Paul Krugman is not happy with my post on echo-chamber etiquette for America’s public intellectuals. As widely read public intellectuals, Paul Krugman and Noah Smith have an obligation to present a description of the world that’s as accurate as possible. They have an even greater responsibility to liberal readers who are attracted to ideas that fit well with their preconceptions about the nature of reality.
Krugman points out that he wasn’t really attacking Sargent but rather commentators who posted favorable comments about Sargent’s commencement address. Fair enough. Paul is not attacking Sargent, and I think he’s justified in pointing out that it is curious that such favorable comments are being highlighted now when the U.S. economy is still in a weakened state and when problems with income inequality are finally getting the attention they deserve.
He also suggests that the right wing echo chamber is worse than the left wing echo chamber. He writes that
America, it goes without saying, has a powerful, crazy right wing. There’s nothing equivalent on the left — yes, there are individual crazy leftists, but nothing like the organized, lavishly financed madness on the right.
I don’t think I would put it quite so strongly but I think again Krugman is basically correct – the “crazy right wing” has assumed too much influence over the broader parts of conservative America and this is surely a bad thing. The left, thankfully, is not at that point yet.
This however gets at what I was trying (perhaps unsuccessfully) to say in my earlier post. The current condition of the right is the inevitable consequence of an environment in which crazy ideas are bandied about cavalierly and amplified to the point at which they become unquestioned. I think this was also the point of the NYT column by Nicholas Kristof.
Now, neither Noah’s post nor Krugman’s post are crazy. Neither is “wrong.” But neither is the message that their more liberal readers need to hear. To me it seems obvious that the proper response to an extreme right-wing statement like “tax cuts pay for themselves” can’t be “oh yeah, well extra government spending pays for itself.” If I could dictate the reading habits of my fellow Americans, I might put Piketty’s Capital in the Twenty-First Century on the bedside table of every conservative but I would put Sargent’s 12 principles on the bedside table of every liberal.
 Krugman points out (again correctly) that there may be efficiency gains to having a more efficient distribution of income. This is true though I strongly suspect that the overall efficiency costs to achieving a more desirable income distribution will outweigh these benefits. Of course, I strongly suspect that, if we are careful about how we go about redistributing income, the overall gains in welfare from having a more equal income distribution will outweigh the loss in efficiency.
But Krugman’s point is that Sargent should be on *everyone’s* bedside table in *2007* (and in similar years with close to full employment). He should be one nobody’s bedside table in 2014.
Which is not to say we should forget that there are efficiency/equality tradeoffs sometimes in 2014. If I was going to write a speech of things for liberals to know in 2007 it would be a lot like Sargent. But there are SO MANY more important things to think about (in both human and purely economic terms) when there are people suffering and underutilized resources sitting idle.
“The left, thankfully, is not at that point yet.” That’s right. Koch Brothers = really evil; George Soros = actually good. That’s the same George Soros who informed us that, “main obstacle to a stable and just world order is the United States.”
George Soros in 2006:
“The main obstacle to a stable and just world order is the United States. This is a harsh — indeed, for me, painful — thing to say, but unfortunately I am convinced it is true. The United States continues to set the agenda for the world in spite of its loss of influence since 9/11, and the Bush administration is setting the wrong agenda . The Bush agenda is nationalistic: it emphasizes the use of force and ignores global problems whose solution requires international cooperation… We must recognize that as the dominant power in the world we have a special responsibility. In addition to protecting our national interests, we must take the leadership in protecting the common interests of humanity…. There is no other country that can take the place of the United States in the foreseeable future. If the United States fails to provide the right kind of leadership our civilization may destroy itself. That is the unpleasant reality that confronts us.”
Do you really think that someone like ANON really cares about the accuracy and time of the statement when he can cherry-pick it and take it out of context to try diligently to make an obviously untrue and ridiculous point?
His statement is perfectly accurate, and hardly cherry picked. You can tell, because the larger quote means exactly the same thing, only goes into greater detail.
And those details seem to me quite reasonable and convincing. Not nice, but reasonable. Thank you, Bloix, for posting the context.
Soros is being unfair to the Bush Administration here. Although much of their foreign policy initiative failed to make a more peaceful world, there are lots of much worse actors on the world stage that caused greater harm than Bush. That said, all Soros is calling for is that the US recognize the important role with play in the world and to consider the greater good of humanity in on foreign policy decision making. This doesn’t strike me as so controversial.
From the money on the right we hear calls to arm ourselves in case we need to overthrow the state, questions of the President’s place of birth, death panels, smearing any science that challenges industrial efficiency, equating universal healthcare with Nazism, ect.
So, yeah, Soros unfairly blamed the Bush Administration for global instability when many were at fault, but I fail to see how this is equivalent to the campaigns of crazy coming from the right.
I think you and Krugman are weighing objectives differently. Your main objective seems to be to maximize public economic knowledge (that may mainly be associated with future policy efficacy). It appears that Krugman, given that policy is clearly too “conservative” under current aggregate conditions, tries to maximize _present_ policy efficacy by massively emphasizing the benefits of more “liberal” policies today (perhaps at the expense of public economic knowledge / future efficacy if people don’t closely read his conditioning remarks).
You may be right. Though I think conservatives made a similar calculation and have lived to regret the anti-intellectual course their party has taken in recent years.
My experience with reading Krugman is that he tends to stress that his current advice is applicable under current conditions, while we’re in a liquidity trap, incessantly.
He is certainly right to point out that things work differently once the economy falls into the trap.
“in recent years”? By which you mean the last four decades?
House, in his own text, suggests his goal is for Krugman to keep his most liberal readers from wallowing in their own biases. That is a different thing than improving public knowledge. Improving general public knowledge requires addressing the most widespread misconceptions about the economy and policy. Krugman’s claim is that the right has misled the public, willfully in some cases, and that the public needs to hear the case against those mistaken views.
If the most important errors in policy and economic thinking were not, in Krugman’s view and very probably in reality, aligned with right wing views, then there would be a legitimate reason to call in Krugman to correct left-wing thinking. In the real world, right now, correcting left-wing errors is largely an academic exercise. Any real-world benefit will go mostly to the rich and comfortable.
It’s worth noting that when Clinton was in office Krugman did aggressively challenge the “policy entrepreneurs” and liberal biases. It seems to be forgotten that the liberal elite used to hate him, his fights with Richard Reich were legendary and he was heavily attacked for suggesting that free trade might make life better for poor people in 3rd world countries (remember the Nike factory?).
The first post misread Krugman; this one seems to explain why you misread him. You seem really worried about liberals becoming as crazy as the right-wingers, so you are looking for evidence of liberal craziness. The problem is that there just isn’t all that much liberal craziness, especially in economics blogs. In fact, liberal bloggers aren’t all that far left. Noah Smith strikes me as politically fairly moderate. Krugman has been a bit radicalized, politically, but I’d say that’s a rational response to the right-wing insanity we’ve seen over the last decades, and he’s still not all that radical by any reasonable historical standard. Certainly neither his specific proposals nor his economics seem particularly radical!
“The problem is that there just isn’t all that much liberal craziness, especially in economics blogs.”
There’s plenty of progressive craziness with regard to economics, just like there is plenty of conservative craziness. This is because the average person, both left and right, are extremely ignorant about economics, particularly macroeconomics, and have opinions about the topic that consist almost entirely of visceral intuitions that reflect their own class interests. The average person, left and right, thinks that foreign aid is approximately 25% of the US federal budget. The average person, left and right, thinks almost exclusively in redistributionist terms (pro or con), thinks that their own taxes are too high and are always being raised, and that they should have essentially unrestricted access to health care without having to pay for it. The average person thinks the government debt can be averaged across every citizen to produce the number each of us owes, without considering that we’re also the vast majority of those who lent the money and are also owed (rendering that calculation meaningless).
Writers about economics for popular audiences have essentially zero influence on the beliefs and prejudices of the general public, of whatever political persuasion. The general public have their prejudices and are largely indifferent to the influence of economists or writers about economics. Sure, they’ll seize on something these people write as validation for their prejudices, but what’s written doesn’t produce those prejudices nor make them more or less extreme.
House’s argument is no more true about the right than it is the left. While the ideas associated with the respectable Milton Friedman or the much less respectable Arthur Laffer have great currency in conservative circles and their names are bandied about sometimes in popular discussions, the fact is that conservatives held those core ideas anyway in the same simplistic and unknowing sense as they always have. Of course taxation is a disincentive to work and therefore less work means less tax revenue — or, better yet, “taxes bad”. Or course inflation sucks and the government should oppose it. These are things that conservatives have always believed, that most people believe. The writings of economists, academic or popular, provide only a name to associate with them, they’re not responsible for these beliefs, nor their extremity, and certainly not their simplemindedness.
The only people that really matter in this context are the people that Krugman calls the Very Serious People. Those are often self-styled centrists, but generally are a cross-section of the political, government, finance, business, and media classes. They do have influence, and they do tend to know (slightly) more about economics than the general public, and they do tend to use economics writers as validation for their worst and more extreme prejudices, whenever possible. And you know what? Those people aren’t leaning leftward, they’re leaning rightward. There’s approximately zero danger of providing them with an excuse to embrace extreme leftist prejudices about economics.
Actually most liberals have conservative views about the economy. This is because they get their economics from the NY Times, the Washington Post, NPR, the Economist, and the Sunday news shows, all of which accept the center-right economic conventional wisdom: deficits are far too high, inflation is the major threat to stability, “entitlements” must be cut, “free trade” agreements benefit everyone, unemployment results from a skills gap, a strong dollar must be maintained, etc.
“You seem really worried about liberals becoming as crazy as the right-wingers, so you are looking for evidence of liberal craziness. ”
In short, when Chris sees somebody pointing out right-wing lies and craziness, he searched from something to which he can point and say ‘both sides do it’.
My first experience with him was when he suggested that Krugman was just as crazy as Prescott. He was called on it, and failed to come up with something.
I don’t think either Krugman or Noah are far left. Certainly not “radical” by any stretch.
‘Incessantly’ becomes necessary when so few decision makers in Europe and Congress seem to be listening or even interested.
So, forgive me for noting: it’s pretty clear that Chris, Noah, Paul and all the readers and posters here have had a nice conversation about what Noah and Paul actually said, how Chris might have misinterpreted a few pieces, what Chris really meant, and how different strategies for communicating might reflect different goals, the relative importance of which we might reasonably disagree over.
Now, to bake your noodles: is that the type of conversation that happens in an echo chamber? …
An echo chamber does not analyze statements, correct misinterpretations and suggest tonal improvements. It merely magnifies and repeats back what is said – ad nauseam. Like the Republican have done with the so-called ‘train wreck’ (how often have we heard that phrase?) of Obamacare.
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You are attacking a straw man. Again. Nobody is saying that government spending pays for itself (as opposed to right who do say that tax cuts pay for itself.) What people like Krugman say is that government spending pays for it self in the current situation. that is an important qualification that makes all the difference. And it happens to be true, unlike the right people like Krugman have arguments as to why it is true now. And they explicitly point out that it is not a general fact. The same is true for inequality. Nobody is saying that full equality of income and wealth is good. But the left says that the *current* level of income and wealth inequality is not only unfair, but in fact bad for the economy. And they explain why, with actual numbers. What I think is counter productive for the left is not pointing out these truths, but your “both sides do it” stance.
But we cannot prove increasing inequality is bad for the economy. We only have hunches that it could be. But there is plenty of evidence that suggests it’s neutral.
no: we already know. as wealth concentrates, political power shifts, and policy swings toward the needs of maintaining the wealth rather than the general welfare.
there is no market unshaped by policy. in fact there are no markets ~without~ policy. the rich know this better than anyone, and when they speak louder, policy breaks.
I’m not sure we can “prove” that murder is wrong either.
But if wealth aggregates into the hands of a small minority, and if the wages of the majority are stagnant, then the likelihood of credit bubbles increases, doesn’t it?
Evidence of neutrality? I’m aware of an assumption of neutrality. I don’t recall seeing evidence. Since there is plenty, you won’t have trouble linking to some? Since there is plenty, the links won’t have to be to AEI or Heritage or Peterson, of course.
Actually, there is this recent IMF study showing clearly that large values of Gini coefficient are, on the average, associated with low GDP growth.
Click to access sdn1402.pdf
Right, this is it precisely. Krugman doesn’t think that increasing government spending (or anything else) is the right thing to do under all circumstances (and by contrast, the right has a knack for thinking of excuses to cut taxes under any circumstances, using shifting rationales that aren’t entirely consistent with each other). The idea that we’re necessarily living in a world where the left and right that are mirror images of each other is completely wrong.
“But the left says that the *current* level of income and wealth inequality is not only unfair, but in fact bad for the economy.” Actually, that’s more like Stiglitz than Krugman. Krugman used to say that while extreme inequality was a problem for lots of reasons, he hadn’t seen any proof that it actually effected the macro economy– there have been some studies released since then that seem to have changed his mind some what, but he hasn’t as of yet said a lot about it (It could be that this is an example of Krugman dialing it back to keep from giving the VSPs the vapors– something I think he does quite often, even without advice from Chris House).
The right: “Here’s some eternal truths. Don’t listen to anybody who tells you different, because they’re [insert stereotype here] and out to fool you.”
The left: “Here’s some good advice, for the current situation. Here’s why I think so and how you can check for yourself. Here’s why I think the counterarguments are wrong, and where I think they’re coming from.”
Policymakers: “I’ll just do whatever compromise gets me yelled at less.”
Reality: “Ow, that hurts. I can hurt you back, you know. And I charge interest.”
House: “Lefties, stop your yelling, or in the long run, you could end up exactly as stupid as the right.”
Keynes: “In the long run?”
*stands up and claps at homunq’s comment*
Its in other topic areas that you tend to find the liberal crazies, for example GMOs and childhood vaccinations.
Yes, the left is pretty nutty about GM food, though I get the impression that the anti-vax crowd isn’t strictly lefty craziness (Kahan has some data up that seems to show that, if I read it right). Additionally, I think the left can be pretty nutty about nuclear power, which makes a nice parallel to conservative craziness about global warming, because if that’s a big deal, then nuclear power pretty much has to be part of the solution. Krugman has turned into quite the solar rah rah recently, which I suspect is a good example of hearing just the echo chamber: if he crunched some numbers he’d be less confident on betting the planet on a 100% wind/solar revolution.
Joseph Brenner: “I think the left can be pretty nutty about nuclear power, which makes a nice parallel to conservative craziness about global warming, because if that’s a big deal, then nuclear power pretty much has to be part of the solution. Krugman has turned into quite the solar rah rah recently, which I suspect is a good example of hearing just the echo chamber: if he crunched some numbers he’d be less confident on betting the planet on a 100% wind/solar revolution.”
I think if you look at some of the latest research, you’ll find that solar is either at or close to being as cost efficient as oil/natural gas, and that we are well on our way to making it far more cost efficient. For instance, here’s a recent article from Science Daily, hardly a politically partisan bastion, on a new technique for taking advantage of full spectrum solar light to increase efficiency: http://www.sciencedaily.com/releases/2014/04/140428121118.htm .
As for nuclear energy, the problems with it are that the waste is radioactive for centuries to millenia. Furthermore, while nuclear accidents/meltdowns are really quite rare, when you do have nuclear power crisis you have to evacuate the area for tens of miles in every direction, for an as yet undertermined period, c.f. Chernobyl & Fukushima. I hardly think such concerns can be fairly characterized as “nutty”.
It is not an accurate parallel. Democrats support nuclear. They aren’t simply gung-ho about it as Republicans. Steven Chu, the former Secretary of Energy and Democrat, is a proponent of nuclear. In fact, adopting a cap-and-trade agenda to combat global warming would have been a big boost for nuclear. Democrats supported it. Republicans opposed it.
On the other hand, you have Republicans openly rejecting AGW and even calling for abolishing the EPA.
Sorry, but there is just no parallel.
You are simply wrong about GMOs and political orientation (More here.
What correlates best with not liking GMOs is sex. Men will shove anything into their gobs.
There are some conservatives who openly advise against childhood vaccinations (!)
Hey while many anti-GMO people are liberals, many of us liberals are as annoyed with those types as you.
Plenty of anti-vaxxars are on the right. While some on the left believe that GM foods are harmful, this does not manifest itself into a national platform on the left.
There are loonies all across the political spectrum. However, loonies and crazy beliefs simply don’t make their way into the mainstream, as they do on the right. There lies the difference
And notice that those are fringe areas; the craziness of the right is far more influential.
Mr. House, you write “… I strongly suspect that the overall efficiency costs to achieving a more desirable income distribution will outweigh [Krugman’s alleged] benefits.” I’m taking that as an opening to opine re: what I strongly suspect, having no qualifications besides living in this pretty terrible current economy.
Look, there is a whole lot more to life than efficiency. I mean, is it economically efficient to kick back with good friends, good food and good beer? No, but it sure is nice.
Inequality really means, “I deserve the nice stuff, but you don’t! Get back to work making me more profit. And kiss my ring before you go.”
How can it be efficient for Finance to monetize triple the future worth of a mortgage loan and pocket it, then crash the world economy and make the innocent borrower pay the margin call? Those are the guys arguing for efficiency over equality, and they have zero credibility with me.
As for the conservative/liberal divide: I delivered Mobile Meals yesterday. They were prepared at a central location, trucked to multiple places of worship all over town, distributed to volunteers riding 2 to a car, and delivered to the consumers. To get 250 meals to the otherwise hungry, we used 25 cars and 100 man-hours just on the last step!
It would obviously be more efficient to give money to the end recipients so they could afford a caretaker to make them 3 meals, rather than one, per day. Conservatives object to and block these kinds of direct payments while strongly encouraging the existing highly-inefficient religious participation instead.
Conservatives don’t care about efficiency, they care about the power to say who “deserves” a good life and who doesn’t.
Good job on the Mobile Meals — you’ve done your good deed for the day. Hunger in the U.S. is actually shockingly common and a complete embarrassment for us as a nation.
Your remarks about conservatives’ true motives are pretty depressing. I hope you are wrong.
Seriously, Mr. House? I refer you to a foundational and oft-quoted piece from a decade ago: “What is conservatism, and what is wrong with it?”
It opens like this:
“Liberals in the United States have been losing political debates to conservatives for a quarter century. In order to start winning again, liberals must answer two simple questions: what is conservatism, and what is wrong with it? As it happens, the answers to these questions are also simple:
Q: What is conservatism?
A: Conservatism is the domination of society by an aristocracy.
Q: What is wrong with conservatism?
A: Conservatism is incompatible with democracy, prosperity, and civilization in general. It is a destructive system of inequality and prejudice that is founded on deception and has no place in the modern world.
These ideas are not new. Indeed they were common sense until recently. Nowadays, though, most of the people who call themselves ‘conservatives’ have little notion of what conservatism even is. They have been deceived by one of the great public relations campaigns of human history. Only by analyzing this deception will it become possible to revive democracy in the United States.”
I would add that Chris doesn’t have any actual proof that decreasing inequality (to the extent under consideration) would cause any decrease in efficiency.
Meanwhile, we’ve watched a massive financial collapse and a quite deliberately-enhanced light depression cause massive efficiency losses.
Reflect, please Professor House, on your two statements above: (1) Hunger in the U.S. is shocking and an embarrassment; (2) you “hope” conservatives aren’t actually motivated by the notion of who is deserving and who isn’t.
If (2) isn’t true, then why is (1) a justifiable characterization? Would there be widespread hunger in our democracy if there weren’t powerful political forces that have been and continue to be opposed to preventing it? Certainly there is enough wealth in this country to have prevented this shocking embarrassment or to eradicate it now, isn’t there professor? (Consider Scandinavia.)
One doesn’t have to go back to the Victorian Age to encounter the notion of “deserving” and “undeserving” poor. It’s easily detectable beneath or even right on the surface of our politics today.
Permit me to offer a hypothesis for the persistence of hunger in particular and poverty in general. One side of the political spectrum (a) worships (and that’s the proper word) “the market,” (b) believes the market never fails because it can’t, (b) imputes moral value to market outcomes, (c) thinks government is not the solution to any problem whatsoever but is, in fact, the problem itself, and (d) concludes poverty results from government actions. [Exhibit A: Paul Ryan; Exhibit B: Cliven Bundy; Exhibit … ] From this logically flows the notion that the wealthy are morally superior, and vice versa. (Also, too: The belief in European, or “white” superiority, which has been present in this hemisphere since Europeans first arrived here, disproportionately permeates one side of the political spectrum, subtly affecting policy debates. And not so subtly. [Google Paul Ryan + inner city and Pat Buchanan + “white people built this country” + Buchanan’s final appearance on The Rachel Maddow Show]
The other side of the political spectrum (a) acknowledges the power of the market to improve human welfare, (b) finds empirical and theoretical evidence of market failures, (c) finds empirical evidence that government action can mitigate the baleful effects of market failures on human welfare, and (d) cannot detect any Calvinistic correlation between personal morality and personal wealth. [Exhibit A: Donald Sterling]
As for economics, one side of the profession finds theoretical and empirical evidence that there is a phenomenon called “a liquidity trap,” and one rejects that evidence because it is contrary to its “belief” and authority/status, as the Roman Catholic hierarchy once rejected evidence of heliocentrism, and for the same reasons. One side, therefore, accepts the empirical and theoretical evidence that the Keynesian prescription for mitigating the cruelty that is mass unemployment is temporarily increasing government spending to make up for a temporary shortfall in private spending, and one side rejects that evidence.
Finally, professor, you observe that “the ‘crazy right wing’ has assumed too much influence over the broader parts of conservative America …” But you can’t leave it there. Oh, no. Instead, you go on to say, “The left, thankfully, is not at that point yet,” clearly implying the remainder of your thought, which is this: “but the left, of course, is headed toward assuming too much influence and will get to the crazy state sooner or later.” So instead of waiting until the left gets crazy and assumes too much influence and then calling it out, you, a level-headed, clear-thinking centrist, make preemptive strikes. So your contribution to public discussion at the moment of economic crisis is to muddy the waters and then lift your skirts?
Tygerr, you are a good man. I wish you all the best.
That’s very kind of you, ANW. We all need each others’ best wishes. And those we might not consider “good” people probably need them most of all.
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Even if it were true that Krugman and his ilk serve primarily as cheerleaders and morale boosters for the small and generally ignored contingent of progressives, that in itself would be a worthwhile role. When you are constantly bathed in Fox News and other right-wing propaganda, along with the fatuous platitudes of the crazy center, you tend to need support. And having a Nobel economist on your side means a lot.
But it’s more than that, as PK notes in his blog today. A lot of people well outside the “liberal echo chamber” read him. So at the very least, they are regularly reminded that there is a respectable point of view different from theirs. Without that, we really would be lost. The small cadre of liberal econobloggers are almost single-handedly keeping the whole idea of a public debate on economics alive.
Now if we could only get Paul to shave off his beard, we’d really be in the game!
@CH: To me it seems obvious that the proper response to an extreme right-wing statement like “tax cuts pay for themselves” can’t be “oh yeah, well extra government spending pays for itself.”
To me it reads like you think PK is inserting an implicit *always* as in “extra government spending [*always*] pays for itself.” If you read his columns and blogs regularly and carefully you would realize that is not true; likewise for tax cuts [sometimes paying for themselves]. Not only does he talk of multipliers, he frequently gives estimates of what they might be (typically cited from other sources, not of his own creation) and contextualizes them in the current financial context, backed by empirical data or models derived from the same.
So, your strawman “oh yeah, …” statement is not something I would expect to hear from him. Ever. Obviously.
I would say the opposite. PK *always* adds appropriate qualifiers. Under some conditions, in theory government spending could pay for itself. In the past I would guess that the same could be said for conservative commentators (under some conditions, in theory, tax cuts could pay for themselves). It’s just that overtime, as these messages get repeated and distorted what remains is are statements which cause more harm than good.
So liberals who say things that are *actually true* are somehow guilty of not saying what people “need to hear” because supposedly liberal intellectuals can’t just say things that are true (when appropriately qualified)? And apparently their main responsibility is to provide a corrective for liberal misconceptions, but not ones that liberals have in the present, but ones they might have in the future. And we are to believe with certainty that liberals will forget the qualifiers and accumulate unqualified misconceptions based on the precedent conservatives have set in the past by forgetting the qualifiers on their statements?
My head hurts.
Ponder sanjait’s comment, Professor House. Such wishy-washy statements like the one she/he calls out contribute nothing useful to econoblog discussions. Moreover, from my reading over the past five years or so, it is conservative bloggers who have distorted Keynesianism as advocating government spending under any circumstances. This they do in order to discredit Keynesianism and/or because they simply haven’t made the effort to understand it. Willful ignorance. (“The boom, not the slump, is the right time for austerity at the Treasury,” Keynes said — as you know, professor.)
The proper role of an academic economics commentator at a time of economic crisis is to educate the electorate and policymakers about what possible remedies are best supported by known evidence. Assuming a lofty above-it-all pose as an honest, both-sides-do-it broker is worse than useless, a corruption of public discourse when clarity is urgently needed.
Moreover, even if the Keynesian prescription is distorted at the moment into spend-under-any-circumstances, at a time when government spending is so desperately needed to counter the mass-unemployment crisis that is disfiguring our present and future, to sniff that this distortion does harm is risible. Not increasing government spending is what’s causing harm. When the crisis has passed, then you can straighten everyone out, if necessary. I don’t think, however, it would be necessary, as skepticism about government spending is always present, and there would be no liberal econobloggers advocating continued spending.
Are you really serious about putting Sargent at liberals’ bedsides? better to have it out in the light of day! Otherwise, nightmares, deep in the echo chamber! Sargent’s 12 principles circulated rapidly, and only added to the large number of other lists of “things all economists agree upon” appearing in the first chapters of econ 101 textbooks. Sophomoric essential myths whose dispelling makes excellent starting points for teaching critical thinking.
Consider your footnote on number 5, tradeoffs between equality and efficiency. It is one-sided. Yes, there may be costs when increasing equality; but they can hardly be considered without also addressing the costs of maintaining or increasing inequality. These include not only the reduced efficiency of deprived labor, but also the costly mechanisms of depriving them. Nature on its own is not responsible for the generational doubling of finance in GDP, for example. Legions of workers have been involved.
Number 5 is just the easiest. The others are also indefensible, number 10 being the worst. Even assuming no unit root in economic activity, reallocating non-utilized resources imposes precisely zero costs on future generations, until a balance is struck between foregone storage and depreciation costs and the expenses of distribution.
To me it seems obvious that the proper response to an extreme right-wing statement like “tax cuts pay for themselves” can’t be “oh yeah, well extra government spending pays for itself.”
I agree. Lafferism is absurd in an economy where we are near full employment – and in that economy, higher government spending does crowd out private spending. Of course, we have been well below full employment for the last six years which is why even Republican economist Martin Feldstein advocates accelerating public infrastructure investment.
“To me it seems obvious that the proper response to an extreme right-wing statement like ‘tax cuts pay for themselves’ can’t be ‘oh yeah, well extra government spending pays for itself.’
It seems, unfortunately, that you actually think that’s what Krugman et al are saying. They are not, and you should know better. Government spending may or may not pay for itself depending on the circumstances. It is hard to believe, for example, that spending on more war-making equipment will pay for itself, since, at least in part, there is no productive use within the country for such manufactures. However, right now, with real unemployment somewhere around 11%, with construction worker unemployment closer to 15%, with gigantic national needs for work modernizing and just maintaining all parts of a decaying national infrastructure, with the likelihood that such work will result in economic efficiencies that will help everyone, with real interest rates at or below zero, etc., etc., such spending might well pay for itself. But even if not or it’s a close call, so what? There’s nothing ideological about saying we should be focusing on ending this persistent large shortfall from full employment.
Defense outlays for materiel and equipment have a negative influence on the economy as these items are withdrawn from other uses in the economy. So the calculations about the influence of government outlays on the economy need to be adjusted, downward, and I do not know if the studies have done that for these outlays. The point is that it is most likely that the outlay side of government actions is even more ‘austere’ now than we understand.
There are longer-term economic questions too, and I’d be interested in analyses about the human capital influences (each year, for more than a decade, we have had thousands of highly productive people ‘working’ in foreign deserts). I’d assume that this has been a drag on the economy to have these talents mis-directed away from productive purposes.
There is a clear approach to determing the level of inequality that is bad. You can prove by the same fundamentals that tell us the free market is Pareto optimum, that the result is a log-normal income distribution. This is the same as the distribution of particle velocities in a hot gas, and comes from the same source, the second law of thermodynamics and considerations of entropy. And, in fact, we have a log-normal distribution for all but the very top end of the distribution, which even includes the very few, very high incomes of actors, sports stars, inventors and so on and most surveys of what people think is an appropriate income dsitribution is also log-normal. But added on to that is a Pareto distribution at the top end from finance and dynastic wealth.
What this tells us is that something is wrong, the game is rigged and therefore effort is wasted on cheating, and by suppressing the efforts of those who are cheated, in addition to any issues based on diffential consumption (clearly an income distribution where one person had everything would not produce much growth, so it is also reasonable to assume that somewhere on the way there growth is reduced).
In the current case one important distortion is the special treatment of capital gains. They are government subsidized and that generally results in too much of the thing subsidized, which we are seeing in bubble after bubble and now pitiful returns on capital. Subsidies also enrich any gatekeepers to a particular activity, and again we are seeing finance types at the top of the income distribution. This also contributes to dynastic wealth as does the accumulation of political power that goes along with money.
I strongly suspect that the overall efficiency costs to achieving a more desirable income distribution will outweigh these benefits.”
It all depends on how the more desirable distribution is achieved. Policies that increase equality of opportunity not only achieve a more desirable distribution, but they also increase efficiency because they make it possible for the skills of the disadvantaged to be more fully utilized. In other words:
INCREASING EQUALITY OF OPPORTUNITY IS A FREE LUNCH FOR SOCIETY because it achieves both a more equitable distribution and increases efficiency.
But many of these free lunches are left lying on the table instead of being picked up because of the ability of the privileged to prevent picking them up.
“but I would put Sargent’s 12 principles on the bedside table of every liberal.” I printed them out so I could examine them more closely. These 12 dogmas go a long way in explaining why Sargent is so totally flummoxed by what has been happening since the onset of the Great Recession.
“I don’t think I would put it quite so strongly but I think again Krugman is basically correct – the “crazy right wing” has assumed too much influence over the broader parts of conservative America and this is surely a bad thing. The left, thankfully, is not at that point yet. ”
Well, i think there’s any easy way to illustrate:
Here’s a list of superPACs: http://www.opensecrets.org/pacs/superpacs.php
Now initially, it seems like the top three are liberal (since they are labeled as such) and they have, by far the tallest dollars. Like:
Senate Majority PAC (Liberal)
That’s a lot of money. BUT-
What Democrats would you call liberal in the Senate? Bernie Sanders? Elizabeth Warren? Can you even point to a single Senator who has ever brought up Krugman, in spite of his pretty solid track record? I think it’s safe to say that the Senate Majority PAC is centrist, and mainly devoted to keeping incumbents in office, and not particularly devoted to any policy.
However, look at the others on the top of this list:
American Crossroads $2,389,722 Conservative $9,142,637
Club for Growth Action $2,278,435 Conservative $5,233,428
These are two very well funded groups (why isn’t Crossroads GPS listed, as well as Rove’s other fundraising arms?) with very solid, inviolable goals: cutting taxes for the wealthy, repealing safety regulations, etc etc.
The next, possibly liberal organization would be the SEIU- who gave money to Clinton, for instance, who passed NAFTA and Gramm-Leach-Blighly. I know that the very idea of unions is supposed to be some kind of left-wing insanity, but it’s hard to say that they are as far to the Left as Club For Growth is to the Right, isn’t it?
The first PAC I can find that even appears to be as close to liberal as Club For Growth is conservative is Ninety Nine Percent, who raised/spent a paltry $149,855/$255,250.
Also, calling Krugman, who isn’t even far enough to the left to be considered a socialist, liberal is kind of stretching it.
I just can’t agree with your second point. I’ve watched Paul Krugman point out, describe, plead, warn, about how we were doing precisely the opposite of what we needed to be doing by practicing austerity at precisely the wrong time and all because of essentially a fad, rumors, common wisdom and so on, and we just kept barreling ahead with it anyway. Europe was even worse, and since Europe is where I lived during most of that period I saw it firsthand, believe me.
Any idea that people like Krugman or Noah Smith or a handful of others were too shrill or extreme or whatever you want to call it is backwards. Conservative-based ideas took over the conversation, were all you could espouse in the serious circles, and they essentially dragged us through nearly a decade now of stagnation and worse that could have been largely avoided, at least after the first couple of years of crisis, if Krugman’s views were the dominant ones that everyone felt they had to repeat and promote, instead of the insane mix of “government budgets are just like a family budget, you just stop spending so much, and your bank account gets more full!” and other austerity myths.
Another small point, regarding your line:
“The left, thankfully, is not at that point yet.”
I don’t think it’s a matter of “yet”, I think the left was somewhat there in the 1960s, at least a similar kind of passion and bent toward extremism was present. These are fads and fashion, to some degree, and one on the left ended long ago. There is no left that’s about to become as extreme as what’s happened to the Republican party recently, not even remotely. It’s very tempting I know to see anyone calling the Republicans extremists as somehow being unfair and overlooking how Democrats are just as extreme in the other direction. The reason it’s not actually unfair is because it’s true.
“I strongly suspect that the overall efficiency costs to achieving a more desirable income distribution will outweigh these benefits.”
We’re progressives here, not conservatives. Who cares what you strongly suspect? I strongly suspect that less inequality will be more efficient. Let’s see some actual evidence. Perhaps we should begin by rigorously defining efficiency? I would expect that an economy with full employment is more efficient than an economy with high unemployment. And by that measure, the more equal 50s and 60s are looking pretty durn attractive compared to other times that were less equal. http://www.multpl.com/unemployment/table
> This is true though I strongly suspect that the overall efficiency costs to achieving a more desirable income distribution will outweigh these benefits. Of course, I strongly suspect that, if we are careful about how we go about redistributing income, the overall gains in welfare from having a more equal income distribution will outweigh the loss in efficiency.
What leads you to suspect these things? Your gut? Data combined with an economic model? Please elaborate.
Also, gains and benefits to whom and how measured? Just as the originator of the GDP (Simon Kuznets in 1934) warned against its use as a measurement of “welfare” (per Wikipedia) I have concern over simple or single-value measures of “better” and “worse”.
“Of course, I strongly suspect that, if we are careful about how we go about redistributing income, the overall gains in welfare from having a more equal income distribution will outweigh the loss in efficiency.”
Since Piketty and Saez we know that the rise of income inequality is due to the rise of incomes of the top 0.1%, i.e. it is not professionals like doctors and lawyers whose incomes are rising but CEOs and heirs. So classical productivity-based explanations like skill-biased technological change have been falsified and the rise of inequality is indeed political economical.
Taxing the hell out of heirs and rent extracting CEOs has no disincentive effects at all and can even have positive incentive effects: you work harder when daddy did not lay it all out for you, you work harder when their is no collusion of top management but actually competition (of course this can only be achieved via improving corporate governance laws and not via taxation and redistribution).
So we are in a Stiglitzian world where there is most likely no trade-off between efficiency and equity; both can be increased.
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“To me it seems obvious that the proper response to an extreme right-wing statement like ‘tax cuts pay for themselves’ can’t be ‘oh yeah, well extra government spending pays for itself.’ ”
And since no one (no one I know of, anyway) is actually making the latter point (the former having been made ad nauseum) you have no worries on that score.