17 Jan 2014

Two New Posts

DeLong, Krugman, Scott Sumner, Shameless Self-Promotion 23 Comments

At Mises Canada I have two posts up:

==> The first gives yet another illustration of my claim that Bernanke has been the FDR of central banking. This time, I discuss a HuffPo writer calling on Janet Yellen to “save the planet” (his term).

==> In this post, I endorse Russ Roberts’ complaint about Krugman’s discussion on unemployment insurance.

Let me elaborate here with a different example. Back during the Krugman/Sumner showdown, some of Krugman’s defenders were absolutely puzzled about why so many people were thinking 2013 was a great test of Market Monetarism vs. Keynesianism. Did Krugman’s critics really think it was that obvious, such that anyone who denied it was a good test was therefore an idiot?

No, that is completely beside the point. The reason so many of us flipped out is that Krugman wrote this in January 2014: “Incidentally, these other factors are why I don’t take seriously the claims of market monetarists that the failure of growth to collapse in 2013 somehow showed that fiscal policy doesn’t matter.”

How in the *world* could a person write such a sentence, when that same person back in April 2013 had written:

The central debate over macroeconomic policy is, of course, between Keynesians and Austerians. And at this point the Keynesians have overwhelmingly won the debate everywhere…

There have, however, been a couple of side shows, with what I guess now constitutes mainstream Keynesianism…subjected to non-austerian criticism on both flanks. On the left are the Modern Monetary Theory types…On the right are the market monetarists like Scott Sumner and David Beckworth, who insist that the Fed could solve the slump if it wanted to, and that fiscal policy is irrelevant.

Now, there won’t and can’t be any current-events test of MMT until we get out of the slump, because standard IS-LM and MMT are indistinguishable when you’re in a liquidity trap. But as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now, with the Fed having adopted more expansionary policies even as fiscal policy tightens.

And by the way, THE TITLE of that April 2013 Krugman post was, “Monetarism Falls Short.”

So the issue isn’t, “Was 2013 a good or bad test of Keynesianism vs. Market Monetarism”? The issue isn’t even, “Krugman changed his mind from April to January, how convenient.”

No, the issue is, Krugman is making it sound like only an idiot could possibly think that 2013 was a good test. One would have no idea from his January 2014 post that it was a position he himself endorsed back in April.

And the same thing with the unemployment insurance debate: The issue isn’t whether demand-side effects trump supply-side effects during a liquidity trap. No, the issue is that someone reading Krugman’s commentary on Barro would have no idea that Krugman endorsed Barro’s analytical framework in his (Krugman’s) own textbook.

Last thing: One might be tempted (as DeLong did) to dismiss such observations merely as “Krugman derangement syndrome.” Imagine that, some of us focus on the personal foibles of some guy, rather than the issues. But if that’s the case, what would you call it when DeLong and Krugman focus on the moral failings of the people who live in a Dark Age of Macro? (And of course, what kind of medical condition is it, when they spend more than one post each discussing a wager between some punk in Nashville and David Henderson?)

23 Responses to “Two New Posts”

  1. Yancey Ward says:

    Personally, I think Krugman is in early to mid-stage Alzheimers and simply doesn’t remember what he wrote 9 months ago.

    • Gamble says:

      A lot of people with early Alzheimer’s can not pick up on sarcasm. It is actually used as a test.

      Not sure if Krug forgot to laugh but it could be another indicator…

    • Bob Roddis says:

      I’m two years older than Krugman. I believe he is nothing other than unscrupulous and dishonest which, as Obama and the Clintons have shown, is an important trait revered by most “progressives” in their “leaders”.

  2. Matt M (Dude Where's My Freedom) says:

    The climate hysterics are getting more and more desperate every day. Less and less of the public believes them. Their lord and savior Obama didn’t lift his magical finger and stop the rising of the tides. A Democrat controlled Congress never rammed through cap and trade.

    They’re reaching out for someone – anyone – in a position of power to just decide to start ramming draconian anti-human policies down the public’s throat, whether they really have the power to or not.

  3. Major_Freedom says:

    I’m starting to notice a pattern, Murphy.

    “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

    “Now, there won’t and can’t be any current-events test of MMT until we get out of the slump, because standard IS-LM and MMT are indistinguishable when you’re in a liquidity trap. But as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now, with the Fed having adopted more expansionary policies even as fiscal policy tightens.”

    • Tel says:

      I keep forgetting. How do we know we are in a liquidity trap?

      • Major_Freedom says:

        We don’t, and that’s the point.

        Those who want more government just say the Fed can’t do anymore when interest rates are somewhere above zero.

        • Tel says:

          So standard IS-LM and MMT are sometimes indistinguishable? But we don’t know exactly when.

  4. Bob Roddis says:

    I’m glad that the Fed is finally going to do something about the horrible problem of Global Warming which it caused by inducing and facilitating suburban sprawl.

    • Samson Corwell says:

      […]inducing and facilitating suburban sprawl.

      Suburban sprawl is a bad thing?

      • peter says:

        According to the climate change jihadis, it is: http://www.worldwatch.org/curbing-sprawl-fight-climate-change

        • Bob Roddis says:

          Thanks peter. I thought the connection between the Fed and sprawl and the warmists was self-evident.
          I was trying to make a snarky reply to all of the “progressives” who claim that “capitalism” causes sprawl. Their silence on the topic is deafening.

    • Harold says:

      There is more than one cause.

  5. Scott H. says:

    You aren’t buying the “Krugman said MM could work before he said that MM couldn’t work” argument?

  6. andrew' says:

    Bob, go read this week’s hussman. And never bet on timing!

  7. Ken B says:

    The alleged Kontradiction is no such thing. It is surprising to see even David Henderson missing this, but he does.
    DRH says Krugman ” completely disowns the claim about incentives that he made in his textbook” here:

    You could, I suppose, muster various arguments against this proposition, or at least the wisdom of increasing UI. You might, for example, be worried about budget deficits. I’d argue against such concerns, but it would at least be a more or less comprehensible conversation.

    But if you follow right-wing talk — by which I mean not Rush Limbaugh but the Wall Street Journal and famous economists like Robert Barro — you see the notion that aid to the unemployed can create jobs dismissed as self-evidently absurd. You think that you can reduce unemployment by paying people not to work? Hahahaha!

    What Krugman disavows is the notion that the textbook argument is a no-brainer slam dunk.
    Krugman thinks Barro presents it this way. Maybe, maybe not, doesn’t matter for the point at hand.
    Krugman is dismissing a dismissal not a textbook argument.

    • Ken B says:

      I’m refering here only to the UI issue in the Roberts link.

      • Major_Freedom says:

        Except Krugman’s textbook argument was that increasing UI is bad for employment. He made a self-contained argument there.

        It doesn’t matter if Barro is flippant over that point, because no matter how you want to present the argument, flippant or sincere, in his textbook Krugman advanced the argument that increasing UI is bad for employment.

        • Major_Freedom says:

          Then he accuses Barro of being essentially an evil moron for thinking the same thing as possible

        • Ken B says:

          No, that’s not the textbook argument. The textbook argument is about creating an incentive not an effect.

          Giving people money also creates an incentive –for them to spend. There is no contradiction in saying these incentives can have differing effects.

          • Anonymous says:

            “No, that’s not the textbook argument. The textbook argument is about creating an incentive not an effect.”

            The word incentive is used to describe the cause for the effect. The textbook argument is that increasing UI isn’t good for employment.

          • Major_Freedom says:

            “No, that’s not the textbook argument. The textbook argument is about creating an incentive not an effect.”

            The word “incentive” is used to describe the cause for the effect that is held to take place in response to increasing UI. The textbook argument is that increasing UI isn’t good for employment. You can describe that in terms of incentives or effects, it doesn’t matter for the purposes of why Krugman contradicted himself.

  8. Andrew' says:

    Wow. “Professional” (in the paycheck sense, not the behavioral sense) are now Opie & Anthony versus Howard Stern.

    Noone can even explain what the esoteric disagreements are about anymore.

Leave a Reply to Major_Freedom

Cancel Reply