OK Bob Murphy is clearly not getting it (here, and he thinks I'm "upset" here).
Bob regularly battles Don Boudreaux and William Anderson for the title of Krugmaniac-in-chief, but I'm more fond of Bob because he's a nice, smart guy and you can actually talk to him about this stuff, so I think he actually has a chance of getting how weird this post by Williamson is.
As a preface, I actually agree with Williamson on a lot of what he has to say (Michael Woodford has said this sort of thing in the past about macro too), much more than I agree with some of Krugman's melodrama. I agree with Williamson that economic science is good at selecting good ideas, and that there's a pretty good consensus among macroeconomists despite the perception that they never agree (this is actually referre to as the "new consensus model"). And what's more, it's got a lot of Keynesian features to it. And Williamson (despite being a junior Krugmaniac), is a great blogger.
But there was something fundamentally weird about the post that I thought everyone would get.
So Williamson starts off by blasting Krugman for not knowing modern macro. To a certain extent it's true - Krugman almost certainly does not keep up with the details these days - but he definitely knows the broad outlines of modern macro, and he knows a lot more of the details than the average person pontificating on it. So Williamson probably overstates the point a little, but that's basically fine.
What's amazing to me is that in launching into what constitutes modern macro, Williamson goes through a litany of ideas that are forty years old, and well integrated into Krugman's body of work.
Bob has to be able to see how weird and funny this is.
Williamson is up to the task of duking it out with Krugman - and I wish he did. That would be a good discussion to follow. But he didn't do it in this post.
"Freshwater" really isn't that big of a mystery here. It has always referred to the Treasury View, demand denialism, and strong Ricardian equivalence. It's definitely out there. It's even more common among policymakers than economists (thankfully), and many economists who when pressed do an about face do make statements like this. Nobody that follows Krugman as closely as Bob does should be confused about this point.
"Freshwater" is not a take-down of the Phelps volume or expectations in macro.
Tuesday, December 18, 2012
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DK, I think what's going on here is the following:
ReplyDeleteWilliamson reads PK as saying that the state of macro is rotten. That over half the field is a cult. That the freshwater macroeconomists have re-introduced 80 year old fallacies. And so on.
Williamson sees the current state of macro as more or less harmonious and cordial, or at least far more harmonious and cordial than it was in the 60s, 70s and 80s. Williamson is saying most macro-economists today speak the same language, have pretty much the same intellectual worldviews, and so on.
So when Williamson sees PK saying the state of macro is rotten, that over half of it should be purged into the void, Williamson is probably thinking to himself "Huh? What is this guy talking about? We're all having a party, more or less relaxed...sure there are some heated discussions, but we're all friends at the end of the day, and this PK guy comes in and says over half of us are in a cult and making the party rotten? Has he not been in the party room recently? It's not like it was back when PK was attending the parties frequently. He still seems to believe there is tremendous animosity and wide intellectual gaps between the saltwater and freshwater types. But that saltwater/freshwater distinction is pretty much dead in the water. It's ancient history as far as we're concerned. We have reconciled most of the differences we once had."
So now, you're saying Williamson's response doesn't make much sense, because he cited 40 year old stuff that PK has integrated into PK's own work. I think you may have overlooked what is actually going on here between Williamson and PK, because your main concern seems to be defending PK's intellectual honor. Yes, Williamson did mention 40 year old stuff that PK has integrated into his work, but that wasn't the main point of Williamson's post. His main point was that macro isn't the war it was when PK was a frequent party guest, before he started devoting his time to NYT articles, giving speeches, and so on.
What you are saying is an extreme tangential point of "Hey now just a minute Williamson, how can you be accusing PK of not keeping up with the current state of macro, when you pretty much described the current state of macro as consisting of ideas that PK himself has utilized? Aren't YOU not keeping up with PK's work? Are you not like a pot calling a kettle black? Your post seems weird to me."
Let's switch gears now. If Williamson's description of macro is what PK has already taken into account after all, then I will ask you to consider PK's characterization of the current state of macro as "rotten" and "cult" infested.
In other words, if you accept Williamson's description of the current state of macro as accurate, and if you say hey wait a minute, PK has integrated that stuff into his own work already, then do you see how that would imply PK would be calling HIS OWN WORK "rotten" and himself a "cult" member?
If you say that's silly, PK would not call his own work rotten, then that would mean you would have to say that Williamson's description of the current state of macro is not accurate after all. That the current state of macro IS still as rotten as PK claims it is, that over half are in a cult.
So that leaves you with two alternatives. Either you accept Williamson's description of macro as accurate, in which case PK himself ends up being rotten and cultish by implication, or, you accept Williamson's description as inaccurate, in which case you side with PK and believe the current state of macro is in fact rotten and cultish.
I am sure that if you explicitly said yes, the current state of macro is rotten and over half are in a cult, here on your blog, and Williamson read it, then Williamson would say you too are not keeping up with the current state of macro.
Aren't most of these falling under the freshwater rubric finance rather than macro economists? Isn't most of PK's criticism that macro has focused on micro foundations and irrelevancies rather than the big picture of demand and their failure to educate these on macro or actively counter these old errors?
ReplyDeleteHoly cr*p Daniel... Krugman said half the profession is a cult that embraces 80-year-old fallacies. Did you just want Williamson to say, "Are not!!" ? To explain that actually there isn't this partition in macro the way PK claims, what else can Williamson do?
ReplyDeleteYes, in the process Williamson is forced to imply that PK doesn't get the Lucas revolution, not because he actually thinks that, but because it's the only way to make sense of Krugman's post. Krugman is saying, "Half the profession doesn't look at macro the way I do," and so Williamson is saying, "Well gee whiz, we look at like XYZ," and then you are mad that Williamson is implying Krugman doesn't know XYZ.
A great reaction would have been to note that the sorts of things Krugman gets bothered by are not believed by half the profession - that the share is smaller (although a bigger share talk irresponsibly with Treasury-View-ish statements).
DeleteI thought it was really bizarre to repeat back what Krugman and his buddies say.
I'm not sure what Williamson was even saying with that. Do you?
It's not just me. Wren-Lewis seems to be as confused as me. He agrees with Williamson that macro isn't as divided as Krugman suggests (like me), but he thinks that Krugman agrees with all the stuff where Williamson is citing disagreement.
"Yes, in the process Williamson is forced to imply that PK doesn't get the Lucas revolution, not because he actually thinks that, but because it's the only way to make sense of Krugman's post. Krugman is saying, "Half the profession doesn't look at macro the way I do," and so Williamson is saying, "Well gee whiz, we look at like XYZ," and then you are mad that Williamson is implying Krugman doesn't know XYZ."
DeleteThat's it in a nutshell.