Krugman takes a big swipe at some dissenters using two terms that are like nails on a chalkboard for Austrians: "hangover theory" and "liquidationism".
What's a shame is that most of the back-and-forth is probably going to be about defending the honor of Austrians and not addressing Krugman's actual point, which is good although I think he makes it too boldly.
I would be the last person to discount matching problems in the labor market - it's what I want to build my research agenda around, for God's sake. But that doesn't mean that that particular problem is always the primary problem. Krugman makes the point that whatever matching problems are out there, and to whatever extent matching problems and malinvestments may explain unemployment rate differentials (we had a housing bust... the fact that construction workers are out of work after a housing bust is common sense), they do not explain the staggering collapse of employment across all sectors.
Which gets me back to what I continue to ask of Austrians - don't explain to me ABCT over and over again. I understand ABCT. I even believe ABCT. Give me a reason to believe that is the primary force behind the downturn right now, rather than the secondary or the tertiary force.
Unfortunately, I think this is just going to degenerate into a "Krugman doesn't understand us!" conversation, as it usually does. Hopefully not - but we'll see.
*****
Speaking of job matching... I've been working in the mornings on my data from 1880. I haven't developed weights yet, but it seems to be behaving relatively similarly to job creation and destruction in the 20th century, which is pretty cool. Job creation and job destruction are both somewhat lower than they are today, though. Could be real - could be recall issues (This is not strictly speaking a panel survey - firms are asked about employment retrospectively. Some may have good reliable records. Others are almost certainly giving it a guess).
UPDATE: Xenophon suggests this talk by Robert Murphy. There's nothing really new or surprising in here, but it's worth listening to. The point of capital consumption that he makes is actually good - I suppose I don't think of that as unique to ABCT, so I didn't think to mention it but that is a good point. I suppose presumably if the boom is driven by capital consumption rather than a capital structure distortion that's going to have a broad-based impact on the downturn. There's nothing really "Austrian" about this point, but it is a point that Austrians make and it has to be highlighted. Jonathan remarks on broader changes in the productivity of capital in this post as well, which is somewhat similar (this is not the only point that Jonathan makes - it's worth reading the rest of it). This is something that caught my eye a while ago, actually - both Keynesian and Austrian models are driven by a change in the perception of the marginal productivity of capital. How are these stories different between them? Anyway - I had forgotten about that because as I say it doesn't seem to be the heart of ABCT because it doesn't really speak to the capital structure and it's not particularly unique. I had wanted to work in my article tomorrow morning, but I think I'll have to work through all this and write on this.
Posts
"Krugman makes the point that whatever matching problems are out there, and to whatever extent matching problems and malinvestments may explain unemployment rate differentials (we had a housing bust... the fact that construction workers are out of work after a housing bust is common sense), they do not explain the staggering collapse of employment across all sectors."
ReplyDeleteSure they do. There have been innumerable articles explaining this very point. It was also recently addressed at one of the talks at FreedomFest.
BTW, this isn't the first time that Krugman has used this line of the attack; so there is really nothing new about this point he is trying to make.
Actually, it wasn't FreedomFest, it was this that I was thinking of:
ReplyDeletehttp://mises.org/media/5240
I'll take a look at it and let you know my reaction. It's not anything I've ever heard adequately addressed before - but then, I suppose if I had heard it adequately addressed before I'd have a different opinion on it.
ReplyDelete"Krugman makes the point that whatever matching problems are out there, and to whatever extent matching problems and malinvestments may explain unemployment rate differentials (we had a housing bust... the fact that construction workers are out of work after a housing bust is common sense), they do not explain the staggering collapse of employment across all sectors."
ReplyDeleteSeriously Daniel?
No, sorry - jk... lol... rofl.
ReplyDeleteYes, seriously, Jonathan.
Oddly enough, I haven't seen much in the blogosphere on this, but I'm sure it will come.
ReplyDeleteOn this Murphy talk, Xenophon - I should note that Murphy is one that demonstrates a very bad understanding of Keynesianism or what Krugman tries to say.
ReplyDeleteThat's not to say that Krugman understands the Austrian school - I think it's quite clear he often doesn't. He "gets" broad strokes at best. But Murphy is one of the most confused on the Austrian side... we'll see how the talk goes, though.
I'm sorry, but if you think we don't explain the collapse amongst multiple sectors, then you don't understand Austrian theory. I know you said you didn't want that answer; but that, is in fact, the problem.
ReplyDeleteAustrian business cycle theory, by the way, has more to it than interest rates, malinvestment, et cetera. There is extensive capital theory behind it, as well, and this is where your misunderstanding seems to stem from.
I wrote something on capital theory on my blog, in response.
Jonathan - or your explanation is not as convincing as you're under the impression it is.
ReplyDeleteI'm constantly in a state of learning - I'm listening to Murphy now. There's nothing especially new here so far.
I'll look at your blog too.
Unfortunately, your rebuttals are even less convincing, because your rebuttals only consist of "I am not convinced" in more articulate forms.
ReplyDeleteIs that like a dressed up version of "I'm rubber and you're glue..."?
ReplyDeleteIf you don't find my rebuttals convincing that's fine - you still believe this stuff so its not surprising that you don't find them convincing. I think it would be a stretch, though, for me to therefore conclude that you don't understand what I'm saying. That's my only point.
What are you even saying? Your rebuttal so far has consisted of, "it's not convincing". Great argument.
ReplyDeleteBy the way, Austrians do not coincide with the Keynesian marginal efficiency of capital. See Jesús Huerta de Soto on this.
Rebuttal? What rebuttal have I offered yet?
ReplyDeleteI'm making the challenge, Jonathan. I'll get around to a rebuttal - don't worry.
Could you paraphrase de Soto on this? I'm absolutely confident there are differences. Sorry if that didn't come out clearly. My whole point was "they're both driven by this point - now in what ways are they different?" Because certainly they are different.
I'm just a little surprised, though. You make the claim that nothing I wrote is new, so obviously this means that you knew this before you wrote this post. The rebuttal that you may write should have been written here, because if you already knew what I had to say, then you should have addressed it in the opening post.
ReplyDeleteSo, I can only conclude all of this is due to sloppiness on your own part. You write a very superficial post, and then you make the claim that "we don't understand you".
Well, no kidding, if you are incapable of expressing your thoughts fully on the subject, it's no wonder that we may not offer anything new. I'm sorry, I wasn't born with the gift of extrasensory perception or telepathy.
So, either you expressed yourself poorly, or you do not know the theory as well as you do.
Regarding Jesús Huerta de Soto, I feel it would be better for you just to read him directly (Keynes's marginal efficiency of capital is not something I've really had a lot of time to study). It's not too long. See here: Money, Bank Credit, and Economyc Cycles.
He addresses marginal efficiency of capital between pp. 555-557.
Btw, Huerta de Soto's book is prob. the best on Austrian business cycle theory.
You write a very superficial post, and then you make the claim that "we don't understand you".
ReplyDeleteI suppose it was superficial - it was a quick link share after all.
But I'd appreciate it if you back up that second statement. I never said such a thing. The only person I've accused of not understanding something is Robert Murphy. I never said you (plural) don't understand something.
Well, no kidding, if you are incapable of expressing your thoughts fully on the subject, it's no wonder that we may not offer anything new. I'm sorry, I wasn't born with the gift of extrasensory perception or telepathy.
Let me get this straight... because I (1.) don't restate all of ABCT in a quick post, and (2.) do not agree with all of ABCT, then its somehow illegitimate or sloppy or misleading for me to have been aware of everything that you bring to my attention in a quick blog post of your own?
I'll read de Soto before I write anything else - thanks.
ReplyDelete*write any other complete blog post, that is
ReplyDeleteOh God... Keynes is an objectivist apparently. This should be an interesting read, but I'm not sure how useful it's going to be.
ReplyDeleteDaniel,
ReplyDelete"I suppose it was superficial - it was a quick link share after all."
What? What is a link share? Before the update, you didn't share any links.
Don't be intellectually dishonest. Your entire claim in this post was that we didn't address Krugman's actual point. Yes we did. If you don't think it's convincing, explain why, but don't lie and say we didn't address it!
In regards to the second part of that statement, sorry I misread one of your comments above (didn't read "...I'd think it be a stretch to...").
"because I (1.) don't restate all of ABCT in a quick post, and (2.) do not agree with all of ABCT, then its somehow illegitimate or sloppy or misleading for me to have been aware of everything that you bring to my attention in a quick blog post of your own? "
Unfortunately, you didn't get it straight. I never suggested you should restate with ABCT, or that your post is sloppy because you disagree with ABCT. I said your post is sloppy because you have persistently failed to explain why you disagree with ABCT.
"What? What is a link share? Before the update, you didn't share any links."
ReplyDeleteUmmm... the second word in the post is a hyperlink. I was sharing it.
Don't call me a liar. I usually take you quite seriously, but calling my a liar is a good way to change that.
I'm going to write a fuller post tomorrow - I really can't do it justice right now.
This was a post to share a link and a thought. I'm not going to provide anything more elaborate then that until I've had time to read through and think through several things. I have ample materialy to do that now, and I've already given you a taste of what my next post is going to be in that update.
I'm sorry Daniel, there is nothing before the update in this post that suggests you are going to elucidate your point (that Austrian theory is not convincing). You have, in fact, never really elucidated this. You just state it as matter of fact, as if that proves anything.
ReplyDelete"This was a post to share a link and a thought. "
Aha! So this wasn't just a "link share". My God, talk about having trouble expressing oneself. This is what you wrote originally,
"I suppose it was superficial - it was a quick link share after all."
So, which one is it? A quick link share, or a link share and a thought attached to that link share (an unsubstantiated thought, at that)?
I don't know how many other ways to say this - you are right - this was meant to be a quick share of a Krugman post that I think has a point with not a lot of detail. I'm not going to apologize for providing a full essay in every blog post.
ReplyDeleteThe discussion now seems to merit one, though, and I'll address it in more detail.
But I'm not going to apologize to you or anyone else for writing a quick post. You could have taken the brevity of the post in one of two ways, and you took the least charitable one. I'm still not quite sure why.
And I'm sorry - I didn't realize by "link share" you were thinking it should be one hyperlink couched in no prose at all.
ReplyDeleteI had no idea that quickly sharing a link excluded the prospect of any elaboration at all.
You're starting to get ridiculous here, and blaming it on my inability to express myself.
We're at a point in the debate where you should know your audience. You made a superficial post, and in it you asked that we don't pull out the "you don't know Austrian economics" card. That may be fair, but you're really asking too much, because you haven't shown that you understand the theory.
ReplyDeleteResponding to someone by saying, "you aren't offering anything new", doesn't really speak well for you, when you have repeatedly shown a failure to properly depict the theory you are criticizing.
I know you aren't going to admit it, but it comes down to the fact that this was simply a bad post. You asked for something new, without specifying what you already know, so how are we going to do know what is new and what isn't?
You offer two starting positions:
1. "Krugman makes the point that whatever matching problems are out there, and to whatever extent matching problems and malinvestments may explain unemployment rate differentials (we had a housing bust... the fact that construction workers are out of work after a housing bust is common sense), they do not explain the staggering collapse of employment across all sectors."
This has been addressed. By saying it hasn't been answered is not a proper rebuttal, if you already knew it had been addressed. Explain why Austrian theory is wrong. Don't just make the claim, and get mad when we "don't offer anything new".
2. "Which gets me back to what I continue to ask of Austrians - don't explain to me ABCT over and over again. I understand ABCT. I even believe ABCT. Give me a reason to believe that is the primary force behind the downturn right now, rather than the secondary or the tertiary force."
The burden of proof is on you, really. At least explain why you are not convinced. We don't have telepathy, Daniel, sorry. We're not at your level of genius yet.
I apologize that we are intellectually inferior to you and that you have to actually explain yourself to us *yuk, I know!*. Unfortunately, that is a reality you'll have to deal with if you want to get some type of good debate going.
I'll await your post tomorrow, in any case. Hopefully, it will be better than this one.
I'm not trying to take sides here (because I think your link-share was a perfectly valid blog post), but Jonathan does have a point that I've pondered for a long time.
ReplyDeleteYou claim to endorse certain aspects of ABCT, but you never give any explanation of that. You never justify why you like this part but not that part. Give some concrete examples of your disagreements.
I can say that I disagree fully with every Keynesian contribution for specific reasons. I'm being intellectually consistent. You need to explain why some are attractive to you and why some aren't. That's what's so confusing to Jonathan and me.