Thursday, November 1, 2012

Some vindication by a panel of economists at the WSJ...

...although you wouldn't know it from the title they slapped on it. They seem to have a different definition of "stimulus" which I generally take to be a word that refers to output.

1. Jan Hatzius, Goldman Sachs sas GDP will take a short term hit but the long term boost to GDP will exceed the short term hit.

2. Mark Vitner, Wells Fargo says the exact same thing. Short term reduction but more than that will be boosted in 2013 as a result of the storm.

3. Gregory Daco and Nigel Gault, IHS Global Insight, David Greenlaw, Morgan Stanley and Michael Feroli, J.P. Morgan Chase do not take a position on how GDP will fall out in the end. Daco and Gault acknowledge there will be rebuilding activity, but suggest that it's unclear whether that will crowd out other activity. I think in a depression that is a bizarre thing to suggest. But they still don't say it's definitely a loss to GDP. They say "there's no guarantee".

All five agree with me that this is not a net good for the economy and that it reduces our wealth and standard of living.

So by my count, none of them come out supporting Don Boudreaux, two of them support me, and three say we can't be sure.


  1. Daniel, You are very emotional today. Take a break.

  2. You can interpret this however you want, Daniel, but I honestly think these guys were emphasizing the "we're not saying this makes us richer..." precisely because of the hootin' and hollerin' from guys like Boudreaux. Sort of like people are careful what they say about black people when Jesse Jackson is watching.

    I think 4 of them clearly indicated that even if GDP on net is boosted, that still standards of living are lower than they otherwise would have been. However, the Wells Fargo guy seemed to be to say that it is an empirical question, to see if the hit to wealth can be more than offset by the net addition to GDP. It seemed like he thought it unlikely, but he was admitting it is theoretically possible.

    So anyway, I am agreeing with you that these guys were very careful about the stock/flow distinction. but I truly think it is because some of us have "raised awareness" on it. If you can find a symposium of people talking about their projections for Katrina or 9/11 or whatever, I would love to see it. E.g. Krugman certainly didn't make the stock/flow distinction in his post-9/11 article, which is what allows us to argue so much about it.

    1. re: "E.g. Krugman certainly didn't make the stock/flow distinction in his post-9/11 article, which is what allows us to argue so much about it."

      You're joking, right? He contrasted losses to wealth and boosts to investment in that piece.

    2. No I'm not joking. He said the attacks could "do some economic good." He didn't ever say, "Now let's be clear, I'm taking 'economic good' to mean 'boost GDP,' not 'good for the economy.' Nobody could possibly be so dumb as to think 'do some economic good' means 'good for the economy.'"

      Let me repeat, Daniel, I'm not here saying that your interpretation of Krugman's 9/11 piece is demonstrably wrong, I'm just saying Krugman wasn't as crystal clear about the distinction between stocks and flows as the WSJ contributors are in this piece. Which is why I don't think Don B. is out line for saying Krugman was touting the economic benefits of the 9/11 attacks. (I agree Don B. shouldn't have used the verb "celebrated" since Krugman wasn't celebrating.)

    3. Oh he didn't take it upon himself to define stocks and flows like they did, that's true. But he said what was bad about 9-11 from an economic perspective: and it was a stock. And he said what was good about it from an economic perspective: it was a flow.

      There was no ambiguity that there was a bad and a good effect, and the bad was a clear reference to stuff we have and the good was a clear reference to stuff we build.

      I don't agree with Don that this stock/flow distinction is so hard. Like I said elsewhere, people have bank accounts and they get paychecks. They're fully capable of understanding these concepts. When Krugman contrasted the good and the bad I don't think he was leaving people in the dark by not spending a paragraph defining stocks and flows.

      That the WSJ panel did is to their credit (and perhaps a function of all the abuse coming from guys like Don who insist we're saying disasters are good things when nothing like that has been said).

      What's amazing to me about Don is that even when the WSJ panel goes the extra step and spoonfeeds these definitions to readers, he then starts complaining that even trying to explain it is "misleading"!!!! (those last three exclamation marks are for you :))

    4. Ultimately there is no way to agree with Don without getting behind him ideologically. Even when you lay everything out carefully and define simple concepts that probably don't need to be explained in so much detail, he doesn't like it. In his case I really think it's hopeless.


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