Brad DeLong Makes a Refreshing, Yet Ironic, Confession
UPDATE below.
Brad DeLong has a post up (HT2 Scott Sumner) where he has the courage to announce: “What I Got Wrong: Batting 2 for 8.”
Long-time Free Advice readers can appreciate why this piqued my interest. But it gets better. If I understand the indentation of his bullet points (showing which predictions were right and which were wrong), DeLong says he botched this one:
“* I thought higher inflation would follow rather than precede a strong recovery.”
So in summary, DeLong himself is admitting that his political/economic model of this crisis was 75% wrong, including a specific prediction about how inflation interacts with a weak economy.
I don’t want to discourage DeLong (or any other Keynesians for that matter) from self-flagellation in the future, but am I wrong for finding this latest post somewhat ironic?
UPDATE: Daniel Kuehn reports in the comments:
This just in to me from Brad:
The “I thought higher inflation would follow rather than precede recovery” is one of the 2 of 8 that I think I got right…
Yours,
Brad DeLong
So, it’s still ironic that DeLong admits he was 75% wrong about the crisis, and yet (as far as I know) hasn’t done anything remotely like what he expected me to do regarding my ideological views, but I wouldn’t have blogged about this had it not been for my erroneous inference that DeLong’s inflation call was one of the things he admits he got wrong. (In case you’re wondering, I thought DeLong was referring to the fact that price inflation has been higher than what a simple Keynesian model would have suggested. Even Krugman has blogged about the fact that CPI is rising faster than he would have predicted in early 2009. Krugman’s explanation was something like [I’m paraphrasing], “This just shows that sticky wages are more powerful than we imagined. If some wages want to fall but can’t, and others want to rise, then you’ll get a gentle drift upward, even at the zero lower bound.” So I thought maybe DeLong was referring to something like that.)
You’re not wrong.
*facepalm*
You realize DeLong has been very open about how his views on theory have CHANGED because of the things that he’s gotten wrong, right?
He makes a huge deal of this annually – why I got wrong and what I now think differently because I got it wrong.
I thought everyone was citing this change of perspective on theory on DeLong’s part to you when you had your little scuffle with him.
[Facepalm]
Assuming you agree with Murphy that price inflation, in theory, is a function of the supply of money AND the demand for money holding (cash preference), how in the world is this comment from DeLong:
“I mean, one would expect an announcement on his weblog like: “I have been totally wrong, about everything.”
justified?
DeLong is not just saying that Murphy got the extent of cash preference wrong, which is what actually happened, no, he is saying that because Murphy got the extent of cash preference wrong, he has to wholly reject praxeology, ABCT, and temporal structure of production theory, the whole of Austrian theory…and what, to adopt…Keynesian theory(!) as a result?
If getting a price inflation prediction wrong means Murphy has to admit he was wrong about everything, the fact that DeLong is still adhering to Keynesian theory means that Murphy is 100% right to call this post from DeLong “ironic”. For is DeLong admitting that he was “totally wrong about everything” (meaning Keynesian theory is wrong), as he himself is demanding of Murphy because Murphy got inflation wrong?
This strikes me as an excellent (decisive even) point, and I’d be interested to hear Daniel’s response.
If DK is feeling honest today, he SHOULD say that DeLong, at the very least, exaggerated and went too far in demanding that Murphy reject his entire worldview, and that if we take his claim seriously that Murphy should admit he was wrong “about everything”, that DeLong is a hypocrite for not admitting he was wrong about everything (i.e. Keynesian theory is wrong).
DeLong would have been justified in saying that Murphy should rethink his assumptions about just how strong cash preference can get even in the face of massive monetary inflation. I myself understimated how strong the demand can get as well.
But I know that it doesn’t require me to admit I was wrong “about everything.” It means I was wrong about people’s future knowledge and subjective preferences. Well, that’s expected, considering how I myself reject the idea that it is scientifically possible to predict people’s future knowledge and preferences! If I were right, I would think the same way. I got lucky being right, instead of lucky being wrong.
But obviously that isn’t what DeLong said, and that’s why Murphy’s argument of “irony” is valid.
OK – I have a question for you now that I’ve answered yours.
You seem reticent to accept that “everything” was a hyperbolic statement, but you seem willing to accept the worshiping at the feet of Paul Krugman as a hyperbolic statement (you don’t mention it here).
Why?
Isn’t the easier solution to this conundrum that Brad was just exasperated (rightly or wrongly), and that he wanted Bob to do exactly what you are saying – just revisit his theory?
“You seem reticent to accept that “everything” was a hyperbolic statement, but you seem willing to accept the worshiping at the feet of Paul Krugman as a hyperbolic statement (you don’t mention it here).”
“Why?”
Because I find it drastically more plausible that DeLong actually wants Murphy to reject his entire theory, than for Murphy to actually sit at Krugman’s feet.
Let me ask you this, when Murphy says or implies or suggests that Krugman’s theory is completely wrong, do you think he is being as hyperbolic as when he says that Krugman ignores mass human suffering as in a recent post?
I think any reasonable person would be able to distinguish the extent of hyperbole versus honesty there, as much as I think any reasonable person might conclude that DeLong was being serious when he said Murphy should reject his entire theory because (DeLong believes) it’s “completely wrong”. DeLong really does believe Austrian theory is wrong, so I took it not as hyperbole, but as honesty.
“Isn’t the easier solution to this conundrum that Brad was just exasperated (rightly or wrongly), and that he wanted Bob to do exactly what you are saying – just revisit his theory?”
You mean isn’t it easier to just assume that DeLong is either right or wrong in what he said?
Well sure, that would be easier, but I fail to see how considering all possible alternatives (Either DeLong is right or DeLong is wrong) gives us any means by which to compare and contrast his arguments vis a vis other people’s arguments.
Also, how in the world does DeLong KNOW that Murphy isn’t considering or changing his mind? Oh I know, it’s because Murphy hasn’t turned into a Keynesian. I strongly suspect that remaining philosophically Austrian is, to DeLong, sufficient for claiming that one is not changing one’s mind about anything, ever.
Daniel,
Look up the word “reticent.” Whatever else you can say about Major Freedom, “reticent” is not on the list.
Indeed. I checked my list and, trust me, it’s a long list.
Be a bit careful mentioning Major Freedom and the words, long list in the same sentence. You may get what you ask for.
Say my name three times and it’ll be the start of a crazy adventure.
“About everything” was not justified. I said that at the time – I believe I called all that “worshiping at the feet of Paul Krugman” his stuff DeLong’s “shtick”.
Or put it this way… it’s not justified if you’re really sensitive to his shtick (and a lot of people are).
What was justified was that maybe it’s an opportunity to reevaluate the ideas that got you to those predictions. All models are abstractions of course, and don’t perfectly render everything in the real world. But but getting inflation/money relations wrong in a model of the business cycle seems like a big deal to me.
I don’t think he said anything about the temporal structure of production (that’s in the GT after all!), or “the whole of Austrian theory”. I do think ABCT runs into some trouble. But as I said, he has an over the top style.
If you want to call “unjustified”, be my guest – I won’t disagree. But I will say that’s a little sensitive of you.
Are you under the impression he LITERALLY wants Bob to worship at the feet of Paul Krugman too?
“Or put it this way… it’s not justified if you’re really sensitive to his shtick (and a lot of people are).”
So you’re saying he wasn’t wrong to say it, it is only wrong in a context of readers being “sensitive”, which of course implies the fault is on the reader, not DeLong.
Is that right?
Well, if there is fault on the reader for being “sensitive”, then you pretty much excused everyone for saying anything wrong ever, because the problem is really the “sensitivity” the reader has to truth, validity, logic, etc.
“Are you under the impression he LITERALLY wants Bob to worship at the feet of Paul Krugman too?”
No, I get the impression that DeLong wants Murphy to reject Austrianism and adopt DeLong’s Keynesianism, and DeLong haphazardly jumped on the incorrect inflation prediction as a means to convince himself and his readers that Austrianism is
“completely wrong”.
re: “So you’re saying he wasn’t wrong to say it, it is only wrong in a context of readers being “sensitive”, which of course implies the fault is on the reader, not DeLong.”
Jeebus. Like I said to skylein – I’ve said a bajillion times that I don’t like it when Brad is nasty to people.
I don’t see the bet thing as being all that nasty, but reasonable people can disagree I suppose.
Doesn’t matter – no matter what the evidence you’re always going to think I have a double standard so it’s not worth talking it out with you.
“Jeebus. Like I said to skylein – I’ve said a bajillion times that I don’t like it when Brad is nasty to people.”
DK, you’re being “sensitive” 🙂
You said above that DeLong’s comment was not justified…if you’re really sensitive to his shtick.
In other words, it seems that if only his readers were sufficiently insensitive, that what he said can rightly be regarded as justified. Do you know the implications of saying it was justified? It means that DeLong was justified in arguing that Murphy should abandon his entire theory, as long as his readers are not “really sensitive”.
If that isn’t the case, what did you mean by “…if you’re really sensitive” as a contingency?
“I don’t see the bet thing as being all that nasty, but reasonable people can disagree I suppose.”
Above you said you thought DeLong was nasty. Now you’re saying it wasn’t all that nasty. Are there two different versions of nasty you’re talking about there?
“Doesn’t matter – no matter what the evidence you’re always going to think I have a double standard so it’s not worth talking it out with you.”
Interestingly, it was precisely the evidence that led me to that conclusion.
But of course it is always open to being falsified, since it’s contingent upon your choices!
re: “For is DeLong admitting that he was “totally wrong about everything” (meaning Keynesian theory is wrong), as he himself is demanding of Murphy because Murphy got inflation wrong?”
I don’t see why this is so hard. DeLong changed his views on several things over the course of the crisis. A lot of the views he holds today he did not hold at the beginning of the crisis.
So DeLong’s way over the top blog post, only aiming to be insulting to Bob, is ok, but you *facepalm* when Bob returns the favor by pointing out how DeLong’s insults work against himself just as well?
No matter if DeLong meant it serious or exaggerated to be insulting. It is still ironic!
Oh come on – that was way too tame to be called “insulting”. Bob’s done stuff on that level.
I’ve said I don’t like when Brad is nasty to people more times than I can count at this point. If you’re going to think I’ve got a double standard then you’re going to continue to think that no matter what the evidence. So go right ahead – not sure what else I can say.
So you agree it is ironic! Then why *facepalm* over Bob’s post?
Maybe you missed what it was about?
Huh? Why do you think I agree its ironic?
Honestly I’m not sure I know at this point what he though he got wrong and why… I’m feeling the need for some confirmation/elaboration.
Because you didn’t make a counter argument that it isn’t, although it was the core of my comment on which you answered.
However you are right, I should have ended the sentence rather with a “!?” or only “?”.
It’s ironic because whereas DeLong isn’t rejecting his entire theory as completely wrong on the basis of an incorrect prediction on inflation, he nevertheless demands that Murphy reject his entire theory as completely wrong on the basis of an incorrect prediction on inflation.
Is there a link to when Delong said this because I’d be interested to see the context it was made in.I didn’t see the original post
Everything is linked in my post here, Mike.
Give him some slack Bob, he gets confused sometimes …
That’s a very valid point. I might add that although Keynes talked about the idea of cash preference, I don’t think this adequately describes what is going on.
When someone goes bankrupt due to bad debt, they default on their loan payments and ultimately this debt is written off. In effect, money is destroyed and the system deleverages. You might think of this as cash preference from the perspective of the person might have been able to avoid bankruptcy if they had got hold of a bit of extra cash. On the other hand, you might just as well think of this as cleaning up malinvestment, on the basis that what was promised in the past turned out to be fundamentally impossible to fulfil.
Similarly, people who might be drifting close to default (e.g. the very large number of delinquent mortgages in the USA) might well reduce their consumption and focus on servicing their loans.
In the past we have heard moaning about “hoarders” and the damage they do to an economy, but is someone up to their eyeballs in debt and working hard to service that debt really a “hoarder”? I can’t see it that way myself. What are they hoarding?
Cash preference doesn’t adequately describe the situation IMHO. Austrian economists do have a bit of a blind side on this matter, but Keynesians don’t capture it in a way that makes logical sense.
In other words, as long as DeLong makes prediction errors but remains a theoretical Keynesian, he is a hypocrite, which interestingly enough has relevance on more than one level.
Except he retracts from what he said in this blog post.
Not gonna happen…
Yes DK but I think Bob is noting that his error, which Bob has fessed up to [unlike his OLG errors] was not really a worse howler than Brad’s own errors. So the end-zone dance at Bob’s expense contrasted with the terse acknowledgement of his own error entitles Bob to call this out I think. Like some guy who got drunk and cheated on his wife, only to be the subject of a blistering sermon from Jimmy Swaggart.
I can’t wait for you to SHOW Bob’s errors re: OLG, Ken B.
You seem to have taken a page out of Wenzel’s “Just you wait, you’re going to get demolished, annihilated, destroyed! You’ll see! I’m getting to it!” playbook.
These are the relevant links
http://kenblogic.blogspot.com/2012/11/a-war-on-public-debt-and-paul-krugman.html
http://kenblogic.blogspot.com/2012/11/my-latest-salvo-in-ongoing-war-at-free.html
http://kenblogic.blogspot.com/2012/11/writing-landsburg.html
(1) This point has already been gone over. If it can be shown that every individual’s lifetime consumption falls, with debt (and taxes) as compared to without, then I would regard that as an example of “Debt is impoverishing future generations”, contrary Krugman. After all, I don’t consider people as instanteneous abstract horizontal slices, whereby the consumption allocation per “slice” adds up to the same 200 consumption per slice. I look at individuals as separate entities, existing over time. If Murphy shows me a model that shows separate individuals consuming fewer apples over their lifetimes with government debt as compared to without, then I hold it is a reasonable refutation of the blanket statement “Debt can NEVER impoverish future generations”.
(2) This doesn’t disprove the OLG model that shows impoverishment. It only shows it’s not the only possible outcome. Who cares? That wasn’t the point of the OLG model.
(3) Not related.
Ken,
Why don’t you ever answer my question? Why don’t you even tell me why you don’t?
http://consultingbyrpm.com/blog/2013/01/thoughts-on-glenn-beck.html#comment-55377
What do you mean by absurd? Implausible? Not as funny? Longer??
Anyway skylien the debate is about what the OLG model shows or does not show. So my posts analyze precisely that. In one for example *using Bob’s criterion for impoverishhment* as applied in the OLG matrix I showed a debt could enrich the future even if apples are destroyed. That shows that Bob’s criterion is suspect at least and probably wrong. Other posts examine just what Bob’s errors are. Whehter I trun that into a funny parable with Kuehn and Landsburg is irrelevant.
Implausible. Counter to how people would ever choose to act. You need a different type of human with special incentives.
Do you admit that? If not show me.
You don’t even need to rewrite the whole exchange. It is enough to rewrite the short exchange between the politician and the crowd.
It doesn’t need to be long nor funny. It should just be plausible.
Not that is has bupkis to do with the mathematics of the OLG stuff skylien, but just for you:
(drum roll)
POLITICIAN: The Old Als are weak and dying!
CROWD: Boo!
POLITICIAN: We need to do something to help them!
CROWD: Woo hoo! Yeah!
POLITICIAN: They each deserve 3 more apples before they die!
CROWD: Woo hoo! Yeah!
POLITICIAN: So I’m gonna tax each Bob 3 apples to pay for it!
CROWD: Boo!
POLITICIAN: (pauses) It’s a green tax! It’s good for the environment!
CROWD: Yay!
I just want to be sure I understand your objection skylien. On a blog where the welfare state, social security, Obamacare, and protectionist tariffs are widely discussed, you find it implausible that a government would implement a capricious and harmful tax-funded wealth redistribution scheme?
“In one for example *using Bob’s criterion for impoverishhment* as applied in the OLG matrix I showed a debt could enrich the future even if apples are destroyed.”
Except you didn’t use the exact same criterions. You changed the assumptions somewhat.
Bob’s OLG model isn’t meant to be the ONLY outcome of debt. Just that it is POSSIBLE.
For Pete’s sake, you keep making the absurd claim that if you can show a different possible outcome, that the OLG model is false. But the OLG model is only intended to show that there is another possible future.
I am still waiting for you to SHOW Bob’s “errors” on OLG. I read your three blog posts, and none of them succeed.
MF, you clearly do not understand the issues.
And I never claimed a model is “false”. That’s like claiming a flavor is “blue”. As I said, you clearly just do not understand the issues.
“MF, you clearly do not understand the issues.”
I’ve been keeping up with this before you started. Trust me, I know the “issues”.
“And I never claimed a model is “false”.”
I’ve seen you say repeatedly “Bob’s errors” in relation to the OLG model, without seeing any explanation of any errors.
“That’s like claiming a flavor is “blue”. As I said, you clearly just do not understand the issues.”
It’s OK to admit that you can’t justify your criticisms. it’s better than playing this game that I don’t understand the issues.
Like I said, I look forward to you SHOWING these alleged “errors” you keep going on about.
For pity’s sake MF. My last response to you on this until you say something substantive.
Bob claimed he could show harm to future states of the country from debt and illustrated it with a construction suggested by Nick Rowe. he did this by adding up diagonal slices through the matrix. I pointed out this is inappropriate because that does not acount all the assets or persons for any future moment or period of the country. So that’s one of Bob’s errors.
Now Bob’s *criterion* was what happends when you do these diagonal sums. His sums came out to less than 100, and he counted that as harm. Using that same criterion, are diagonal sums over or under 100, I showed an example where debt and destruction enrich. That suggests the criterion is wonky. I used the same criterion — ask Bob.
Ken B:
Somebody sounds like they got up on the wrong side of the bed this morning.
“Bob claimed he could show harm to future states of the country from debt and illustrated it with a construction suggested by Nick Rowe. he did this by adding up diagonal slices through the matrix. I pointed out this is inappropriate because that does not acount all the assets or persons for any future moment or period of the country.”
Except it is “appropriate”, because humans aren’t sliced and diced entities of instantaneous consumption. They are individual separate beings that live and then die, over time.
It is entirely appropriate to show that debt can make the lifetime consumptions of ALL individuals lower than it otherwise would have been.
“So that’s one of Bob’s errors.”
Except it isn’t an “error”!
“Now Bob’s *criterion* was what happends when you do these diagonal sums. His sums came out to less than 100, and he counted that as harm.”
So far so good…
“Using that same criterion, are diagonal sums over or under 100, I showed an example where debt and destruction enrich.”
Irrelevant! It is not an argument against the point of the OLG model, which was that it was a single counter-example to the universal claim that debt cannot make future generations poorer.
I’ve said this many times to you, but it seems to have fallen on deaf ears:
It is of no consequence that you can show a different model with slightly different assumptions where there is no impoverishment as in the Murphy/Rowe OLG model.
“That suggests the criterion is wonky. I used the same criterion — ask Bob.”
Except you didn’t use the same assumptions. You changed them, which is why you got to a different conclusion.
The criterian is not merely a “diagonal” analysis!
Way to continue to totally miss the point of the OLG model.
The OLG model does follow from its premises. It is an example of a possible future whereby debt impoverishes every individual.
It makes no difference whatsoever that you can show a different model using different assumptions where the outcome is different. You’d only be emphasizing the fact that there is not one possible future, the whole point of the OLG model!
Ken,
That is the perfect example of what I mean with absurd/implausible. Come on, do you really believe the government can implement whatever it wants? No, not even if you are the dictator could you do what you want, at least not as long as you want!
I don’t see how from “welfare state, social security, Obamacare, and protectionist tariffs” it follows therefore that a government could “implement a [every] capricious and harmful tax-funded wealth redistribution scheme [it thinks of]”. Not to mention that as far as I am aware of no one on this blog would think this is possible, not even you I guess.
Things in brackets added by me are necessary to give this statement of you meaning. If there are limits to what a government can implement and what not (especially in a democracy) then I urge you study those limits, the dynamics of voting and public choice.
And then maybe you find out why debt is needed to get certain schemes running. Although I thought this is fairly obvious in this case, which is the reason why I call your implied assumptions absurd.
I really doubt that you fully understand my objection, else you would not come up with useless counter examples.
Ken,
Nevertheless, thanks for answering!
skylien, just to make a technical point, the issue was was what taxes can do. More realistically, all these models can be applied to situation where the effected persons, the ones we are tracking apples for, can be a subset of a larger society. So it is not implausible to impose a tax scheme upon the island. Imagine we are looking at the impact of a federal tax on Puerto Rico for example.
Ken,
I think it is better to frame it as what debt can do, than to formulate it the other way around. However what does you example prove now? Yes if it were constitutional you could vote on the issue of taxing people from Puerto Rico 50% or 100% which is distributed to Non-Puerto Ricans. Yet first this would probably raise the desire of Puerto Ricans to secede peacefully, which you think was ok to stop with military force, which might raise the desire to secede violently. That is already a huge difference isn’t it? And secondly this scenario works only because a majority will oppress a minority in the present, but this one-off tax has absolutely nothing to do with what will happen in the next period.
However you cannot “tax” (=impoverish/burden) future generations to benefit present generations, if the government doesn’t take on obligations in some form on behalf of future generations. Such an obligation is called “debt”, that those people from the present generation who currently pre-finance the redistribution scheme can rely on to be compensated later. Without them there is no reason to pre-finance the scheme in the first place! Hence they just say “BOO!”. You can mirror the results on the XLS only if you ignore how humans act and vote.
Nicely said, Ken B.
So Bob as it’s so refreshing do you want to admit any mistakes or do you feel you were batting 1000? I don’t think there’s any shame in admitting mistakes that’s what a real scientist does. If you feel differently then it might mean that…
Wait a minute… did he even say he botched that one????
That seems to be the bullet point he got right, right?
I am very confused now…
I think those may be sub-bullets??? I’m genuinely not sure.
I wonder if the inflation points are what he has “right”. It turns on what “high inflation” means in that bullet (or, equivalently, what “use it aggressively” means in the earlier one).
DK I’m not sure either about which bullets are right and which are wrong. If the indented means anything, obviously it has to be that the indented ones are right. And they don’t seem to be indented for any other reason.
But, I agree it’s not obvious.
Well they’re kind of sub-points to the immediately prior one.
2 for 8 are indented. I take those as the 2 for 8 he was right about.
Personally I’d make it 3 for 9, adding the indented bullet point “We’re all just jumped up monkeys.”
+1
And another +1 for your restraint in talking about monkeys without mentioning bonobos.
Being careful with my blood pressure these days.
This just in to me from Brad:
The “I thought higher inflation would follow rather than precede recovery” is one of the 2 of 8 that I think I got right…
Yours,
Brad DeLong
Wait, if that is one of the two correct predictions, then DeLong must be claiming, by implication, that one of the two indented predictions turned out wrong with the others. In other words, TBTFs did not know they had a backstop and did not aggressively use it, and that there was a run on Treasuries.
???
Ok Bob I get the context now. However, I must say that when you talked about your mistake on inflation you waffled a bit yourself:
Here I think is the key from Delong:
“The most terrifying thing of all is that being completely, comprehensively, unmistakably, fundamentally, fatally, totally wrong has not led Robert Murphy to rethink or modify any of his analytical positions or ideological beliefs by even one iota.”
He’s saying you didn’t question your analytical framework. I think this example makes his point:
“Suppose I bet… $500 that Team X would win the Superbowl, and then I lost. Would you guys say that was a foolish thing, and that I obviously didn’t understand Mises? Suppose I take an umbrella with me to work, because I see thunderclouds and make a prediction about the future. Would you email me Rothbard’s critique of econometrics?
“No… you would say, “Bob is making a bet. This doesn’t have anything to do with Austrian economics. He isn’t misapplying the theory, and he’s not jeopardizing the integrity of the movement because–as the author of several study guides on Mises and Rothbard–surely Murphy knows Austrian economics has nothing to do with predictions about the future.”
http://delong.typepad.com/sdj/2013/02/robert-murphy-austrian-economics-has-nothing-to-do-with-making-accurate-predictions-of-the-future.html
Bob I think that’s a little disingenuous. If you make a bet that the Bears beat the Packers and the Packers beat the Bears, then this has nothing to do with ABCT. If you make some predicitons about soaring inflation that doesn’t happen it at least has relevance to ABCT as you made the prediction on that basis. Now doesn’t necessarily mean you give up ABCT that very moment but it should make you at least do a little analysis.
If the Packers beat the Bears there’s no analysis.
Bob i think it comes down to this. You claimed that your bet on galloping inflation had nothing to do with ABCT. You certainly were an inflation hysteric predicting disaster and a 20% inflation rate. However, when it was time to bet you were a lot more conservative in your predictions.
However, if it wasn’t ABCT that took you there what did? Certainly your analysis of the effect of the monetary base-whatever model you may have been using-was wrong. Yes, I know there’s always the escape hatch of “some day inflation really will start galloping” which was David Henderson’s point.
So that’s a question. If you don’t refer to ABCT when doing monetary analysis where do you turn?
Dr. Murphy,
DeLong’s newest comment doesn’t make sense. If the inflation bit is one of the two he believes he got right, then that would mean he believes that one of his two indented predictions turned out wrong.
So does that mean the TBTFs did *not* know they had a backstop and did *not* use it aggressively, or that there *was* a run on Treasuries?
As far as I can see, both of those are false, which means we can’t even take his judgment of going 2 for 8 seriously.
Well there clearly wasn’t a run on Treasuries, so it must mean that DeLong thinks the TBTF either didn’t know they had a backstop or didn’t use it aggressively. I’m guessing the latter, but I admit the whole thing is odd.
It can’t be the latter either:
http://delong.typepad.com/sdj/2009/06/the-public-plan-for-health-insurance-in-which-greg-mankiw-confesses-to-remarkable-ignorance-and-asks-a-question-that-we-answ.html
“The exammple Mankiw uses to back up his argument seems to me to be very strange. It is: “Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed–correctly, as it turned out–that the federal government would stand behind Fannie’s and Freddie’s debts…” and thus provide them with a subsidy.”
“There is a problem with this argument.”
“The problem is that in the past year and a half the Federal government has stood behind the debts of not just Fannie and Freddie, but AIG, Bear Stearns, Merrill Lynch, Bank of America, Morgan Stanley, and Goldman Sachs–none of which bear any resemblance whatsoever to a “public plan.” The government has stood behind Fannie and Freddie not because they were, before 1968, public enterprises but because they were–like AIG, Bear Stearns, Merrill Lynch, Bank of America, Morgan Stanley, and Goldman Sachs–too big to fail. The Treasury staff would have loved to have let Fannie and Freddie default on their bonds had they not feared the systemic consequences.”
and then
http://delong.typepad.com/sdj/2012/02/which-romney-is-romney.html
“In a similar fashion, Romney yesterday said that the government should get its nose out of the housing-finance business, let the waves of foreclosures roll their way forward, and let the housing market find its bottom.
“But private mortgage lending is broken: there are no large pools of private money willing to take on long-term mortgage default risk. Either the government backstops the risk and greases the transactions, or the market freezes.”
http://delong.typepad.com/sdj/2011/07/hoisted-from-comments-bakho-on-how-fannie-and-freddie-should-always-have-been-arms-of-the-treasury.html
“Indeed. It was privatized, but it retained its government guarantee as “too big to fail”…”
Query:
1. Have we made a final determination as to which items DeLong claims to have been right about and which ones he claims he was wrong about?
2. Is there any evidence that DeLong has a working familiarity with Austrian concepts and analysis? Please provide proof.
Bob Roddis,
2. Is there any evidence that DeLong has a working familiarity with Austrian concepts and analysis? Please provide proof.
Yes Bob, my understanding is that Lord Keynes and DeLong had a long session last week on economic calculation.
Well then, I guess that’s that.
After all that huh? Just to round out the discussion see here
What the choice between Hayek and Keynes amounted to http://diaryofarepublicanhater.blogspot.com/2013/04/keynes-vs-hayek-redux.html
In 2002 Krugman said that,
“Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html
In 2005, Krugman admitted that the Fed *had* created a housing bubble and that it wasn’t surprising because…
“After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.”
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
But by 2010 Krugman completely changed his story and tried to absolve the Fed by saying…
“These considerations suggest that it would be wrong to attribute the real estate bubble wholly, or even in large part, to misguided monetary policy.”
http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/?pagination=false
Hahaha
http://data.bls.gov/timeseries/LNS11300000
In terms of future price inflation: four and a half years of steady downturn in productive work effort must lead at sometime to a shortage of supply. If this trend continues, the US economy must necessarily produce less, and therefore US citizens must consume less. When you couple this with the Fed money injection, you have more money covering less goods. The price inflation has to wash through sooner or later.