Tuesday, January 10, 2012


And I thought Bob Murphy of all people would stand firmly against these enhanced interrogation techniques!

He has one more post on the debt issue, which I'm not even going to touch (much), but there are some interesting "loose ends" you all might want to look at.

I do have to respond briefly to this, though: "It is clear that Daniel Kuehn still has no idea what Nick Rowe (and later me) are bringing to this discussion. And I say that, acknowledging that Daniel and I are the MVPs of the two teams, respectively. It’s also true that I was misunderstanding Landsburg and Daniel for much of the debate. Nonetheless, since Daniel thinks Nick’s slogan is goofy, it shows Daniel still doesn’t understand the absolutely critical perspective Nick (and Boudreaux) brought to this issue."

I really think I do know what they're bringing to the debate. Note that what I thought was goofy was the idea that macroeconomics wasn't about GDP. I don't think it's goofy to say macroeconomics is about people. I also don't think the point about "generations" (the two period individual experiences in Bob's model) is irrelevant and I certainly recognize it. Debt imposes costs. Debt hurts people in the future to help people now. That's all quite important which is why everyone (including Krugman and myself) have noted it. Rowe and Murphy bring an emphasis on these issues to the debate, and Murphy especially has done a great job presenting them.

I'm not sure why noting that that's not the only thing I think is important and that's not quite what Krugman was arguing against means that I don't recognize this.

Also - people should tread carefully in reading Bob's account of "flipping" the result. He says you can only do it with a surplus and a negative interest rate. That's not really true - what I showed was you can also do it with inheritance. Bob doesn't like including inheritance, which is entirely fine - but that doesn't invalidate the model. One of Bob's critiques is that it's hard to track whether people are happier. Again, we really need to watch terminology here. If you are talking about welfare that's one thing, and inheritance does introduce complications. But if you are talking about whether the future is poorer or not it's less clear how that's a legitimate critique. Anyway - I completely concede Bob's result if we are ruling out inheritance.


  1. I like this bit:

    In closing, a few loose ends:
    * It is clear that Daniel Kuehn still has no idea what

    That's cutting and running. Or declaring victory and retreating.


  2. I like how Rowe and Murphy are trying to declare theirs is the only side that cares about people.

    That was, after all, the starting point for focusing on transfers and debt. I must have missed where they asserted that the only purpose of transfers and debt was to inflate nominal (as opposed to build real) GDP. When you look at the writings of people who are the least concerned about debt levels (i.e. Bill Mitchell's stance) it is clear that they are trying to refocus the issue entirely on the average worker and take some of the bite from the investment types that get more excited about "structural debt" than structural improvements.


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