Tuesday, September 13, 2011

Karl Smith: "We Need to Stop This"

There's no point in paraphrasing or selectively quoting this one:

"I know some people who read my blog know Don Boudreaux personally and perhaps eat lunch with him regularly, so I am hoping this message gets through.

This kind of stuff is just unseemly.

This Keynesian explanation is adolescent. Lazily identifying the symptom as the
underlying problem, Keynesians then craft a "theory" that shows just how
inadequate spending can in fact cause inadequate spending. How clever of them!

It’s understandable that many people untutored in economics fall for
this nonsense. Just as many untutored in geography naturally think the Earth is
flat (looks that way, doesn’t it?), many untutored in economics, upon seeing
businesses closing up and workers being laid off, conclude that the problem is
inadequate spending (looks that way, doesn’t it?).

Really? No liquidity demand? No deep uncertainty? No sticky prices? No monopolistic competition? No dual role for money as a medium of exchange and a store of value? No efficiency wages? No flight to quality?

Just low spending begets low spending. Keynesians must really be ignoramuses.

Its one thing to disagree with a theory, its another to erect such an insulting straw man. Why do this?

I look forward to Boudreaux’s promised column on regime uncertainty. If he has an alternate theory of recessions, then I am happy to hear it. Yet, I would prefer if he did not begin by spitting on mine.

Additionally, if Don Boudreaux wants to debate these ideas personally I will be more than happy to. Not because I want to “show him up” though I know a lot of people watch debates for this. But, because by actually engaging one another’s ideas intensely and seriously I think we can come to a deeper understanding.

There really has been a flood of nonsense in the last two weeks about Keynesianism, and I'm not sure why. I don't understand how these people can actually convince themselves that Keynesians are this dumb or simplistic - and not just that, but even when they get informed about their misunderstandings they dig in and mock the people who are informing them. It's not pretty. People read these blogs and these guys do get out into the media, and for that reason alone it's worth responding to. But every post I see like this makes me think of them all more like politicos and less like economists - a change which I genuinely find unfortunate.

Anyway - I think there's a challenge in that last paragraph. Maybe Smith will come up to GMU - I'd show up for that. I might even go down to North Carolina to see it.


  1. 'There really has been a flood of nonsense in the last two weeks about Keynesianism, and I'm not sure why.'

    Because Austrians have been hiding in the recesses of the internet happily knocking down straw men and patting each other on the back for years. But the Hayek-Keynes spotlight and the fact that they are beginning to be engaged by real economists has exposed them and they are flailing around wildly.

  2. There seems to be a lot of these debate challenges lately. I've been seeing them all over the blogosphere the last couple of months.

  3. I know why:



  4. Daniel, I am so thankful that I found your blog. I had no idea what kind of straw manning prominent non-Keynesians were engaging in on such a regularly basis. Your blog has really opened my eyes to a whole 'nother world of economics. Unfortunately, I used to buy the consumption-centric view of Keynesian economics hook, line, and sinker. Your posts have helped bring me into reality. I just wanted to thank you for that.

    On a different note, I tried to e-mail you regarding some textbook suggestions. Did you receive my message?

  5. Nice -
    I did get your email, I've just been pretty busy the last two days.

    Honestly it's not like I've used a ton of books myself (I've only taken so many classes) - do you mind if I repost your question here, provide my thoughts, and solicit thoughts from others?

  6. I'll beat you to the punch! Here is what I asked Daniel: "Do you have any favorite textbooks for the undergrad level? I've already completed the introductory micro and macro courses, so I'm looking for something a step above."

    My micro theory class starts in two weeks. We'll be using Microeconomics by Pindyck, et al. I like the looks of it from the skimming I've done so far. I also bought Landsburg's Price Theory and Applications just for the heck of it. (Found a copy for 3 bucks and I'm always happy to have more econ books.)

  7. Ya - but it's nice to have easy things to post (I feel like I've got to every morning). If this doesn't get feedback I will.

    I used Williamson for intermediate macro and liked it a lot. I used Romer for grad macro. That was hard to get the hand of - but I think that's just because grad macro is different from intermediate. That one (Romer) has come to be my favorite econ textbook for any class.

    For intermediate micro our professor was in the process of writing a textbook so we got printoffs of his draft. I liked it a lot (at least in the form he gave us!). The professor was Donald Campbell - I believe the book was called "Incentives". You can google that.

    For grad school I've used Varian at both GWU and AU. I like it a lot. It is very efficient in presentation, though. That's nice when you already have some understanding of the material, but can be hard if you don't. There are two Varian texts - they're called "baby Varian" and I guess "big Varian" is the nickname for the grad text I use. I've never used baby Varian but apparently it's of the same very high quality - that would serve better as an intermediate text, I'm guessing.

  8. Thanks for the recommendations. :)

    Another question I had (and maybe you've already posted about this): Do you have any advice for econ students? I mean, outside of the usual study hard, take as many math courses as possible, etc. ;) Generic question, I know, I know...

  9. ...think of them all more like politicos and less like economists

    Ding, Ding, Ding!!! These two lost any curiosity about other perspectives some years ago. They're of the don't need to read a book to review it school of economics.

  10. http://mises.org/books/failureofneweconomics.pdf

    Hazlitt breaks down Keynes' General Theory "page by page, theorem by theorem, chapter by chapter."

    Smith / Bob Murphy Debate here: http://www.youtube.com/watch?v=lPxzE2XM1TY&feature=youtu.be


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