Sunday, February 5, 2012

Assault of Thoughts - 2/5/2012

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- David Henderson on five myths about free markets. I haven't listened to this yet, but past talks by David along similar lines have been very good. I think some people are under the mistaken impression that these myths are held by left-of-center economists. I think this is largely untrue and really a straw man I have to deal with a lot. But there are large segments of the population that think this sort of thing, and Henderson's clear exposition is great for meeting that.

- A great article in the New York Times by Christina Romer explaining why manufacturing isn't special and shouldn't get special treatment. Yes, yes - be nostalgic if you want. But don't use that as an excuse to be reactionary, regressive, or protectionist. The "decline of manufacturing" is actually not a decline in manufacturing per se, but a decline in manufacturing employment. And that is a very good trend. We can do things to help those who are hurt by the dislocation, but don't mix that up with an argument for standing against progress.

- Arrggh. Arnold Kling on 1946. It's like these people don't even realize that a counter-argument exists. It's like they don't even realize that most Keynesians in the early to mid forties were not saying this. Samuelson bent over backwards in his chapter in the Harris volume to point out that he was swimming against the tide, that he was making recommendations that ran counter to thoses of a lot of his fellow Keynesians. Dealing with the 1946 issue feels like dealing with 1920-1921 all over again. I'm not saying it's a fantastic vindication of Keynesianism and an assault on your theory or anything. I'm simply saying that theories like Keynesianism don't last as long as they do by being so vulnerable to such a simplistic chain of logic. Arnold, if you think this is a decisive case of Keynesians getting it wrong, you're working off of a strawman version of Keynesianism. Here's the end of my public service announcement: Keynesianism does not, and never has claimed, that government is the only source of demand or that the economy can't recover without government spending or that government cut backs will doom the economy in all circumstances. In some cases, government cut backs can be quite beneficial for the economy.

- LK has a discussion of Hayek's prediction of the Great Depression. He raises serious doubts about the veracity of the claim.


  1. What book is that Samuelson discussion in? I have not really been that interested in this part of the reconversion debate (because its pointless) but I guess since its cropping up now I might as well collect citations.

    1. He probably says it elsewhere too, but what's often quoted is his chapter in Seymour Harris's "Postwar Economic Problems" (1943). What I like about it is that Samuelson actually comes out and says he's more pessimistic than other analysts.

      Hansen has a chapter in that one too that is more upbeat.

      I was curious if you had thoughts on this - let me know if you do. I haven't read all that extensively, but I've read enough to know that (1.) Samuelson wasn't representative and he was aware of this, and (2.) nothing in Keynesian thinking - even at this early date - necessitated Samuelson's fears. This isn't to say he didn't use Keynesian arguments - he did. But there were excellent reasons to suspect the postwar period would not see a resumption of the depression, and indeed many Keynesians did not expect such a thing.

  2. Could you, as a center-left Keynesian, give an example of a situation where you would personally advocate big budget cuts? Let's say they would have to be drastic enough that defense cuts (or other cuts that liberals approve of) wouldn't be enough. And just to drive the point home with a power tool, tax increases on the rich aren't enough either.

    The reason I'm asking this: you keep telling us that Keynesians (particularly Krugman) really aren't the vicious anti-market spendthrifts that libertarians seem to think they are, but I honestly haven't seen Krugman make a pro-market argument in years. Liberal commentators and bloggers have made the word "austerity" almost synonymous with "rape the poor", and Krugman is only fanning the flames, so I'd be very surprised if he ever advocated major budget cuts.

  3. Daniel Kuehn, whenever you get around to that Keynes and the post-war Keynesians article, will you cite David Colander's article on Keynes and Lerner regarding Keynes's opposition to deficit finance?

  4. Daniel, in light of Russ Roberts' post at, you might want to cite some evidence that most Keynesians were not predicting another depression.

    1. I have on here before, and I think I'm going to start collecting them all together soon.

      A good place to start is for people to read the entire Samuelson chapter. He comes out and says he knows his view is unpopular.


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