Friday, September 2, 2011

Assault of Thoughts - 9/2/2011

"Words ought to be a little wild, for they are the assault of thoughts no the unthinking" - JMK

- Just an interesting FYI - Bastiat is taught to undergraduates at American University. I was talking to a professor the other day and he said the first day of class he was talking about the economics of the hurricane with them, and he made them read "this French economist from the 1800s". Bastiat? I asked. Yep. He figured I wouldn't know how him, which is why he said "this French economist". Anyway, I think it's funny how some Austrians think that a Nobel Prize winner like Hayek is a non-person or that nobody is aware of the points that are discussed on Austrian blogs.

- Gene takes the quite simple claim of guys like Krugman on broken windows and says it in another context. Hopefully this helps highlight how straightforward and non-masochistic the claim is, as well as how stupid this whole argument is. [Silas Barta - try to contain yourself in the comment section].

- A priorism kills.

- Bryan Caplan tries to divine Keynesian theory from some accounting identities. The comment thread clears up the confusion. It's very important to understand what accounting identities like the Keynesian cross or the equation of exchange can and cannot do. They provide constraints and structure that can be informative, but they obviously don't tell you the path of their component variables. Doing some comparative statics is definitely informative, but you can't stop there.


  1. Here is another one of your unusual definitions, or maybe mine.

    Isn't the Keynesian cross a model not an identity?

  2. I suppose it's an identity with a few things attached. The only real "model" attached is the construction of consumption, which of course drives the multiplier.

    Caplan basically says that to keep it at an elevated Y you have to keep G up forever.

    Well that only follows if you don't attach a theory of the behavior of I. Yes, if I stays put then to maintain the multiplied level of output G has to stay put forever. But that doesn't seem to say "Keynesians think G has to stay put forever" so much as it says "let's think more about shocks to I that caused the problem in the first place and determinants of I that lead to a recovery". These are the sorts of intuitions that are discussed in the comment section.

  3. Gene_Callahan doesn't let me comment on his blog, but my response would be, "But from that it doesn't follow that by breaking your leg, you can increase your expected utility, and if you implied as much (the way economist do) I'd say you were very stupid."

    Btw, did you read my explanation about where the job creation in breaking windows really comes from and why it needn't create jobs even well below full employment?

  4. All this talk of crosses and no mention of the Southern Cross:

    Tsk. Tsk.

  5. As for your comment on Austrians (I say this not being one), your individual experience is no measure of how much other econ types read Austrian blogs. Most econ blogs are for the most part echo chambers.

  6. I forgot - I meant to link to your post stickman!

    Yes - check that. I might right on it soon.

    How's school? You've started, right?

  7. No problems ;) It's been an interesting discussion to watch unfold.

    School's been good thus far, though pretty frantic. Thought of you during our introductory micro lecture, as there was a discussion of the roots of micro and it's links - and discontinuities - with macro. There were some intriguing quotes from the likes of Robbins, Keynes etc regarding methodological individualism and so forth. (Here's one reference from that lecture -- written from a Post-Keynesian perspective I believe -- that you might find interesting. Disclaimer: Beyond a particular passage quotation, I haven't read it!)

  8. > I suppose it's an identity with a few things attached.
    > The only real "model" attached is the construction of
    > consumption, which of course drives the multiplier.

    Well I'd say that it assumes other things too, but that's a discussion for another time.

    I agree with you mainly. The 45 degree line is the identity, the rest is theory.


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