Sunday, February 19, 2012

Assault of Thoughts 12/19/2012

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Mark Thoma highlights a nice passage from an interview with Romer about the Great Depression. She talks about how we can trick ourselves into imagining the fiscal stimulus of the New Deal was bigger than it was because of the myth of FDR and the physical legacy, and also compares it to ARRA and talks about what happened with the states. This was a particularly good passage: "Even under Roosevelt the fiscal expansion was modest. When we think about the New Deal, we tend to remember things like the WPA [Works Progress Administration relief program], which built dams and bridges, and the Civilian Conservation Corps, which constructed so many buildings in our national parks. These programs left enduring legacies, and so we often think of the fiscal policy response of the New Deal as being big and aggressive. But what Chandler points out, building on a classic paper by E Cary Brown, is that the fiscal response to the Great Depression was actually quite small – not nearly as large as the American Recovery and Reinvestment Act of 2009. Even when Roosevelt increased the Federal deficit in the mid-1930s, a move to budget surpluses by state and local governments meant that the net fiscal stimulus was much smaller."

This was one of those five books interviews. Her books were: Golden Fetters (Eichengreen), A Monetary History of the United States (Friedman and Schwartz), Essays on the Great Depression (Bernanke), America's Great Depression (Chandler), and The End of One Big Deflation (Temin and Wigmore).

- Gene Callahan argues that liberalism imposes a moral viewpoint, that it is not morally neutral as many suggest, and that we should be honest about this. I strongly agree. Richard Rorty said something very similar, although he put it in terms of cultural norms rather than morals (but really - is there a difference?) he wrote: "The rhetoric we Westerners use in trying to get others to be more like us would be improved if were more frankly ethnocentric, and less professedly universalist. It would be better to say: Here is what we in the West look like as a result of ceasing to hold slaves, beginning to educate women, separating church and state, and so on. Here is what happened after we started treating certain distinctions between people as arbitrary rather than fraught with moral significance. If you would try treating them that way, you might like the results." I don't always live up to that - I talk about univesalist ideas and I talk as if liberalism is morally neutral all the time, I think. But if you pinned me down on the point, I'd agree with Gene and Rorty.

- Russ Roberts has a great post on Van Halen and their M&M contract. Contract theory is really fascinating stuff. I took a class on information and contract economics at GW - it was when I really first got introduced to this stuff, as well as two great economists (I'm calling them both economists, although they don't always get referred to as such): Avner Greif and Elinor Ostrom. Anyway, I think contract theory is important to bring to the table when we're bringing theories about marginal product equaling wage rates to the real world. I've been thinking about this a lot myself with the labor market for scientists. I'm bothered by the way journal publications are often treated as a measure of productivity and therefore as some kind of direct determinant of wages in a standard labor market model. I suspect that publications are more of a status symbol, and also one of these contract monitoring devices - but have very little direct relevance to thinking about the productivity of scientific labor.

- Ryan Murphy pokes fun at Russ Roberts being over the top about the Keynes vs. Hayek debate. I agree. He's refering to the same post that botched Keynesianism by reducing it to underconsumptionism, and thereby completely missing how much Mill and Keynes agreed about the determinants of output. Russ really should know better than to keep telling students and the public that Keynesianism is consumptionism. It's not a good thing, and ever since that post where he openly declared he said things for ideological reasons, it worries me.

- Jonathan Catalan replies to my post on re-framing the discussion of Keynes and Hayek. He writes: "Second, and more importantly, Daniel is looking to frame the discussion from his point of view." Well, yes. I'm reminded of a response Christopher Hitchens often gave to people who accused him of just offering "his opinion". "Of course", Hitchens would reply, "who else's opinion would you expect me to offer?". I think this is what Keynes thought and I think this is what most Keynesians think, and I think that Keynesians who don't think like this are in many ways wrong about Keynes and Keynesianism. Certainly some people disagree with me on that. That's almost another matter entirely because I still think the MMT/Minsky/Post-Keynesian types that disagree with me on that are still closer to my interpretation than Brian Doherty's interpretation is to my interpretation of Keynes. My point is simply this: if you want to argue with Keynes, argue with Keynes - not your preferred underconsumptionist, big-government, anti-market strawman (that's not directed at Jonathan - it's a general "your preferred"). If you want to argue with an underconsumptionist, big-government, anti-market strawman, then go find such a person to argue with. They're certainly out there. My concern with my re-framing post is that even putting it in the terms that Doherty (and many other people) do skews the argument. It's like I said about the Keynes-Hayek rap when it came out: I've always liked Hayek, but if you find me rooting for Hayek against Keynes, something seems wrong with your portrayal of Hayek, Keynes, or both of them. And the important point I was trying to make is that a lot of people who don't really know Keynes watch that video and now have a completely different impression of Keynes. That's not trivial when it comes to the economics dialogue.

- Speaking of Keynes, I found a neat new picture of him. That may not interest anyone else, but I like finding these. My favorite so far is the one of him and Lydia dancing.


  1. I think Keynes was clearly more of a market interventionist than you would have us believe.

    To bring up my comments from the last thread,. Again, he said we should

    1)Drive the MEC down to zero

    2)socialization of investment

    Not saying Keynes was a communist, again, but he was definitely a market interventionist that saw fundamental defects with the capitalist system.

    1. He's obviously an interventionist - I never said he wasn't. I am too. The claim is that he is pro-market, not that he's not an interventionist.

      You can do a search on the discussion of the socialization of investment - I don't have time to write a full post now, but I've written a lot on it in the past. He goes into a lot of detail on this in "The End of Laissez Faire", too.

      I think Keynes is probably a lot like Stiglitz. He words things in terms of "fundamental defects", which is grating to read - but he's not against the market economy. If it were me, I wouldn't call these things defects - I would say that there are values that we have as a modern Western liberal society that we turn to other institutions for because we can't depend on the market for them. I don't see that as a "defect" and I'm certainly pro-market. I think Stiglitz and Keynes are pro-market too, from my reading of both. They do have a proclivity for more confrontational language.

    2. "He's obviously an interventionist - I never said he wasn't. I am too."

      I could have sworn that a few weeks ago you claimed that you were a free market economist.

    3. Yes.

      You're working off the false premise that government and the market are implicitly antagonistic institutions.

      They can be, obviously.

      But that's not an inherent relation that they bear to each other.

    4. Again, dan you define things the way you want them to. And this goes back to what I said about NC economics. They say they are free market, except for the million externalities they would have government correct.

    5. Stiglitz said there is no invisible hand. If there isn't then there is no point in the market, Marxism would work better.

  2. cultural norms rather than morals (but really - is there a difference?)

    Large difference.

    1. I can't think of a moral that isn't equally well described as a norm and the critique of cultural norms on a moral basis seem to exclusively emerge from competing normative frameworks.

      If you can offer an argument or example rather than just offer your disagreement, I'm all ears.

    2. Lots of contemporary philosophers have extensive theories on morality that differ with the typical, cultural relativist picture of "whatever works for this society." Charles Taylor, for instance. The moralities of Plato and St. Augustine are not cultural norms.

      Adherence to the non-aggression principle is not emergent of a cultural norm.

  3. Daniel is there any other video or audio of Keynes other than that one clip of him on youtube talking about the gold standard?

    Also, are there any good documentaries on him?

  4. Daniel: Not to be putting words into Gene's mouth, but I don't think what he says in any way supports Rortyan relativism. Pointing out that there is no such thing as a neutral Liberalism, that Liberalism has a view of the good life which it tries to smuggle into the picture under the pretense of neutrality, doesn't entail that there isn't a correct view of the good life, Liberal or otherwise. The point is that Liberals should make moral arguments for Liberalism and not pretend that they are exempt from the need to do so.


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