As probably the only person on the whole wide internets that likes Bob, Brad, and Paul, I feel obligated to relink.
1. Brad DeLong
2. Bob Murphy
3. Brad DeLong (ouch!)
4. Paul Krugman (OUCH!)
I obviously agree with Brad and Paul a zillion times more often than I agree with Bob, but let's put that aside for a second. I didn't get involved in the initial post by Bob because I've been busy and it looked like an in-the-data-weeds sort of post. But also because I doubted it would amount to much. Paul Krugman tells us that the CBO is not stupid. This is true. They have some really smart people there and dumb mistakes simply aren't their thing. But it is even more true that Brad DeLong is one of the most careful bloggers out there. IMO he passes Krugman in this regard. Krugman has a tendency to make sweeping statements, get grouchy about the state of economics, etc. which leads him to make broad claims sometimes that don't hold up. Brad is more careful than Krugman in that sense.
Another way of putting this is that Brad is a great details guy in his posts and Paul is a great big picture guy in his posts. I feel like I disagree with Brad sometimes too - but I feel like I take my life into my hands when I do.
That having been said, I will still push the hopeless line that Keynesians ought to follow Bob's blog. Unfortunately, a lot of Austrian bloggers don't offer much interesting. It's complaining about vaguish methodological concerns. Bob, meanwhile, doesn't raise some kind of purist methodological objections - he jumps into mainstream modeling and keeps up with the best of them (Nick Rowe, for example). Bob also doesn't really have any sacred cows. He's happy to knock Mises and Hayek on substantial points and not only agree with Sraffa but claim that Sraffa didn't go far enough. And he's a clear writer. He's too obsessed with Krugman gotchas IMO, but nobody's perfect. I'm sure there are things about me that bug people too. So I enjoy following him.
Nice. Good for you, Daniel. Bob's my favorite Austrian blogger and I agree with your compliments of him.
ReplyDeleteWell said!
ReplyDelete"I feel like I disagree with Brad sometimes too - but I feel like I take my life into my hands when I do."
ReplyDeleteThat's exactly how I feel. And he just proved the feeling right.
As you know, I can't help but think that someone who "keeps up with the best of them" would perform the calculation: .05/(GDP-years) x 4 years x .05/year = .01/(GDP-year) = a number that is not materially significant.
ReplyDeleteIt's hard to "keep up with the best of them" if you can't be bothered to do the arithmetic to figure out which of the effects you are talking about are large and which are small.
And if you won't do the arithmetic, and thus insist on writing a 600-word irrelevant comment on a five-word clause, you really shouldn't be surprised if people conclude that you need to go off and do something else with your life...
Yours,
Brad DeLong
The assumption seems to be that all investment just adds an additional 5% if its value to GDP each year.
DeleteIs that a good assumption ? Isn't some investment actually replacing older investments that have worn out and not adding anything to increased GDP ? If (say)an investment of 17% of GDP is the breakeven point for replacing old capital then couldn't the fall in investment from 19% of GDP to 14% of GDP actually lead to a decline in the capital stock ? And if the capital stock falls how is potential GDP going to carry on growing on its old trend line of 3 or 4% a year ?
That's what the burn is for. I can't say I agree with him in more than 5% of his criticisms of you and Krugman (the lion's share directed at Krugman, of course). And honestly the gotcha nature of those posts is really what gets him into trouble. Posts that aren't gotcha's against Krugman or whoever else tend to be far more interesting. But he puts a lot of interesting stuff up and he's a good guy as far as I can figure.
DeleteCan someone explain the math in Delong point
ReplyDelete"Does Murphy note, anywhere, that at a 5% real rate of return on capital the reduction in potential as a result of the post-2008 investment shortfall is now (19%-14% fall in investment share) x 4 years x 5%/year return on capital = 1% reduction in potential GDP, which is why I said that the path of growth is not "materially lower" rather than not lower when you compare it to the 5.5% real aggregate demand shortfall relative to trend?"
If the share of investment has fallen from 19%-14% isn't that a 25% fall in investment not a 5% fall ? And wouldn't that make the fall in potential closer to 5% than 1% ?
I assume I'm missing something but what is it ?
Upon review I can see that if you just take the shortfall in investment then that would indeed add up to 1% of GDP (based on Delong's assumptions).
DeleteBut if there is 5% return on investment (which I take to mean capital last 20 years on average) and you cut investment by 25% a year for 4 years, then this would cut your capital stock by 5%. Intuitively it seems unlikely that you can you have RGDP falling by only 1% when your capital stock has fallen by 5%.
For all of Bob's gotchas, I don't think ever seen him end it with "X should just go off and do something else with his life". And this is despite even more ignorant posts regarding things like the Salim Furth hearing. How juvenile can you get?
ReplyDeleteI think that after this performance of his I am entitled to tell Bob Murphy: either step up your game, or go do something else.
DeleteYou disagree. Fine. Free country. But in my view the soft bigotry of low expectations *is* a kind of bigotry...
Yours,
Brad DeLong
As we're on the subject of famous economists rounding up on Bob Murphy, just seen this on the Social Cost of Carbon (SCC):
ReplyDeleteGHG Rule Critics Face Push-Back For Touting Study To Fault Carbon 'Cost' [Scroll down to get see the article... seems the best way of getting around the subscription requirement.]
During the interview, [Robert] Pindyck also objected to several aspects of the IER critique of his paper, starting with its reference to Obama's climate "models," which Pindyck notes were not developed by Obama but used by the interagency working group.
"I've never even heard of the Institute for Energy Research," Pindyck added. "Obviously, they are upset about the whole idea of having an emissions abatement policy," he said.
Pindyck added that others skeptical of global warming or carbon controls, including the Cato Institute, have picked up on his paper as further justification for their resistance to GHG emissions limits. "That is unfortunate, that is not what I intended to say," Pindyck said.
"I've never heard of the Institute for Energy Research" is not a great way to argue against them.
DeleteHi Daniel,
ReplyDeleteI think you're correct that the suggestion that Keynesians follow Bob Murphy's blog is hopeless. I remember Paul Krugman saying explicitly on his blog that he doesn't read, nor need to read, ideas by those he disagrees with. I guess the exception is when someone else (De Long, in this case) points out that the other (Murphy, in this case) has made a mistake, in which case, Krugman will gladly read it.
No, he did not "explicitly" say that. You may try to argue that he said that "in effect", but even then you'd be wrong:
Deletehttp://krugman.blogs.nytimes.com/2011/03/08/other-stuff-i-read/
You might still disagree with what he said. But to do so, you'd have to take on what he has actually written, be it explicitly or between the lines. You did neither, this is just your imagiantion gone wild.
I hardly think my point was just my imagination running "wild," especially after reading the post. Thanks for the link, Martin!
ReplyDeleteI said imagiantion, not imagination.
DeleteBut seriously, there is absolutely nothing in his post "explicitly" stating what you suggest. If it is explicit, quote it - and be sure that the quote actually contains what you say.
Ha! I know you wrote "imagiantion" and not "imagination," and that is why I did not put it in quotes. I think I'll let Mr. Krugman's wisdom and truth and insight speak for itself. Perhaps I am wrong. He is just too smart, too ethical and too humble, at last, for me to deal with. As his followers say, "Thank God for Paul Krugman." And thank you, Martin, for showing me the light. xo
ReplyDeleteGibberish does not change the fact that you got that one wrong. Somewhere out there is this notion that people like Krugman and Delong are purely ideological hacks, and for some this is what determines how they process whatever information they find about them. And so it comes that you "remember Paul Krugman saying explicitly on his blog that he doesn't read, nor need to read, ideas by those he disagrees with", when he has never claimed anything the like. Asked to provide actual evidence from the post in question (which should be easy enough, as Krugman was saying that "explicitly") you ressort to a lame attempt at being funny. As if that made your self-delusion about who it is, actually, whose ideological footing clouds his ability to process information somehow vanish.
DeleteThe fact remains that there is no evidence anywhere that Krugman understands the first thing about Austrian concepts and/or analysis. DeLong may or may not understand the first thing about Austrian concepts and/or analysis, but he isn't about to show us.
DeleteFurther, Bob Murphy just blew DeLong and Krugman right out of the water.
http://consultingbyrpm.com/blog/2013/08/news-flash-the-non-stupid-cbo-proves-delong-was-wrong.html
Further, DeLong wrote:
Delete“Does Murphy note, anywhere, that business equipment investment, which ought to fall as capital lifetimes are extended if the pace of trend economic growth markedly slows, has not? No.”
That’s wrong. It markedly decline post-2008:
http://research.stlouisfed.org/fredgraph.png?g=lPp
ht2 Major Freedom
http://consultingbyrpm.com/blog/2013/08/so-this-is-what-it-feels-like-to-be-a-square.html#comment-72556
And has since recovered which, if potential output growth were on a lower path and thus capital lifetimes were extended, it would not have, no?
DeleteYou are just going through the motions. Why bother?
Actually, when you get right down to it, there is no reason to believe that a series of artificially induced and clearly unsustainable prices, transactions and lines of production create any type of useful "trend" at all, much less a "trend" that should be replicated in the future via artificial inducement. Further, the idea that generic government spending can and/or should replicate this unsustainable and harmful trend for the good is baseless and preposterous.
DeleteMartin, I was just having fun there at the end. But, I really don't have any delusions about my own ideological footing. Nor, do I imagine, does the author of the blog called "The Conscience of a Liberal". I think the post to which you link is revealing of an ideology, and one that is different from mine. I often read people with ideas different from mine, in fact.
ReplyDeleteI read this post with the Rocky theme music in my mind:
Deletehttp://consultingbyrpm.com/blog/2013/08/news-flash-the-non-stupid-cbo-proves-delong-was-wrong.html#comments
Just when DeKrugman thinks he punched out Murphy, he gets up and unloads.
The more I think about this issue the more I think DeLong's post was totally over-the top in the way it treated Murphy.
ReplyDeleteI just left the following comment on his blog. I curious as to whether it will be approved.
'see: link: http://consultingbyrpm.com/blog/2013/08/news-flash-the-non-stupid-cbo-proves-delong-was-wrong.html
Murphy appears to have demonstrated that
1) The CBO is estimating potential GDP growth at 25% lower now than in 2007
2) The CBO estimate of potential GDP has a fallen by a lot more than the 1% you claim above.
This discussion is about whether "the path of growth of U.S. sustainable potential GDP is materially lower today than was believed back in 2007." Bob appears to have demonstrated that his view that the underinvestment must have led to a bigger fall in the growth path is more accurate than yours.
I think that if you are at all honorable you need to address the points made in Bob's new post publicly.'
Rob,
DeleteI'm not defending DeLong's reaction. I thought it was over the top too. Actually, for all the shit Krugman gets, I thought his comment was actually very polite and educated. But, you have to understand how DeLong interpreted Murphy's post (see my comment above and DeLong's response); to him, it seems that Murphy missed the point (and, notice that DeLong's graph of potential GDP shows the capital stock dip) of the post, which is that we're still below potential GDP.