothing else.
I have not lost all faith –Sweden and Switzerland still stand – but it is hard to watch this carnival of human suffering and believe that we supporters of central banking are not part of the problem.
And that’s the whole post. There’s not a “P.S. John Taylor drowns kittens for sport” at the tail end. Nope, Karl isn’t throwing in the towel, but he’s at least acknowledging that there might be something wrong with his position.
In contrast, our more famous Keynesians bloggers are so out of touch with their opponents that–get this–Matt Yglesias tries to prove that Paul Krugman doesn’t always support big government, by linking to an article from 2000 (Yglesias has a typo and says 2008) in which Krugman opposed tax cuts. Yes you read that right: Yglesias was trying to show that Krugman sometimes is a fan of smaller government, by linking to an article where Krugman deployed economic analysis to oppose tax cuts.
(In case you are too busy to click the links, I’ll give you the trick: Yglesias subconsciously took “supporter of bigger deficit” ==> “supporter of bigger government” and thus concluded that “opponent of tax cuts that would give a big deficit” ==> “an opponent of bigger government.”)
So in conclusion, I can recognize fair Keynesians when I see them. I don’t pounce on Krugman because he presses for big government–I pounce on him because he is the epitome of a partisan hack (on his blog), and has the audacity to lecture others on their ideological biases. (I also obsess with Krugman because he’s such a good exponent of the Keynesian view. Like Russ Roberts, I claim that Krugman picks his conclusions based on his ideology, but I love Krugman because he tries to demonstrate his conclusions using economic models.)
Karl Smith is a Keynesian, and some of his positions shock me, but I think he is a fair guy and is just honestly mistaken. Maybe give the guy a spell checker, and the truth will eventually out.
It is one thing if the Keynesian story is right, and it is another if you really can set up institutions with the right people who actually follow those policies. Even if the Keynesians are a 100% right, the people in charge can still be too “stupid” to do what they want them to do or/and bound by public opinion or/and too corrupted by the power they have and abuse their power by rigging the system for special interest. All in all probably making things worse than without having such institution at all.
Yet if you already doubt that the Keynesians are right, it is really not hard to choose. This is different for Karl and Daniel of course. Still nice to see though that this issue is recognized by them, although I think in general receives too less consideration. (Maybe because they think without CB system and government money it would be by far the worst case scenario anyway? So better a stupid and corrupt CB chairman than no chairman?)
Hey speaking of mirrors, there’s an old physics trick that goes a bit like this… you have a mirror on the wall and when you stand up and look at yourself in the mirror you notice that you can’t see your feet (the mirror is just a bit too high). So moving the mirror down on the wall would be a lot of effort, just to get a glance at yourself wearing your lovely new boots, maybe you should just take a step closer to the mirror, and then you can see your feet. Or, hmmm, maybe just take a step back away from the wall and then you can see your feet.
Well which is it?
Step forwards or step back?
Nice question. Without trying out. Neither?
Angle of incidence is equal to angle of reflection.
I’m not sure how you get “but he’s at least acknowledging that there might be something wrong with his position” from the quoted text when he’s bemoaning that central banks are not doing even MORE of the things Austrians already hate about them. Sounds to me, like Krugman does, that he’s doubling down.
“Two world wars, three monstrous dictatorships—in Soviet Russia, Nazi Germany, Red China—plus every lesser variant of devastating socialist experimentation in a global spread of brutality and despair, have not prompted modern intellectuals to question or revise their dogma. They still think that it is daring, idealistic and unconventional to denounce the rich. They still believe that money is the root of all evil—except government money, which is the solution to all problems.”
-Ayn Rand “The Establishing of an Establishment” 1972(!)
Perhaps Karl is having second thoughts about his Keynesian dogma.
Ideas are more powerful than standing armies of Krugman clones.
Perhaps the brittle reef upon which the Keynesian battalion stands is breaking faster than we thought.
Anyone else notice the Freudian slip from Smith regarding the foundation for his advocacy of central banking? Faith.
Faith indeed.
It sounds to me like Smith’s argument is that CB’s would be providing even more “relief” if only they gave up their “independence” and handed control over to elected representatives, but maybe I’m reading it wrong…
Where’s Roddis? Still looking for that graph?
What graph?
And what about you? You are yet to demonstrate that you understand any economics at all.
To put this in context – Karl Smth is a free market orientated new Keynesian who believes (as far as I can see) that fiscal stimulus may be needed no more than once or twice every century – and whose current ides of this fiscal stimulus is tax cuts.
As already mentioned above his despair is that the central banks are failing to do enough not that they are doing too much.
I’ve recently become a fan of Karl Smith because of that debate you had. I think he’s wrong, but he’s absolutely correct to point out the inconsistencies in the data, which I thought he did a good job of doing. Seems like a good guy, regardless of what his views are.
Jambi.
Finally, a recent “sci-fi” reference with which I’m familiar.