Garrett Jones's review of Krugman's book (also discussed by David Henderson here) does a great job highlighting one, misses the second, and is guilty of violating the third. They are:
1. Don't expect miracles
2. Do no harm
3. Snark is in the eye of the beholder
First,
Don't expect miracles
Jones does a good job deflating miracle expectations about policy. I think good macroeconomics teaches us that economies can spontaneously fall into downturns. The mechanisms are endogenous and inherent in human psychology: you don't have to invoke some kind of exogenous mischief by the Fed and you really don't have to accept criticisms that you "don't have faith in the market" by acknowledging this. Good macroeconomics also provides a few solutions. The mistake is in thinking that those solutions are necessarily going to be completely satisfying. Jones bursts this bubble, appropriately:
"...he doesn't even believe in overwhelming payoffs to government spending: A
dollar of government spending might only increase the private sector by
fifty cents, he reports in his postscript. Once you consider that
government isn't all that efficient, that taxes will have to be raised
someday to pay the bill, and that government programs tend to outlive
their usefulness, this doesn't sound like such a great idea."
We can debate about how much sense that last point makes (it's kind of weird to be cautioned against income generation because that income will be taxed... taxed income is better than no income! Positive multipliers at the zero lower bound are sustained even in the face of full Ricardian equivalence), but generally speaking I think this is a reasonable, if alarmist, statement. We could of course keep Congress continually appropriating until a 1.5 multiplier filled the jobs deficit. If we had something sensible to do with that money (like keep fascists from taking over Europe), that might make sense. But in the real world today, there could be very real limits (and not entirely senseless ones) to the public expenditures that are willing to make. Tack a 1.5 multiplier on top of that and you're going to get good policy, but there's no law of macroeconomics that says its going to be sufficient.
The same goes with monetary policy. Scott Sumner regularly confuses the goal with the policy lever. The Fed does not control NGDP - it just controls things that are related to NGDP. While an NGDP target may be wise, damaged credit channels could keep it from materializing. We may have to live with a second or third best.
Do no harm
One thing that frustrated me about Jones's review was this line: "By his own calculations, however, state aid would make a modest contribution". This seems like a very misleading way of framing the issue to me. Insofar as this is just a reiteration of the point above - that we shouldn't expect miracles - that's fine. But that's not really the issue at hand with state and local aid. Public sector employment is down, not up, and of course even if it were to improve it's still way off trend. State and local hiring isn't some kind of excessive Keynesian stimulus. It's just doing the stuff that government always did. Our approach should be "do no harm". Who cares if turning around state and local hiring only makes a "modest contribution", to use Jones's words? A modest contribution to the economy is better than a drag on the economy! Right now state and local austerity isn't just costing the jobs that are being cut, but you have a negative multiplier effect. That's what's truly insane about policy these days - it's not just that they're not doing things that would improve the situation: they are actively hurting it. If we just did what most of us agreed was good policy in 2007 it would be an improvement.
Jones obscures this point by treating state and local aid as weak fare.
Snark is in the eye of the beholder
Anyone that ever plans on writing about Krugman should read this carefully. Jones's review was less about Krugman's book than about Krugman himself - it's full of obnoxious barbs against the man. The opening line is a backhanded compliment ("he's playing nice than usual"). He recommends the book "if you're comfortable with Krugman's snark". Another backhanded compliment: "Paul Krugman doesn't give a good clean fight, but he gives a good fight" and "he names his opponents and gives a hint of their ideas so Google can tell us if he's representing them fairly (50% fair)". Some of it isn't even disguised as a compliment: "the descent into what some have called Krugmania is also here in abundance", and "when you disagree with Paul Krugman, you have a better than even chance of being right". Krugman fans also come in for abuse!: "Let it be noted for all congregants in the Krugman church: Paul K. said
it was "clearly right" that there were limits to stimulus in 2009" - the "Krugman church"?!? What is that? This stuff is sprinkled throughout the review - it's a part of every point that Jones raises and is really the unifying theme of the review.
So why do I point this out? I've met Garrett Jones once and had an online exchange with him once, and he seemed perfectly nice. I've been very interested in his work on IQ and growth and have been wanting to cite and integrate that work into my own stuff on the science and engineering workforce. I barely know the guy but even from the little I do know, he's impressed me.
If I didn't have that context and just read this review, I would have just assumed he was just some asshole with the same knee-jerk reaction to Krugman that a lot of people have.
So, part of me is just glad I had some familiarity with Jones before reading this. But part of me also thinks there's a lesson here for people: snark is often in the eye of the beholder. There are a lot of us out there who don't think Krugman is a partisan hack and who think that the people who bend over backwards to paint him as such can be truly neurotic. Clearly the "macro wars" get heated - it's one thing to recognize that. But if you act like only crazy people deny that Krugman has somehow fallen from grace, you're going to come off as a real jerk that doesn't really know what he's talking about.
If you feel the need to acknowledge the heat of the macro wars, do that and move on.
Monday, September 10, 2012
Sunday, September 9, 2012
A few links
1. Mark Thoma on misrepresentations of Keynesianism by Jeff Sachs. He comes out treating Sachs much how I've been treating Sumner these past few months: pointing out that the guy is advocating much the same stuff for much the same reasons, so why in the world is he being so divisive and insistent on convincing everyone that there's a big group of people that disagree with him? I don't understand that mindset and apparently Mark Thoma doesn't either.
2. My crush and fellow W&M econ alum, Christina Romer, has a good column on why the Democrats need to present a deficit reduction plan rather than just criticizing the Republican plan. She emphasizes the same point she's been making for a while: smart deficit reduction is a combination of short term accomodation and medium to long-term cuts. The primary driver of the deficit right now is the recession. Deficit reduction that makes the recession work isn't just bad macroeconomics - it's a bad way of reducing the deficit.
3. Bryan Caplan has his response to Steve Horwitz on Austrian empiricism. I haven't gotten to read it in full yet, but Cato gives a good summary and Bryan leads with a summary, so I have a good sense of several of his points and I agree with a lot of them. One of them is that Steve understates methodological pluralism in the mainstream. This is a good point, certainly in the fields that I'm involved with (labor, welfare policy, job training). There are lots of case studies, site visits, etc. going on that economists are actively involved in. I think there are a couple reasons why people miss this. First, sometimes these economists are working in public policy departments or they're partnetering with the non-economic sector, so they're missed by other economists. The product is often a big report for a government agency or a book, rather than a journal article. And if a journal article is published in a major journal usually it only deals with the quantitative data in the project, and not the qualitative. Anyway, I've gone from a qualitative data skeptic to an enthusiastic participant in that kind of research, so I think it's good to highlight.
Bryan also points out that a lot of the "Austrian empirical work" that Steve points out isn't really distinctively "Austrian", it's just normal empirical work done by people that like Austrian economics. You wouldn't know the authors were Austrian by reading it, in other words. It's mainstream economics. While I'm not intimately familiar with everything Steve listed, this is my impression too. It's an important observation for those of us (myself included) who would like the good elements of the Austrian school to be incorporated into mainstream economics. It shouldn't be a criticism of those studies.
2. My crush and fellow W&M econ alum, Christina Romer, has a good column on why the Democrats need to present a deficit reduction plan rather than just criticizing the Republican plan. She emphasizes the same point she's been making for a while: smart deficit reduction is a combination of short term accomodation and medium to long-term cuts. The primary driver of the deficit right now is the recession. Deficit reduction that makes the recession work isn't just bad macroeconomics - it's a bad way of reducing the deficit.
3. Bryan Caplan has his response to Steve Horwitz on Austrian empiricism. I haven't gotten to read it in full yet, but Cato gives a good summary and Bryan leads with a summary, so I have a good sense of several of his points and I agree with a lot of them. One of them is that Steve understates methodological pluralism in the mainstream. This is a good point, certainly in the fields that I'm involved with (labor, welfare policy, job training). There are lots of case studies, site visits, etc. going on that economists are actively involved in. I think there are a couple reasons why people miss this. First, sometimes these economists are working in public policy departments or they're partnetering with the non-economic sector, so they're missed by other economists. The product is often a big report for a government agency or a book, rather than a journal article. And if a journal article is published in a major journal usually it only deals with the quantitative data in the project, and not the qualitative. Anyway, I've gone from a qualitative data skeptic to an enthusiastic participant in that kind of research, so I think it's good to highlight.
Bryan also points out that a lot of the "Austrian empirical work" that Steve points out isn't really distinctively "Austrian", it's just normal empirical work done by people that like Austrian economics. You wouldn't know the authors were Austrian by reading it, in other words. It's mainstream economics. While I'm not intimately familiar with everything Steve listed, this is my impression too. It's an important observation for those of us (myself included) who would like the good elements of the Austrian school to be incorporated into mainstream economics. It shouldn't be a criticism of those studies.
Saturday, September 8, 2012
Either Steve Landsburg thinks I'm stupid or he's trying to put words in President Obama's mouth to make a point he wants to make
He writes:
"This morning I heard President Obama call for universities to lower their tuition rates so that “everybody in America can go to college”.
I am virtually certain that the President is not stupid enough to think that if tuition rates fell to zero, there would magically be enough room in the colleges for everybody in America. So I’ve got to believe that he’s purposely saying stupid things in order to appeal to stupid voters — the sort of voters, in other words, who probably don’t belong in college."
He goes on to discuss how universities use tailored financial aid packages to effectively price discriminate. Price discrimination (as opposed to being restricted to charging a single price) means that colleges don't have to undersupply seats to maximize their objective (yes, presumably most of these schools aren't for-profit, but they have some objective to achieve and that objective costs money).
Now - I actually found the claim fairly appealing. So we have two options here, according to Steve. I'm either stupid, and the president has to say stupid things to appeal to me and I don't belong in college...
...or maybe the president was talking about the people who find themselves on the demand curve to the right of the intersetion of supply and demand and thus are excluded even if a university is a price discriminating monopolist.
That seems like a more straightforward interpretation of what the president said - that college costs a lot both in terms of what you pay and your opportunity cost - for credit constrained families, than that he was trying to make some point about schools exercising monopoly power.
There's a lot of neat stuff to talk about in economics, like how universities are price discriminators.
I get the desire to share those points. It doesn't seem like you need to call people stupid or distort plain English to share those neat insights.
Here's another guy that put words in the president's mouth on that line. At least Landsburg communicated some economics in the process.
"This morning I heard President Obama call for universities to lower their tuition rates so that “everybody in America can go to college”.
I am virtually certain that the President is not stupid enough to think that if tuition rates fell to zero, there would magically be enough room in the colleges for everybody in America. So I’ve got to believe that he’s purposely saying stupid things in order to appeal to stupid voters — the sort of voters, in other words, who probably don’t belong in college."
He goes on to discuss how universities use tailored financial aid packages to effectively price discriminate. Price discrimination (as opposed to being restricted to charging a single price) means that colleges don't have to undersupply seats to maximize their objective (yes, presumably most of these schools aren't for-profit, but they have some objective to achieve and that objective costs money).
Now - I actually found the claim fairly appealing. So we have two options here, according to Steve. I'm either stupid, and the president has to say stupid things to appeal to me and I don't belong in college...
...or maybe the president was talking about the people who find themselves on the demand curve to the right of the intersetion of supply and demand and thus are excluded even if a university is a price discriminating monopolist.
That seems like a more straightforward interpretation of what the president said - that college costs a lot both in terms of what you pay and your opportunity cost - for credit constrained families, than that he was trying to make some point about schools exercising monopoly power.
There's a lot of neat stuff to talk about in economics, like how universities are price discriminators.
I get the desire to share those points. It doesn't seem like you need to call people stupid or distort plain English to share those neat insights.
Here's another guy that put words in the president's mouth on that line. At least Landsburg communicated some economics in the process.
Conor Williams on Progressivism
This is so good I'll have to just quote him at length. The motivation is Paul Ryan and Glenn Beck repeating the standard line on the progressive movement that you hear from pretty much everyone right of center (conservative, libertarian, populist, you name it) these days.
"This progressives-as-un-American-transformers narrative is almost completely nonsense. The original progressives were almost entirely concerned with rehabilitating the American Founders’ ideals in a new political and economic era. For example, Woodrow Wilson revered Alexander Hamilton for his “deep and passionate love of liberty, and that steadfast purpose in the maintenance of it.” He argued that no one but Hamilton “could have done the great work of organization by which he established the national credit, and with the national credit the national government itself.” Wilson is hardly alone. Progressive intellectual John Dewey recognized and celebrated the permanently Jeffersonian core of the American political tradition. For Jefferson, Dewey wrote, “it was the ends of democracy, the rights of man—not of men in the plural—which are unchangeable.”
Dewey’s progressivism consisted in the next sentence: “It was not the forms and mechanisms through which inherent moral claims are realized that are to persist without change.” And that, by the way, is the small kernel of truth at the core of Ryan’s and Will’s attacks on progressivism old and new. Most progressives believed in the profound importance of the Founding’s ideals, but they realized that some of the Constitution’s rules were being used to perjure those very ideals. The ends of democracy are the key. Always have been. The specific means—can we elect our senators? Can presidents run for office interminably?—are considerably less important. Of course, that’s what most Americans (especially women and non-white citizens) believe, if you ask them about the details.
(Dewey and Wilson are hardly the only examples of early progressives who loved the American tradition. Other than Charles Beard and a few other minor figures, almost everyone was on board with the line of argument that I’ve just sketched. Even Herbert Croly, in a strange way.)
Conservatives (then and now) will have none of this. They see progressivism as an attempt to transform and abandon the Founding’s principles (or a project aimed at “detaching people from the Constitution,” etc). For these folks, real Americans venerate the original Constitution in every aspect. They believe that America means limited government along precisely the original lines. Just don’t ask them anything about women’s suffrage or the direct election of senators or the “Three-Fifths Clause,” etc (usually)."
"This progressives-as-un-American-transformers narrative is almost completely nonsense. The original progressives were almost entirely concerned with rehabilitating the American Founders’ ideals in a new political and economic era. For example, Woodrow Wilson revered Alexander Hamilton for his “deep and passionate love of liberty, and that steadfast purpose in the maintenance of it.” He argued that no one but Hamilton “could have done the great work of organization by which he established the national credit, and with the national credit the national government itself.” Wilson is hardly alone. Progressive intellectual John Dewey recognized and celebrated the permanently Jeffersonian core of the American political tradition. For Jefferson, Dewey wrote, “it was the ends of democracy, the rights of man—not of men in the plural—which are unchangeable.”
Dewey’s progressivism consisted in the next sentence: “It was not the forms and mechanisms through which inherent moral claims are realized that are to persist without change.” And that, by the way, is the small kernel of truth at the core of Ryan’s and Will’s attacks on progressivism old and new. Most progressives believed in the profound importance of the Founding’s ideals, but they realized that some of the Constitution’s rules were being used to perjure those very ideals. The ends of democracy are the key. Always have been. The specific means—can we elect our senators? Can presidents run for office interminably?—are considerably less important. Of course, that’s what most Americans (especially women and non-white citizens) believe, if you ask them about the details.
(Dewey and Wilson are hardly the only examples of early progressives who loved the American tradition. Other than Charles Beard and a few other minor figures, almost everyone was on board with the line of argument that I’ve just sketched. Even Herbert Croly, in a strange way.)
Conservatives (then and now) will have none of this. They see progressivism as an attempt to transform and abandon the Founding’s principles (or a project aimed at “detaching people from the Constitution,” etc). For these folks, real Americans venerate the original Constitution in every aspect. They believe that America means limited government along precisely the original lines. Just don’t ask them anything about women’s suffrage or the direct election of senators or the “Three-Fifths Clause,” etc (usually)."
Ryan Murphy with great thoughts on the Cambridge Capital controversy
This is pretty much my take on the whole thing, although I actually don't know the debate in detail (something I know I should clarify now before someone like Robert Vienneau comes by and challenges me on it):
"“Cambridge UK” (i.e. Joan Robinson) believed that this destroys neoclassical economics and that only Sraffian economics had a way to explain interest rates correctly. This is because, if you present entrepreneurs as deciding between two production methods (one labor-intensive and the other capital-intensive), they may sometimes find it profit-maximizing to switch back and forth between the capital intensity as the interest rate shifts. This means that there is more than one interest rate corresponding to an allocation of capital, in turn meaning that the interest rate is determined by arbitrary institutions, not the logic of marginal analysis. Of course, this is all an artifact of the algebraic formalization of the problem in the first place; the same mathematical issue comes up if you try using things like internal rate of return. The response of people who know cost-benefit analysis is that you shouldn’t use internal rate of return. Similarly, most people would see this as demonstrating that you shouldn’t take the concept of marginal efficiency of capital too seriously. “Cambridge US,” despite its infatuation with formalistic Samuelsonian methodological descriptivism (say that five times fast), kinda understood that such modeled results are cute but not particularly meaningful. “Cambridge UK,” because it was a group of Marxists, was giddy to find any excuse to say that interest rates are too high and the system is unjust. Which is why they still won’t shut up about it and mainstream neoclassical economists don’t care about it." (emphasis added)
The bit about Marxism is particularly insightful. If you ever get the chance to read a little Marxist economics (as opposed to some other Marxist work), it's incredible how riled up they get over a little algebra. Actually it's reminiscent of a lot of the MMT people, with one exception: MMTers actually do work with data a lot and get into some behavioral discussions around what drives financial markets. In other words, they check the data and think more about microfoundations and don't just take some algebra for granted. The theory is (predictably) more useful as a result.
I think Samuelson just liked playing around with the math, because he got involved in the transformation problem and the Marxists too.
I should probably stop here because as I said - I'm only vaguely familiar with all of this. But Ryan's response rang true for me. One bit of Marx I have read in much more detail is his work on Say's Law. That is actually quite good, and in a lot of ways better than Malthus's writing on it (which is also quite good).
"“Cambridge UK” (i.e. Joan Robinson) believed that this destroys neoclassical economics and that only Sraffian economics had a way to explain interest rates correctly. This is because, if you present entrepreneurs as deciding between two production methods (one labor-intensive and the other capital-intensive), they may sometimes find it profit-maximizing to switch back and forth between the capital intensity as the interest rate shifts. This means that there is more than one interest rate corresponding to an allocation of capital, in turn meaning that the interest rate is determined by arbitrary institutions, not the logic of marginal analysis. Of course, this is all an artifact of the algebraic formalization of the problem in the first place; the same mathematical issue comes up if you try using things like internal rate of return. The response of people who know cost-benefit analysis is that you shouldn’t use internal rate of return. Similarly, most people would see this as demonstrating that you shouldn’t take the concept of marginal efficiency of capital too seriously. “Cambridge US,” despite its infatuation with formalistic Samuelsonian methodological descriptivism (say that five times fast), kinda understood that such modeled results are cute but not particularly meaningful. “Cambridge UK,” because it was a group of Marxists, was giddy to find any excuse to say that interest rates are too high and the system is unjust. Which is why they still won’t shut up about it and mainstream neoclassical economists don’t care about it." (emphasis added)
The bit about Marxism is particularly insightful. If you ever get the chance to read a little Marxist economics (as opposed to some other Marxist work), it's incredible how riled up they get over a little algebra. Actually it's reminiscent of a lot of the MMT people, with one exception: MMTers actually do work with data a lot and get into some behavioral discussions around what drives financial markets. In other words, they check the data and think more about microfoundations and don't just take some algebra for granted. The theory is (predictably) more useful as a result.
I think Samuelson just liked playing around with the math, because he got involved in the transformation problem and the Marxists too.
I should probably stop here because as I said - I'm only vaguely familiar with all of this. But Ryan's response rang true for me. One bit of Marx I have read in much more detail is his work on Say's Law. That is actually quite good, and in a lot of ways better than Malthus's writing on it (which is also quite good).
Herman Melville trolls the politically correct of the nineteenth century (and probably many from the 20th and 2st as well)
I thought this was a particularly well constructed passage:
"Long exile from Christendom and civilization inevitably restores a man to that condition in which God placed him, i. e. what is called savagery. Your true whale-hunter is as much a savage as an Iroquois. I myself am a savage; owning no allegiance but to the King of the Cannibals; and ready at any moment to rebel against him.
Now, one of the peculiar characteristics of the savage in his domestic hours, is his wonderful patience of industry. An ancient Hawaiian war-club or spear-paddle, in its full multiplicity and elaboration of carving, is as great a trophy of human perseverance as a Latin lexicon. For, with but a bit of broken sea-shell or a shark's tooth, that miraculous intricacy of wooden net-work has been achieved; and it has cost steady years of steady application. As with the Hawaiian savage, so with the white sailor-savage. With the same marvellous patience, and with the same single shark's tooth, of his one poor jack-knife, he will carve you a bit of bone sculpture, not quite as workmanlike, but as close packed in its maziness of design, as the Greek savage, Achilles's shield; and full of barbaric spirit and suggestiveness, as the prints of that fine old Dutch savage, Albert Durer."
"Long exile from Christendom and civilization inevitably restores a man to that condition in which God placed him, i. e. what is called savagery. Your true whale-hunter is as much a savage as an Iroquois. I myself am a savage; owning no allegiance but to the King of the Cannibals; and ready at any moment to rebel against him.
Now, one of the peculiar characteristics of the savage in his domestic hours, is his wonderful patience of industry. An ancient Hawaiian war-club or spear-paddle, in its full multiplicity and elaboration of carving, is as great a trophy of human perseverance as a Latin lexicon. For, with but a bit of broken sea-shell or a shark's tooth, that miraculous intricacy of wooden net-work has been achieved; and it has cost steady years of steady application. As with the Hawaiian savage, so with the white sailor-savage. With the same marvellous patience, and with the same single shark's tooth, of his one poor jack-knife, he will carve you a bit of bone sculpture, not quite as workmanlike, but as close packed in its maziness of design, as the Greek savage, Achilles's shield; and full of barbaric spirit and suggestiveness, as the prints of that fine old Dutch savage, Albert Durer."
Friday, September 7, 2012
A couple complaints about AEI
The job training talk was great. The panels were the best in the field, and each presentation was fascinating. This doesn't reflect on them at all. But I'm hungry and kinda tired so I'm still frustrated with a couple things. They might be useful to someone attending AEI:
1. When you walk in the conference room it is pretty strange because they have a big framed picture of Paul Ryan up on the wall. I'm sure it was taken before his nomination, but (a.) that's weird to begin with - you'd never see that sort of thing at the Urban Institute for example*, and (b.) they really need to take it down now that he is nominated. There are pictures of a lot of other Republican politicians around the place too. If you were on the fence about whether AEI was objective walking in there, you certainly would have decided by the time you left.
2. OK, this is what really frustrated me: the moderators were terrible. The thing lasted the whole morning - three panels with Q&A after each. The audience was not that big - twenty to thirty people. Several of us (myself included) had our hands up at every Q&A and never got called on, while many of the people that did get called on spoke during several Q&As. What's worse is the moderators didn't moderate. Many of the questions were just a person pontificating at length on what they thought and concluding with something like "what do you think of that?". Bad moderators don't reflect well on organizations that hold public events, in my opinion.
And these are minor, but I think they bug me because I was bugged by the first two:
3. The food was bad and there wasn't much of it. The table was empty by the time half the people arived and the breakfast coffee was gone by the coffee break. Bush league.
4. The AEI conference chairs are REALLY uncomfortable. I appreciate arms to the chairs, but the bar across the back jabs into you.
< end rant >
* I think there's an old photo of a bunch of the old Urban Institute board members from the sixties with Lyndon Johnson among them somewhere, but that's because he was involved with starting it - and it's not a head shot of Johnson the way this was a big head shot of Ryan.
1. When you walk in the conference room it is pretty strange because they have a big framed picture of Paul Ryan up on the wall. I'm sure it was taken before his nomination, but (a.) that's weird to begin with - you'd never see that sort of thing at the Urban Institute for example*, and (b.) they really need to take it down now that he is nominated. There are pictures of a lot of other Republican politicians around the place too. If you were on the fence about whether AEI was objective walking in there, you certainly would have decided by the time you left.
2. OK, this is what really frustrated me: the moderators were terrible. The thing lasted the whole morning - three panels with Q&A after each. The audience was not that big - twenty to thirty people. Several of us (myself included) had our hands up at every Q&A and never got called on, while many of the people that did get called on spoke during several Q&As. What's worse is the moderators didn't moderate. Many of the questions were just a person pontificating at length on what they thought and concluding with something like "what do you think of that?". Bad moderators don't reflect well on organizations that hold public events, in my opinion.
And these are minor, but I think they bug me because I was bugged by the first two:
3. The food was bad and there wasn't much of it. The table was empty by the time half the people arived and the breakfast coffee was gone by the coffee break. Bush league.
4. The AEI conference chairs are REALLY uncomfortable. I appreciate arms to the chairs, but the bar across the back jabs into you.
< end rant >
* I think there's an old photo of a bunch of the old Urban Institute board members from the sixties with Lyndon Johnson among them somewhere, but that's because he was involved with starting it - and it's not a head shot of Johnson the way this was a big head shot of Ryan.
A good point and a bad point from Sumner
Here.
The bad point is apparently elevating semantics over substance. This time the point is credibility. Central bank credibility strikes me as a fairly unoffensive thing to talk about if what we're interested in involves expectations (which it always does, when we're interested in central banks). When we don't see the Fed moving NGDP, my reaction (and Krugman's reaction) is to say that they have failed to credibly commit to a higher NGDP level. They are doing something, after all. All the QEs and statements that they'll maintain an accomodative policy. They just haven't made a credible case. Under other conditions, that might have done the trick but it wasn't credible. Scott essentially says there's no credibility problem at all, they just haven't done what they need to do.
OK... sounds like semantics to me.
See here's the thing with Sumner and Krugman (who uses the credibility line a lot). Scott will talk ad nauseum about how Keynesians and Krugman are wrong, often because of semantic differences like this. Krugman might not concede - he keeps using his lingo - but he also keeps advocating for good policy rather than investing in someone that fundamentally agrees with him about what the Fed should be doing.
And I keep stressing this because this sort of thing makes good policy less likely, not more likely. So if you're of the market monetarist ilk, take heed and behave accordingly.
The good point is shorter, but still quite good: Scott recognizes that conservative central banking type models depend heavily on what you put in their objective function and the model of inflation that you use. That's a very important point. A lot of people take the traditional version of that model to be gospel truth. It's not, it's just a model.
The bad point is apparently elevating semantics over substance. This time the point is credibility. Central bank credibility strikes me as a fairly unoffensive thing to talk about if what we're interested in involves expectations (which it always does, when we're interested in central banks). When we don't see the Fed moving NGDP, my reaction (and Krugman's reaction) is to say that they have failed to credibly commit to a higher NGDP level. They are doing something, after all. All the QEs and statements that they'll maintain an accomodative policy. They just haven't made a credible case. Under other conditions, that might have done the trick but it wasn't credible. Scott essentially says there's no credibility problem at all, they just haven't done what they need to do.
OK... sounds like semantics to me.
See here's the thing with Sumner and Krugman (who uses the credibility line a lot). Scott will talk ad nauseum about how Keynesians and Krugman are wrong, often because of semantic differences like this. Krugman might not concede - he keeps using his lingo - but he also keeps advocating for good policy rather than investing in someone that fundamentally agrees with him about what the Fed should be doing.
And I keep stressing this because this sort of thing makes good policy less likely, not more likely. So if you're of the market monetarist ilk, take heed and behave accordingly.
The good point is shorter, but still quite good: Scott recognizes that conservative central banking type models depend heavily on what you put in their objective function and the model of inflation that you use. That's a very important point. A lot of people take the traditional version of that model to be gospel truth. It's not, it's just a model.
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