Tuesday, January 29, 2013

A study in contrasts

"He [James Buchanan] got a lot right that desperately needed to be gotten right and that nobody else would have gotten right in his absence. He made a difference in economics at more than the margin, which is something you can say of very few economists." - Brad DeLong, 2013

"Thus Say gives what is the first thorough explanation I have ever seen of irrational exuberance, overtrading, excessive leverage, disappointment, panic, flight to quality, excess demand for high-quality and liquid assets producing excess supply of goods and services and labor, falls in incomes, and the fall in incomes causing the initial problem to snowball..." - Brad DeLong, 2010

"The resurrection of Keynes among professional economists, public intellectuals, and especially politicians and policymakers in the wake of the global financial crisis of 2008 has been one of the most disappointing developments I have witnessed in my career as an economist... Keynesianism is indeed a disease on the body politic in democratic society. An economic doctrine of technocratic arrogance, it suffers from the “pretense of knowledge” and gives scope to the opportunistic behavior of politicians who become unconstrained by Keynesianism in practice." - Peter Boettke, 2012


I always enjoy reading what Boettke has to offer - the point of this study in contrasts is not at all to try to slam him as some kind of meanie (although his discussion of Keynes in the chapter I quote is surprisingly aggressive and dismissive).

What I want to highlight here is how I think he diagnoses the fault lines in economics, the nature of economics, and the primary issues at hand quite inaccurately. As I noted in a comment yesterday, it's not so much that Boettke's conception of "good economics" is bad (although of course I'm sure we'd all have our tweaks we'd make) - it's that he cannot take "yes" for an answer and seems to insist that there is a large divide that isn't really there.

The heart of Boettke's dissatisfaction and disappointment in my opinion has very little to do with economics and a lot more to do with what he considers to be good and bad political ideology. People on the "bad" side of the political ideology question are interpreted to have abandoned Smith, abandoned Hayek, abandoned Buchanan, signed off on any sort of interention and written off any concern with institutional design or constraint.

This, in my opinion, is barking up the wrong tree.


  1. I am astonished by your politeness. If you think about it, Boettke's political crusade is intended to destroy YOUR VERY LIVELIHOOD as a Keynesian economist. I'd feel a lot of contempt towards such a person or at least wouldn't ascribe generally good intentions to him.

    1. I have to say, I was pretty shocked to read the introduction (there's more like that in there). It was not what you would write if you viewed Keynesians as hard working scientists that you're in a dialogue with.

      Regardless of what he thinks of whether Keynesians are hard working scientists that he's in a dialogue with, I certainly think of other economists that way so there's no point in not being polite. I don't think Keynesianism will fall because of name-calling. It will fall when better arguments are provided. And anyway, Keynesianism is an intellectual interest of mine but it probably will never put food on the table (except indirectly, insofar as any independent work I do on these issues builds my CV and advances my career). Labor economics and probably long-run macro has and will bring home the bacon in the future. History of thought and short run macro has and will continue to be the personal/scholarly interest.

    2. It helps to realize that Boettke probably doesn't have any particular Keynesian in mind, so I should not take it personally. Still, in other walks of life that wouldn't completely absolve you...

    3. I still think you are polite to a fault. Right-wing politicians and pundits are your ideological adversaries and right-wing economists, who they support, are your competitors in the business of receiving society's support (and money). Your position is fine as long as you expect there to be an equilibrium between your groups, which will limit the worst you'll face to the unpleasant comments on this blog or something of this magnitude.
      Still, the winds of fortune don't blow the same... Who is to say that Keynesianism won't fall, in some sense, not because of its theoretical shortcomings, but as a result of a political pressure? You might not be spearheading Keynesian macro, but your convictions might leave you open to censure and ostracism all the same.

    4. Is this Boettke's twin brother?

      I swear they think just alike.


      Others have warned Daniel about how he shouldn't handle snakes.

      As for Boettke, there really are none more disingenuous in their statements. For example in What happened to Efficient Markets he admits that all make "errors in judgment." He also admits that at least some are prudent. Thus he admits that the lack of judgment of A can damage B who has been entirely prudent and he calls this efficient. Of course, saying such doesn't make it so and it is not efficient, it is terribly wasteful. In a Democratic Society people who view themselves as having lead prudent lives will demand that the Government take action when the actions of imprudent businesses threaten their survival.

      Thus, Boettke is really high farce. He would permit all firms to buy, sell, and hold synthetic derivative (gambling in its purest form), which are financial weapons of mass destruction, and as we have recently learned, more a threat to democracy than the wisdom of Keynes.

      BTW, Buchanan---well, in 2000 when he was claiming that the natural policy outcomes of democratic governments are government budget deficits, public debt, and monetary debasement, well we had a balanced budget and were starting to return federal debt.

      If he were honest, Boettke would admit that the policies and conditions that gave rise to government budget deficits, public debt, and monetary debasement were from his camp (Greenspan, Bush, and Cheney) and not ours


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