Sunday, March 10, 2013

This is really embarassing

Jeff Sachs has had some really puzzling columns criticizing Krugman lately, most recently on Huffington Post (HT Grant McDermott).

I remarked before on how odd the Scarborough/Sachs piece was, particularly how they:

1. Noted that Krugman said just a few years ago deficits could be bad
2. Noted that now he says they are good, and then
3. Accused Krugman of forgetting that non-crude Keynesianism thinks deficits are sometimes bad and sometimes good, apparently immediately forgetting their own citation of Krugman calling deficits bad in their own damn column.

DeLong has more on that here with this excellent summation (apparently what they link to is damning as well): "You do not say "X says Y" and then cite to a work in which "X says not Y". You simply do not do that."

It honestly does seem like a bad joke rather than an argument.

This Huffington Post column has even more of this sort of thing. As I said to Grant McDermott, it's not bad analysis per se (although I would argue a little too conservative on the fiscal side of things) - but it's awful as criticism of Krugman. They knock Krugman as a crude Keynesian by criticizing temporary tax cuts - but this is a Krugman point (here and here, and almost certainly lots of other places). They talk about how things would really be better if we had more government expenditures and investment rather than transfer payments and tax cuts - but this is a Krugman point (here and here, and almost certainly lots of other places including his review of some of John Taylor's work). They tie him to CBO projections which they call "Keynesian" (which is odd - how is forecasting related to Keynesian macro? - forecasting is its own field with its own methods), even though he thought the projections were too pessimistic early on because we were dealing with a financial crisis and a liquidity trap.

The two areas where there probably is real disagreement with Krugman and Sachs is the claim that there's a structural component to this and the disagreement over how much debt to worry about. Sachs may have a point on the structural issue, but I'd have to know more about how potential GDP is calculated to say. Krugman dealt with the deficit issue very effectively yesterday I thought, and also made the point that it is growth rather than rising debt that is going to introduce more interest burden down the line. With the examples of Napoleonic Britain, the world wars, and modern Japan in front of me I have a very hard time budging from Krugman's position on this point.

So Sachs may have a point on the structural issue and that may require some non-Keynesian policy thinking in addition to the solutions to the demand problem, but his deficit hysteria is clearly misplaced and the rest of the column is pure Krugman.

I hate to bring more undue attention to him, but this is just like John Papola talking about how the problem is excess demand for money and then championing Say rather than Malhus, or saying investment is the problem and not consumption but then trashing Keynes.

One wonders what is going on inside their heads when they write stuff like this. It's like they don't want to be associated with these people even when they agree with them because... because I don't know why. You don't have to even call yourself a Keynesian if you don't want to, but at least don't talk like this is antithetical to Keynes or Krugman.


  1. Wow - sorry. If it seems like a fifth grader wrote that initial post I fixed a lot of the typos and such.

  2. I write in answer to your stating, "One wonders what is going on inside their heads when they write stuff like this."

    Daniel, I have often written about what causes this kind of stuff and it is "incentive caused bias." Sachs is doing what everyone else does (Kimball, Williamson, blah, blah, blah) and that is write for the purpose of bringing attention on themselves, or worse, for financial favor.

    You forget that Sachs has his nets out, seining for dollars. I never pay any attention to his for that reason. It is so transparent that he is playing for face time on Scarborough's show and, of course, Scarborough still has ambition.

    Yesterday's WSJ had the only editorial with which I have ever agreed, "Malaysia's U.S. Propaganda," an editorial about conservative and libertarian writers taking $400 as payments for propaganda.

    Often I used to write to you about Buffett and Munger using filters---they simply pay no attention to people who are speaking with incentive caused bias.

    I do the same and attempt to alert your readers to this constant problem. For example, look at Cato. Why ever bother with Cato or anything libertarian. It goes all the way back to Hayek, who developed his point of view for money, paid by people who wanted to counterbalance Keynes for their own reasons. I wouldn't read Hayek if he was condensed and made into an additional gospel in the Bible.

    Being on the outside, it is very plain to me that economics is in a downward spiral. Events have shown a lot of people got in the water not wearing bathing suits. We known they will double down and lie more and more. Look at Taylor, Cochrane, Williamson, etc., They become more detached from reality every day, for they sold out long ago. The same is true for Summers and Rhomer.

    It seems to me you have a stark choice before you. Adopt filters or join in the spiral. This is a good first start toward adopting filters and I am glad to see such.

    I would urge you to be even more explicit going forward, starting with Cato. Its POV is purchased and you ought to have the courage to say such.

    Of all the blogs, I pay attention to only three or four substantively, Noah and David Andolfatto and David Glasner and M. Pettis.

    1. Why would you need pre-emptive "filters" to process information if you have critical thinking skills? A cynical mind might think you're just being lazy and trying to find excuses not to respond to critics.

      In the long run it's much more fruitful (for everyone) if you just heed to Hanlon's razor ("Never attribute to malice that which is adequately explained by stupidity*.") categorically. Not to say economists aren't susceptible to bribery - some certainly are - but if someone is trying to manufacture facts, that should be fairly evident in their writings, and it can be pointed out by an astute critic. Cato, for example, certainly has wealthy patrons and an agenda to sell, but it also has writers (and more importantly: readers) who believe what they preach, and aren't motivated by money. Just point out what's wrong with whatever they're saying and you might convert the intellectually honest readers who care - accuse them of being shills for the powers that be, and nobody's the wiser.

      I'm curious, though - do you have any evidence that Hayek wrote in order to please wealthy interests?

      *Stupidity in this case can mean anything from bias to a lapse in judgment.

    2. Hayek was specifically hired to go to the London School of Economics to rebut the policy implications of Keynes

      Developing filters is critical thinking. Read Munger's Psychology of Human Misjudgment on the meaning of filters.

      Consider this set of developed filters.

      Before June 22, 2007, he economics profession all the answers. An example of the confidence of the economic profession in this was Robert Lucas, who in 2003 declared that the "central problem of depression-prevention [has] been solved, for all practical purposes."

      One would expect a lot of untoward behaviors to develop among the people in the field, if there is no new discovery to be made. People of ambition will turn to other efforts to satisfy their ambitions.

      Economists turned to making money. Consequently, all sorts of unacceptable conduct emerged. You had people playing for appointments to the Gov't or the Fed. People served as directors of corporations. If you are on a corporate board, are you going to follow Soros, Munger, and Buffett on the irrationality of markets and the need for regulation or Cochrane? And, you get all the tieups with friends, desire to please donors (Booth, U. of Chicago), etc. If you think friendships don't matter, go watch any good detective show on TV. My favorite at present is Spiral, French, on Netflix. You get into having to know the "family tree" of the players. For example, lots of people cross swords with Krugman, but Tyler Cowen will always come to the defense of fellow students when he was at Harvard. And, so, you see, there is always a back story, requiring very very critical thinking, lots of observation and thought.

      You need to understand, for example, that the Economics Profession did not even have Code of Ethics prohibiting conflicts of interest until 2010, which is why Cochrane will now tell about his connection to CATO.

      Now, all of economics has a further problem. We are now 6 years into the Lesser Depression and lots of people are feeling the pressure. Take Krugman, for example. Is he in a comfortable position at the NYTimes? If you are a critical thinker you would have an answer to that question for yourself. Look at the negative evidence. 1. Fox has ditched failed pundits, including Palin, gearing for 2014 and 2016. 2 The Times is hurting financially. 3. The Times has to be disappointed in Obama and disappointed that Krugman hasn't gotten him to move. So, if I read Krugman, which is rare, there is a filter in place.

      Now, there is a another filter. Does the writer offer substance or red meat. Well we know the answer as to the Right, all you get is red meat. Cochrane and Taylor are the worst. Neither has ever actually proposed one positive step, not even a calculation that, if we all increase our giving to our favorite charity or religion by X% we could do away with food stamps. They reveal themselves in their generality, which is, surprise, the indictment of Hayek and Mises (there is no there there).

      In sum, I have given this far more critical thought than you or the other commenter here. Economics has not advanced really past Keynes (and may never). Keynes was very specific about who should have done what over the last 6 years, it wasn't done, and he has been proven correct.

      Delong, who is a wonderful resource, just put up the key thought, again, today.

      For if effective demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards. Hitherto… the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough.


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