Friday, June 21, 2013

Great Krugman column today

Here, with motivating model discussion here (how many columnists think through models - even simple ones - before pontificating?). Oh, and of course this was < sarcasm > extraordinarily uncivil < /sarcasm >.

This is what the haters don't seem to understand: Krugman is not popular because he is some kind of political hack. He's popular because he thinks carefully about issues before speaking on them. He's popular because he gives credit where credit is due and then speaks truth to power when he has to. As I've said before he's a goddamned national treasure.

I understand he gets catty sometimes, but usually when you accuse him of being cruel he's actually just saying emphatically that he thinks you're wrong (which is not inappropriate at all). Even when he's genuinely out of line (we all slip into it), he's a paragon of virtue relative to much of the economics blogosphere. To my knowledge, for example, he's never written anything nearly as cruel as this, and people usually (as far as I can tell, rightly) consider that guy to be fundamentally a nice guy.

btw - these connections he's making - separating mark-ups out from rental rates on capital, and thinking about the responsiveness of investment to each component of profit - should be very familiar to anyone that works with Post-Keynesian models. This is why I don't take the Post-Keynesian griping about neoclassicism very seriously: you can get the same result with Cobb-Douglas and Dixit-Stiglitz. The value Post-Keynesians add is in the different sort of questions that they ask, not their stand against neoclassicism.

PSA over.

36 comments:

  1. So, Apple makes a lot of money without employing many American citizens. How does this imply that they make money from "rents"? It seems quite hard to say that they're any kind of monopoly; there are a lot of substitutes available for its flagship product, the iPhone.

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    1. No, Apple is a monopoly. (Sent from my Samsung Galaxy Note II phone- which has majority market share).

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    2. One of the models Apple wants banned?

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    3. Wanting to be a monopoly is different than being one.

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  2. Hang on a second, Daniel. Are you saying Krugman has never written that his intellectual opponents want to see people suffer?

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    1. No - I said he DOES get catty and inappropriate. "Usually" he's just saying emphatically that people are wrong. That doesn't mean he isn't sometimes "genuinely out of line".

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    2. I think it's fine to point out when Krugman and DeLong and others get problematic. I do when it happens and it doesn't change my tremendous respect for them. What frustrates me, I guess, is that on the other aside from Mises Institute bashing (which has its origins in deeper schisms than blog ettiquite anyway) there is almost no self-policing like this when it's arguably a lot more common than on Krugman's blog. And that gets frustrating.

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    3. Anyway - not to detract - there's a lot of meat in this column and the associated blog posts.

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    4. Krugman has written that about some of his opponents and he meant it and he was right. There is a constituency out there, even in academic circles, for the whole Calvinist "suffering is good for the soul" thing.

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  3. "Oh, and of course this was extraordinarily uncivil."

    The piece you link to was not uncivil at all. Rogoff and Reinhart ran around telling people that 90% was a cliff - even if that was not what their paper said. That position had real consequences for real people. Academics do not have a license to peddle damaging crap to the general public and not get called out for it publicly. If academics want to sit around in their own haunts drinking sherry and being polite to each other then fine. But Rogoff and Reinhart walked into a very different kind of bar when they started peddling a misleading version of their (erroneous) result to a broader audience.

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    1. HA!
      No I meant the exact opposite. I had put < sarcasm > ... < / sarcasm > around it but it looks like blogger dropped the html! I'm going to try to fix it.

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    2. fixed :)

      Ya - I thought it was a great example that you can disagree with part of someone's work and agree with other parts and he handled it very well.

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    3. OK that makes more sense.

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  4. Was underwhelmed by the article. I was surprised Krug didn't note that a tech-heavy 21st century means an IP heavy 21st century. The market power of giants like Apple and Monsanto (two diff industries) come in much part from the patents they've acquired. The purpose of those patents is to incentivize innovation by granting the monopoly power necessary to recover fixed investment costs. You can't have your cake and eat it too.

    The article would have been mildly more interesting had he noted that the patents themselves may not promote innovation as much as we think. But that suggestion is not new. The only thing I got from the article was that there's a bunch of evil monopolies sucking up the profits, sitting on those profits, and depressing demand. That argument is old and stale.

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    1. That was not his point at all. His point was that the nature of market power has changed. In the past firms like GM could exercise legitimate market power while still employing a large portion of the nation's workforce. Not the case today....

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    2. That was not his point at all. His point was that the nature of market power has changed. In the past firms like GM could exercise legitimate market power while still employing a large portion of the nation's workforce. Not the case today....

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    3. "The market power of ... Apple ... come in much part from the patents they've acquired."

      I don't think so. Apple's power comes from superior design rather than underlying technology. So far as technology goes they probably had some technical leadership back at the very beginning but those days are long gone and did not depend on patents.

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    4. Partly. But what also makes Apple products so great are their functionality. If you can make something cool looking but it doesn't function, it isn't going to go very far. Take their trackpad. Still the best. Windows machines have been trying to produce something as good for a while and while they're getting close, they still aren't there. Take away the patents and you probably get much more rapid imitation. If the only thing distinguishing Apple were it's physical design, I don't think it would have acquired the same degree of power.

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    5. "I don't think so. Apple's power comes from superior design rather than underlying technology."

      But the problem is that Apple doesn't deserve exclusive rights to basic designs (like touchscreen slabs). The dominant mobile phone form factor has changed several times (candy bar --> clamshell --> slider --> touchscreen slab). I don't recall Motorola trying to ban everyone else from using clamshells (maybe they tried, but they obv weren't successful).

      Despite Apple's design patent attacks, Android tablets and phones have already taken the market share lead over Apple (in the aggregate). But this should have happened a lot faster, b/c Android manufacturers (esp. HTC) had to deal with Apple's (and MS's) patent attacks instead of focusing on making and selling great products.

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  5. And btw, the shenanigans Krugman recently pulled with the Furth/Heritage hearing were pretty despicable. And implicit accusation of intellectual dishonesty is far beyond catty - that can affect someone's career, especially if you have as wide of an audience as Krugman. I was not surprised that he never apologized, but I was surprised that you never called him on it (or was I?).

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    1. OK, if you start insinuating stuff like that I'm going to start feeling the itch to delete comments. I was pretty busy during that time and hadn't read any of the posts or counter-posts, and there seemed to be a lot of them. I am less inclined to do the work of going back and reading it if it's because someone is accusing me of not being even handed and more inclined if it's someone that's just curious about what I think of it all. My prior is it's probably safer to assume he skimmed something, assumed he knew the arguments made and the data, and made a sloppy post instead of actually being dishonest (which I don't see any history of with Krugman). This is assuming, of course, he was even in the wrong. The primary critics that I know of were Landsburg and Murphy and needless to say I've learned not to take their word on everything (not that they're dishonest - just that they're not particularly convincing in a lot of cases). Maybe they're right, maybe not - couldn't say because I didn't read any of the exchange.

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    2. "implicit accusation of intellectual dishonesty"

      There was nothing implicit about the accusation. Krugman called them out. Their choices are to either prove that what they were saying was true (and not mere sophistry or demagoguery) or shut up.

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    3. This comment has been removed by the author.

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    4. Auughhh. One of these days I am going to learn to not hit "Back" on my browser after posting a comment on this blog.

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  6. I wonder is this is because it is the most efficient method of political rent harvesting, concentrate income then skim off as much as possible, billionaires spending hundreds of millions on elections.

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  7. It should also be noted that Apple isn't literally sitting on all that cash. It's mostly invested in conservative assets like corporate securities and US Treasuries, as noted at the bottom of the page here:

    http://appleinsider.com/articles/13/03/18/apple-cash-hoard-could-hit-170-billion-this-year

    This seems different from the picture Krug is painting. So Apple is investing conservatively elsewhere. That's not literally cash hoarding. Those profits aren't just being consumed either. More than anything, it's just a signal of the low marginal return to investment in it's own industry.

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    1. Yes, it's not a case of an Apple mattress full of cash somewhere.

      "More than anything, it's just a signal of the low marginal return to investment in it's own industry."

      I think there's some truth to this, but I would argue that it is more a matter of Apple not having sufficient ideas or possibly having a plan that they are not ready to launch, yet. Amazon and Google are sitting on cash, but seem to have plenty of ideas that could come to fruition. Apple essentially had one product, the iPad, which they gradually developed over decades launching low-featured versions along the way. Small players are being kept out of these markets by a lousy patent system.

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  8. Your prior is probably right - I don't think he was being dishonest. It has nothing to do with dishonesty. It has to do with an understanding of proper etiquette. Hasty and ignorant posts are okay when you're simply disagreeing with someone's opinion. Hasty and ignorant posts when you're implying intellectual dishonesty by a specific person are a completely different thing. They can be irreversibly damaging - that's why I find it despicable. It befalls Krugman to be aware of that distinction, and in turn to be more careful before posting something of that nature.

    I've read the posts by Landsburg and Murphy. I don't know Krugman’s underlying motivations, which they discuss; but as I said above, what irks me is the dangerous lack of tact he's demonstrated (again, I don’t think he was being dishonest). And to make things worse, he's never apologized (he probably just moved on without looking into it further, who knows).

    You should watch the hearing. It's fascinating. I was shocked at arrogance of Senator Whitehouse (especially knowing he was completely in error). He really made a fool of himself. Krugman pales in comparison.

    And apologies for the jab. I don't think you meant to ignore what was going on. But I do think that we all have priors and priorities. And sometimes when we have a rosy prior we tend to ignore negative updates without being aware of it. I'm guilty of it myself.

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    1. Shoot. That was a response to the 1:58 comment by Daniel.

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    2. I seriously doubt anyone at the Heritage Foundation's career is going to suffer because Krugman didn't take a liking to them...

      it might even be enhanced by it :)

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  9. Investors may see things differently from Krugman. Apple is down 30% for the past year, while Samsung is up 20%.

    I'm not sure what Krugman is referring to with "intellectual property regime change", but I do believe a gluttony of unworthy patents are keeping small firms from entering existing markets and reducing the rate of spawning new markets. To that extent, I agree that less than perfect competition exists.

    The markups he refers to are better explained by the benefits he ignores, such as:

    How many small businesses can now run credit cards thanks to Apple? How many more authors are selling books via Apple products? How many photographers have easy portable portfolios? How many people get income from app development? How many features would my Samsung phone lack if they didn’t have to compete with Apple?

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    1. I got distracted. The last one does not explain markups and neither does authors selling books. Those two are more like positive externalities.

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  10. Daniel, I know we make jokes about you being a moving target blah blah blah. But seriously, I want to pin you down on this one.

    You wrote: "To my knowledge, for example, he's never written anything nearly as cruel as this..." and you linked to an Art Carden piece, where Art said that his opponents wanted people to suffer.

    So then I challenged you and asked, "Are you saying Krugman never said his opponents wanted to see people suffer?"

    You came back and seemed to be admitting that yes he had done that.

    So are you willing to retract the statement from your original post, and agree that yes indeed Krugman had been just as cruel as Art Carden?

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    1. Oh I see - so you're harping on the phrasing of that one sentence.

      Well that depends on a head-on comparison with Art's article and that's a subjective thing. Art said that people in general who wanted minimum wages were elitists that were willing to watch people suffer. He said that they were unsophisticated, dangerous, and violent.

      Most people in America don't like running deficits either. I don't think Krugman has said that about people that think that way. I think he's mainly reserved his fire for leaders and yes he probably has said something to the effect that they want people to suffer.

      So it still seems like Art's was more brazen. You might want to make a case that Art is comparable. But the point is a lot like that goes uncriticized on "your side" while benign stuff from Krugman gets demonized.

      I'm not retracting that statement, no. I reject your premise entirely that I'm a "moving target". I've been clear as day that Krugman can be inappropriate (it's not a new position of mine) and it seems to me Art's column is worse than any that come to mind from Krugman.

      So I tell you what - you spend some time doing dumpster diving on Krugman's blog and if you find anything let me know and if I agree I'll post it here criticizing it if you post a comparable post taking Art to task. I'm not talking about a post where Krugman says that Congressional Republicans or John Cochrane are willing to watch people suffer to maintain their VSP status. I'm talking about ragging on average people.

      btw - this also seems different from Krugman's "pain caucus" don't you think? The point of "the pain caucus" is some kind of confusion that the scales must be balanced which is NOT what Carden is saying at all. Carden isn't saying that minimum wage advocates think that minimum wage recipients need to suffer for some kind of optimality to be achieved (like how Malthus might have argued). That would be comparable to "the pain caucus" and it would just be an eccentric and potentially dangerous theory to hold. Carden is instead saying that people are superficial, elitist, and indifferent to suffering simply because they come to different conclusions from him about the economic case for the minimum wage.

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  11. Daniel, I didn't read Art's whole piece. Your link of "cruel as this" went to your earlier post, quoting Art. So I thought you were referring to that single sentence.

    (I'm not agreeing that Krugman is nicer than Art, I'm just saying I thought you were saying that single sentence from Art was crueler than anything Krugman had ever written, which it clearly isn't.)

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