Thursday, September 8, 2011

A good point from Karl Smith

This was another good point from Karl Smith's response to the gnome thought experiment: "However, the larger point is that I think Bob’s analysis and that of many economists in this debate misses what working economists do every day."

That was exactly my thought when Steve and Troy made this absurd assertion that Keynesians can't grapple with capital heterogeneity the other day. They were telling me this at a time that I - upstart Keynesian kid that has somehow managed to get on the radar of a fair number of libertarian economist bloggers over the last couple years that I am - was (1.) working on first week problem sets going over models where one type of capital was good at producing one type of output but not another, (2.) writing a chapter about the dynamics of a specialized labor market, and investment in specialized human capital, (3.) teaching my undergraduates about specialized factors of production, and (4.) giving my edits to my team members on a feasibility study on a training model (apprenticeship) that is celebrated because it can be adapted by firms to their own production processes, which are often very different from other firms.

In other words I, as an actual economist and student of economics, was immersed in capital and labor heterogeneity and it's implications. And these guys are really suggesting that everybody but the Austrians has somehow missed this!!! As Smith suggests -they are missing what working economists do every day.


  1. Would you describe yourself as New Keynesian or Post-Keynesian? You seem to have sympathies with the latter that a lot of academic economists don't share.

  2. I am definitely not a Post-Keynesian, but you're right - I think they're interesting at times. I'm not even sure I completely understand Post-Keynesianism, so I view them positively but don't consider myself one. Certainly there are a couple very valuable Post-Keynesian bloggers out there.

    I think it's probably fair to say I'm New Keynesian. I never explicitly call myself that (like Karl Smith does) for two reasons: (1.) I do not have a good enough understanding of the mechanics of New Keynesian models to even feel qualified to call myself one, and (2.) I think this crisis has shown that some very basic "old Keynesian" or Neoclassical Synthesis Keynesian insights (which I do feel I have a good grasp of) are a lot more important than we gave them credit for just ten years ago.

    So I say "Keynesian" because by any measure I'm that, and if I discover I'm a New Keynesian too, that falls under the "Keynesian" umbrella.

    I also really doubt that microfoundations are especially crucial to macroeconomics (although they are always nice to have if they're reasonable)... that's not a very New Keynesian thing for me to think.

    I spent a lot of my time in college and the last five years of work as an almost exclusively empirical guy. So I'm not expert enough in the theoretical details to really commit myself to a narrow group. During my PhD I hope to get more comfortable with the theory, but I doubt think my fundamentally empirical self-image is going to change that much.

  3. Let me put it this way - when I did work with some New Keynesian material during my master's program at GWU, I never recoiled at it! Seemed reasonable enough to me.

  4. "...upstart Keynesian kid that has somehow managed to get on the radar of a fair number of libertarian economist bloggers over the last couple years that I am..."

    That easily explainable; you engage them.

  5. Gary is right. Sometimes I think it isn't worth the time, as many libertarians have themselves so deep in the hole of 'taxation is theft' 'free markets are good' and w/e else that it would take an incredibly well crafted essay before you both even knew where you stood.

    I'm going to quote a commenter called Chris from modeled behaviour:

    'It seems impossible that the audience of a site dedicated to your opponent’s ideology — an audience that in fact pays money to have that ideology drummed into their heads — will heed anything you say, no matter how cogent, reasonable, and correct. The only way you will sway any of them would be to pull off an 8 Mile-style beat-down in which you make your points and leave your opponent utterly speechless for 12 minutes.'

    Maybe somebody should get to work on a rap?


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