It's an extremely frustrating post. Like a lot of what he's written recently on the subject, it's very much "do you still beat your wife" blogging. It is also quite vague in exactly what his concerns are. I was worried I was making too much of this (it's only a blog post, after all - maybe he'd lay things out more clearly in a longer piece), but it seemed to frustrate Barkley Rosser too. If there's a real disagreement between Peter and us on cyclically balanced budgets or debt-stabilizing deficit levels then we can legitimately disagree with that. I'd probably argue that if Smith were around today he'd be on my side, but clearly back in the 1700s he wasn't pro-debt-stabilizing deficits, and that's OK. Nobody was. Nobody was on Einstein's side back then either. That's OK. But instead of getting specific he makes vague allusions to the "economics of illusion". First, that's a condescending way to talk about your fellow economists and I wish he'd stop it. It does not incline me to take the post or the argument very seriously. But more importantly it's not clear at all what he's talking about. Where does he draw the line? Cyclically balanced? Debt stabilizing? And more importantly - why? What's the actual argument? All he does is call people jugglers and illusionists and make references to some future day of reckoning. It's not a clear argument. I know exactly why Michael Wickens, for example, differentiates between deficits that do and don't stabilize the debt and I know precisely where he draws the line. Same with Barkley on the cyclical balancing. I know what the standards are and I know why. I am completely clueless when it comes to Pete.
I like Pete a lot, but I've been trying desperately lately not to engage people that write like this. The correct answer to "do you still beat your wife?" is to ignore the question. If I said something equally absurd like "those libertarians really could care less about poor people" I expect a lot of libertarians would ignore me too - and rightly so. Part of why I'm bringing attention to this is that other people seem irked by it too. For example - here's a great post by Ryan Murphy on how aggregate demand belongs in Pete's "mainline economics" (which is basically all the economists Pete likes - his definition of it as the economists in the Smithian tradition who hold enduring ideas would not produce the same list in most peoples' estimation). He also points out that Malthus won the debate with Say and practically everyone understands this (including Say).
Anybody can slip into this sort of thing. Pete is a smart guy after all and he does. One of the questions you should ask yourself when you are disagreeing with another group of people is "would they agree with my characterization of their argument even if they don't agree with my views on the validity of their argument?". If the answer is "no", then you have a very big problem. I have an article coming out in Critical Review later this year on Austrian business cycle theory (Hayek's business cycle theory actually - I make pretty clear in a footnote right up front that I'm not working with all of Austrian thought on the subject). I think people will find the paper valuable. But I also think people will find it accurate. I think most people will criticize my sections on the pros and cons for Hayek's ideas (yes there are many pros I discuss), but not my exposition of the theory itself. That's very important.
What About Trade Deficits, Anyway?: DeLong FAQ
4 hours ago