Monday, January 28, 2013

Not a good post from Russ

You guys know that over at Cafe Hayek Don's style and content bothers me leaps and bounds more than Russ's. But today's post is not a good one for Russ. A couple observations:

1. He really can't juxtapose Smith/Hayek with Keynes the way he's doing here. Economics, in reality, is actually not a boxing match. That's not to say Hayek and Keynes can perfectly co-exist. There were clearly specifics they disagreed on and one (or both) has to be wrong on something. It's irresponsible to look at the success of Keynesian economics and conclude Adam Smith has fallen. I guarantee you, Russ - we are Smithian as much as you are. Very few economists aren't. By acting like these cannot co-exist you're getting a bad answer to your own question.

2. There is a "market for science" in both the strict supply-and-demand market and in the broader sense of a set of exchange relations. In neither sense is science produced predominantly for the consumption of politicians and the general public. Scientists try to convince other scientists. To the extent that they are public expositors, that's not going to drive their scientific conclusions.

3. The idea that modern policy is supported by Keynesianism is nonsense. Why do you think Keynesians have been pulling their hair out for almost five years now? It is amazing to me people are still claiming this. There's this weird assumption that because Russ didn't get what he wanted we must be getting policy justified by Keynesianism. That's not how it works.

4. Ultimately, the same critique needs to be made here that needs to be made about the Keynes v. Hayek raps that Russ worked on: it's not so much the finer points as it is the big picture - if you see this as a battle royale or if you see this as "bottom up" vs. "top down", you are fundamentally misunderstanding the nature of economics discussions right now and you are fundamentally misunderstanding what the other side claims. I'm a bottom-up guy. I'm a Smithian. I'm a Hayekian. I'm also a Keynesian.


  1. Isn't the mainstream of economics some variant of New Keynesian? And as Mankiw wrote in his scientists vs engineers paper, it is going to be the more saltwatery types who make policy in D.C. Of course, you could argue that New Keynesians aren't really Keynesian.

    Your other points are good though.

    1. I've never been particularly impressed with the scientists vs. engineers point. It's a science of human behavior so are economists working on central banking scientists or engineers?

      New Keynesians are indeed in Washington, but ultimately central bankers and Congressmen make policy. We got a modest stimulus in 2009. We've had some modest monetary accomodation. All this helped - don't get me wrong. But the idea that we're steering the ship is nonsense. A bunch of politicians and a somewhat better assortment of lawyers, bankers and economists at the Fed are.

    2. I think guys like Russ have more sway over the thinking of Congressional Republicans than guys like Krugman have over Congressional Democrats, for example.

  2. Daniel,

    My team didn't get our way in the crisis. Neither did yours. But your side got a lot closer. Don't you think that the $820 Billion dollar "stimulus" package had more in common with Keynes than Hayek? Alan Blinder is a pretty Keynesian guy. He thought it was about the right size:

    I know--some people wanted a bigger stimulus. But it's a Keynesian stimulus not a Hayekian one.

    What is Smithian about me is that I start with what Dan Klein calls a "presumption of liberty." I also have little faith in precise models of human behavior. I believe that good social science is narrative in nature using facts and observations about the world. I am suspicious of politicians who try to engineer economic systems from the top down. I think people are a mix of self-interested and altruistic but the self-interested part dominates. What induces altruistic behavior is a desire for respect. I believe people (even economists) are prone to self-deception. I think the division of labor is limited by the extent of the market and is likely more important for creating prosperity than Ricardian comparative advantage.

    What's on your list?

    1. Right but everything that has happened since the stimulus has been holding federal spending steady and they've all been arguing about how to reduce it - in the middle of a depression. That sounds closer to your response (cut) than mine (grow).

      I'll talk about my Smithian list in a post. Thanks for taking the time to comment.

  3. Perhaps Russ Roberts ought to note that Smith and Keynes opposed speculative activity, in addition to rent-seeking...please read the following paper.


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