tag:blogger.com,1999:blog-2546602206734889307.post5111885875231919693..comments2024-03-19T09:54:37.187+00:00Comments on mainly macro: Speak for yourself, or why anti-Keynesian views surviveMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger54125tag:blogger.com,1999:blog-2546602206734889307.post-38126955244611114002015-06-30T06:30:25.106+00:002015-06-30T06:30:25.106+00:00Recently I was reading the transcript of a talk by...Recently I was reading the transcript of a talk by Bob Lucas given before the Council for Foreign Relations a few years back after all Hell broke loose. He said he supported Obama's post crisis stimulus. What ever happened to Rational Expectationalist policy invariance?Misbahhttp://canggah.heck.innoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49428520653944480442015-06-24T12:03:07.271+00:002015-06-24T12:03:07.271+00:00I'd like to correct an error I made in my prev...I'd like to correct an error I made in my previous post. Lately I've read quite a few pieces by Lucas and I was working from memory when I posted the comment.<br /><br />I made reference to a comment by Bob Lucas at a 2009 Council On Foreign Relations meeting to the effect he supported Obama's post crisis stimulus. Actually, the comment was made in a 2011 interview with Holman Jenkins of the Wall Street Journal. He said:<br /><br />. "If you think Bernanke did a great job tossing out a trillion dollars, why is it a bad idea for the executive to toss out a trillion dollars? It's not an inappropriate thing in a recession to push money out there and trying to keep spending from falling too much, and we did that."<br /><br />In the ConFR talk he did wax lyrical about Bernanke's monetary stimulus saying it would "help us accelerate the recovery".<br /><br />This statement and the one preceeding I would think are totally out of character for a New Classical Rational Expectationist.<br /><br />In the 2009 ConFR talk he actually did rail against fiscal stimulus - so this puts this in contradiction to his later comments.<br /><br />In the same talk he also seemed to be saying fiscal stimulus can be characterised as monetary policy and Bernanke's monetary stimulus could be "properly called fiscal stimulus". <br /><br />Figure that one out.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-66282520538478539222015-06-23T21:01:00.206+00:002015-06-23T21:01:00.206+00:00Looks like we are all Keynesians now.
Recently I...Looks like we are all Keynesians now.<br /><br />Recently I was reading the transcript of a talk by Bob Lucas given before the Council for Foreign Relations a few years back after all Hell broke loose. He said he supported Obama's post crisis stimulus. What ever happened to Rational Expectationalist policy invariance?<br /><br />Henry.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-36901058712706500142015-06-22T09:07:37.359+00:002015-06-22T09:07:37.359+00:00"For right wingers it has never been about th..."For right wingers it has never been about the size of the state but who benefits from its largesse"<br />Bingo, bingo, bingo.<br /><br />It's always class war for right-wingers. Always. This is the only way to make sense of their behavior.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88349174411188594612015-06-22T09:05:06.501+00:002015-06-22T09:05:06.501+00:00*Almost* everything spent is economically stimulat...*Almost* everything spent is economically stimulative. <br /><br />War spending is a really special case because it's spent BLOWING THINGS UP -- the destruction may well outweigh the stimulative value. Similarly, spending on "urban renewal" (destroying priceless old buildings), or spending on ripping up railway lines, might not be stimulative.<br /><br />Also, spending on "financial products" consists of shuffling paper around and isn't actual spending, so it isn't stimulative either.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30666603649009471192015-06-22T09:01:57.248+00:002015-06-22T09:01:57.248+00:00This is wrong. What most people forget is what Ke...This is wrong. What most people forget is what Keynes actually recommended during a boom -- take the punchbowl away! Stop lending money! Tax the profiteers!<br /><br />Keynesianism calls for fiscal retrenchment during booms. Bill Clinton did this; I can't think of another example in the world. It's politically *very difficult*. There's always a political vibe of "we're rich, let's spend it all!"Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83075492937718905182015-06-21T03:26:30.296+00:002015-06-21T03:26:30.296+00:00I did not say that there might not be different mu...I did not say that there might not be different multipliers. I was saying that proponents of stimulus think that everything is stimulative. In Congressional testimony in 2009, Nobel Laureate Joseph Stiglitz was asked, "John Maynard Keynes said that the government could stimulate the economy by digging a hole, by paying someone to dig a hole and fill it back up again. Dr. Stiglitz, do you <br />agree with that?"<br /><br />His response: "Yes, but we have better ways of spending <br />money than either going to war or filling holes."<br /><br />My response: "I don't agree with it. In fact, I want to emphasize one thing we do agree on is that money spent on war is wasted. It is not a stimulus package. I think one of the most destructive and immoral economic doctrines of the last 75 years was the belief that World War II was good for our economy because it created a Keynesian multiplier. Even more effective than just digging ditches, it got people to buy tanks and airplanes. But tank and airplane purchases are good for tank and airplane manufacturers. They are not good for the rest of us. Private consumption in those times fell. It was very bad."<br /><br />Transcript is here: http://www.gpo.gov/fdsys/pkg/CHRG-111shrg55916/html/CHRG-111shrg55916.htmRussRobertshttps://www.blogger.com/profile/16234286961852563933noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-26052715442467767472015-06-20T01:30:38.913+00:002015-06-20T01:30:38.913+00:00There is a third way. I, for example, can read th...There is a third way. I, for example, can read the papers on minimum wage from both the left and the right. The right raises simplistic arguments based on pre-conceived ideals about how the world must work. The left raises a variety of arguments that more accurately reflect the complexity of the real world. <br /><br />The Left is not convinced by the Right because the Right have poor arguments. The Right is not convinced by the Left because the Right insist that their preconceived ideals must be true regardless of evidence to the contrary.Cesiumhttps://www.blogger.com/profile/02025636403503365433noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-7229048129710819162015-06-20T01:12:17.702+00:002015-06-20T01:12:17.702+00:00ROFL. A fine example of completely failing to und...ROFL. A fine example of completely failing to understand the article.Cesiumhttps://www.blogger.com/profile/02025636403503365433noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-50736104685172894662015-06-19T17:20:03.711+00:002015-06-19T17:20:03.711+00:00"The big/small government idea makes no theor..."The big/small government idea makes no theoretical sense. Why would wanting a larger state make someone a Keynesian? "<br /><br />Reverse the question: is there any strategy for which small government makes sense? <br /><br />I suspect that a lot of those non-economists who support anti-Keynesian views and fund those who research on their behalf believe that smaller government costs less to run than big government, and that they would therefore pay smaller taxes. That is as far as their logic carries them. Multipliers are too abstract but paying money to the taxman hurts them deeply.<br /><br />I believe that it - and they - are as simple as that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6111507260981564242015-06-19T17:17:56.038+00:002015-06-19T17:17:56.038+00:00"The big/small government idea makes no theor..."The big/small government idea makes no theoretical sense. Why would wanting a larger state make someone a Keynesian? "<br /><br />Reverse the question: is there any strategy for which small government makes sense? <br /><br />I suspect that a lot of those non-economists who support anti-Keynesian views or who fund those who research on their behalf believe that smaller government costs less to run than big government, and that they would therefore pay smaller taxes. That is as far as their logic carries them. Multipliers are too abstract but paying money to the taxman hurts them deeply.<br /><br />I believe that it - and they - are as simple as that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-35806066053566948372015-06-19T14:47:42.204+00:002015-06-19T14:47:42.204+00:00You make a fair point. But I wonder if it's n...You make a fair point. But I wonder if it's not too anglocentric. For example, a lot of people think Germany is an economic success-story. So the predominantly non-Keynesian mainstream view of German economists (and in parts of Asia ?) needs some careful explanation.ttamalanoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1112383700743737232015-06-19T14:24:18.972+00:002015-06-19T14:24:18.972+00:00Thank you Simon. I am not an expert in economics a...Thank you Simon. I am not an expert in economics and was starting to have a crisis of faith in supporting an anti-austerity agenda, but you have given me the belief back, and to take on my opponents!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88474765560778576332015-06-19T09:19:21.584+00:002015-06-19T09:19:21.584+00:00Pathetic. When I plot data:
http://mainlymacro.bl...Pathetic. When I plot data:<br /><br />http://mainlymacro.blogspot.co.uk/2015/01/faith-based-macroeconomics.html<br /><br />to show US austerity began in 2011 and continued thereafter, I am now accused of saying there was no austerity in 2013 and being an austerity-denier!! When I also point out that wider fiscal measures like underlying primary balances say the same thing, this is ignored. You follow faith based economics, and a perfect illustration of the point I am making here. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-7711105560743889032015-06-19T09:08:51.804+00:002015-06-19T09:08:51.804+00:00Its not the same series.Its not the same series.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24413050828076094852015-06-19T08:33:59.843+00:002015-06-19T08:33:59.843+00:00For right wingers it has never been about the size...For right wingers it has never been about the size of the state but who benefits from its largesse. Military contracts? Fine. Police and surveillance state? We need to be safe. Jobs for our sons and daughters in the legal system, diplomatic corps and civil service? Only nat'ral.<br /><br />Universal access to education? Waste of resources on 'them'. Safety net against micro-economic market failures? Scroungers more like. Local government services? Bunch of grifters you wouldn't trust to run a piss-up in a brewery.AllanWhttps://www.blogger.com/profile/05056883330644304960noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30816397689471091542015-06-19T07:26:10.656+00:002015-06-19T07:26:10.656+00:00"The logical snag of this popular slogan is t..."The logical snag of this popular slogan is that roughly right is equivalent to roughly wrong."<br /><br />No it isn't. If I say that a parameter's true value is in a specific range, and it is within that specific range, then I'm roughly right, not roughly wrong. I'm not a Post-Keynesian, but there is nothing logically wrong with seeking imprecise but correct theories. There are non-logical reasons to prefer, at least in some contexts, precise but wrong theories e.g. it is sometimes by testing precise models and finding them to be wrong that we find out important facts about what doesn't work.<br /><br />Incidentally, Keynes was a metaphysical determinist and criticised the idea of objective chance. Uncertainty, in Keynes's view, is always a product of our ignorance, which is why he had a logical rather than a physical interpretation of probability, and was notably uncompromising on this issue.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-19289486004064717442015-06-19T06:10:47.810+00:002015-06-19T06:10:47.810+00:00On your basis, using the same G for the UK, makes ...On your basis, using the same G for the UK, makes it hard to see Osborne's austerity either.<br />https://research.stlouisfed.org/fred2/series/NAEXKP03GBQ652SJames in Londonhttps://www.blogger.com/profile/08392235894752150063noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11926975424786316002015-06-19T05:51:29.197+00:002015-06-19T05:51:29.197+00:00Simon
In the face of everyone in the U.S. (and mos...Simon<br />In the face of everyone in the U.S. (and most people elsewhere) agreeing that there was fiscal austerity in 2013 you appear a lonely "austerity-denier" by sticking to your use of G. Why is everyone apart from you wrong?James in Londonhttps://www.blogger.com/profile/08392235894752150063noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-45811483333019188462015-06-18T18:58:26.374+00:002015-06-18T18:58:26.374+00:00"The modern proponents of fiscal policy have ..."The modern proponents of fiscal policy have argued that the US stimulus was a good idea no matter what it was spent on..."<br /><br />How can you have a Ph.D. in economics and still ramble off this BS? This is first year macro. Keynesian-oriented economists are well aware that there are different mutlitpliers for different types of spending and tax cuts, and do not view all spending as equal. Plus, lets not forget that a large component of the stimulus were tax cuts (e.g. the payroll tax holiday). Keynesian economics also relies on demand side tax cuts, something that the anti-Keynesian camps quickly forgets. <br /><br />Even Keynes was well aware of different types of spending:<br /><br />"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."<br /><br />Notice Keynes was not advocating that government actually bury money, but was advocating capital spending, specifically on housing. If anything, he was poking fun at gold buggers.<br /><br />Either one of two things is happening in the anti-Keynensian camp. <br /><br />1. They cannot even comprehend first year macro. <br />2. They can comprehend first year macro, but their ideological predispositions prevent them from honesty. Therefore, they create strawman arguments. <br /><br />Anonymoushttps://www.blogger.com/profile/05505776327177377127noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15843596074815982852015-06-18T13:55:47.409+00:002015-06-18T13:55:47.409+00:00From true/false to garbage-wrestling and back
Comm...From true/false to garbage-wrestling and back<br />Comment on ‘Speak for yourself, or why anti-Keynesian views survive’<br /><br />Science is about true/false and this is why most people do not like it. They point out that the world we live in is not black and white. So we have a zone of indeterminism (Schrödinger's cat!) where true and false coexist.<br /><br />This idea reappears in economics as a positive methodological principle: “For Keynes as for Post Keynesians the guiding motto is ‘it is better to be roughly right than precisely wrong!’” (Davidson, 1984, p. 574)*<br /><br />The logical snag of this popular slogan is that roughly right is equivalent to roughly wrong. Indeterminacy works both ways, but consistency has never been the strongest point of Keynesianism.<br /><br />Keynes enthusiastically took indeterminacy on board and became the prophet of vagueness and uncertainty. Thus he occupied the ground between true and false where “nothing is clear and everything is possible.” (Keynes, 1973, p. 292)<br /><br />The problem with indeterminism is that it degenerates to anything-goes and wish-wash faster than an egg boils. The remarkable thing is that two of the most advanced scientific propositions, Heisenberg's uncertainty principle and Gödel's incompleteness theorem, are routinely cited by people who have not realized that supply-demand-equilibrium is scientifically barely on a par with the Law of the lever.<br /><br />What economics urgently needs is a return to the Principle of bi-valence, i.e. true/false, in order to minimize the zone of indeterminism. For scientists the guiding motto is “It is better to be precisely right than roughly wrong!”<br /><br />When we focus on the formalized part of Keynes's theory there is no way around the fact that it is precisely wrong. Keynes stated in the General Theory: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (1973, p. 63)<br /><br />This elementary syllogism contains a fundamental conceptual error/mistake (2011) that invalidates all I=S-models without exception. The fundamental flaw of the General Theory is that Keynes got the pivotal distinction between income and profit wrong. Now, because I=S is wrong, the multiplier is wrong, and this affects the whole employment theory. The only question that remains is whether Keynes's common sense arguments apply independently from the defective formal foundations.<br /><br />Now we can advance from the intense yet pointless pro/anti-Keynesianism wrestling of Cafe Hayek, viz. “The evidence for the Keynesian worldview is very mixed”, to the straightforward Principle of bi-valence, which states unambiguously and definitively that Paul Krugman, Russ Roberts and Simon Wren-Lewis are out of science because they refer to models that are built upon the logically defective and empirically refutable I=S-proposition.**<br /><br />Pro/anti-Keynesianism survives because ‘nothing is clear and everything is possible’ is the perfect motto for a sitcom of indeterminate duration.<br /><br />Egmont Kakarot-Handtke<br /><br />References<br />Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian<br />Economics, 6(4): 561–575. URL http://www.jstor.org/stable/4537848.<br />Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN<br />Working Paper Series, 1966438: 1–20. URL http://ssrn.com/abstract=1966438.<br />Keynes, J. M. (1973). The General Theory of Employment Interest and Money.<br />The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke:<br />Macmillan.<br /><br />* See also Lars Syll on the RWER blog<br />https://rwer.wordpress.com/2013/09/19/why-it-is-better-to-be-roughly-right-than-precisely-wrong/<br /><br />** See<br />Krugman http://krugman.blogs.nytimes.com/2011/10/11/why-believe-in-keynesian-models/<br />Roberts http://cafehayek.com/2011/10/the-evidence-for-keynesian-economics.html<br />Wren-Lewis http://mainlymacro.blogspot.de/2015/06/speak-for-yourself-or-why-anti.<br />htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23235980698876092252015-06-18T13:32:43.874+00:002015-06-18T13:32:43.874+00:00Simon,
Would you be willing to be a guest on my w...Simon,<br /><br />Would you be willing to be a guest on my weekly podcast, EconTalk (econtalk.org) to discuss the evidence you discuss here and the issue of confirmation bias? Past guests include Joseph Stiglitz, Thomas Piketty, Jeffrey Sachs, and Robert Solow. I think a conversation on this topic would be highly illuminating to our listeners and to me, of course.RussRobertshttps://www.blogger.com/profile/16234286961852563933noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82615446137996063042015-06-18T09:06:32.520+00:002015-06-18T09:06:32.520+00:00Russ Roberts, you staked a much stronger claim tha...Russ Roberts, you staked a much stronger claim than that Krugman is unmoved by econometric evidence that fiscal policy isn't stimulate. You wrote that: <br /><br />"Krugman is a Keynesian because he wants bigger government." <br /><br />Where does this come from - other than from the voices in your head? Where does one get such an idea from - even allowing for confirmation bias and ideological bias?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64669142170919485212015-06-18T08:25:14.850+00:002015-06-18T08:25:14.850+00:00As I said in my post, of course there is confirmat...As I said in my post, of course there is confirmation bias and ideological bias. But the point the post was making is that this admits (at least) two outcomes. It admits the position you put forward, where the evidence is a mess and we all go with our biases, or it admits the case where the world is Keynesian, but because of these biases a smallish proportion of economists refuse to admit this. My post contains a number of reasons why the second is much more plausible, which your comment seems to ignore.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82700812271524168132015-06-18T07:38:34.992+00:002015-06-18T07:38:34.992+00:00@Anonymous at 9:28 +1. And SWL is still incapable...@Anonymous at 9:28 +1. And SWL is still incapable of actually defending anything but the most basic Keynesian claims.Anonymousnoreply@blogger.com