Krugman, Keynes, Kalecki, Konczal

by John Quiggin on August 18, 2013

Paul Krugman’s recent columns, responding in various ways to JM Keynes, Michal Kalecki and Mike Konczal have made interesting reading, signalling a marked shift to the left both on economic theory and on issues of political economy.1 Among the critical points he has made

  • Endorsement of Kalecki’s argument (which he got via Konczal) that “hatred for Keynesian economics has less to do with the notion that unemployment isn’t a proper subject of policy than about the notion of shifting power over the economy’s destiny away from big business and toward elected officials.”

  • Rejection of the Hicks-Samuelson synthesis of Keynesian macroeconomics and neoclassical microeconomics and advocacy of (at a minimum) comprehensive financial controls

  • Abandonment of the idea that the economics profession is engaged in honest intellectual debate, in favor of the conclusion that the rightwing of the profession, including leading economists, is characterized by denialism and bad faith. As he says, while many economists would like to believe otherwise ” you go to economic debates with the profession you have, not the profession you want.”

I accidentally posted this before completing what I meant to write, which anticipates a few comments I already made. So, I’ll add some more points, updating as I go.

First, as with most intellectual shifts, it is hard, and not particularly helpful to assign a precise date. These themes have been evident for a while, but for me at least, this is the first time the points have been made so clearly.

Second, while Kalecki’s article is getting new attention, it’s not all that obscure. Among my first ever publications in the 1970s (in a long-lost magazine) was a piece citing him on the way in which “business confidence” had been restored to pride of place by the abandonment of Keynesian stabilization.

Third, Krugman is certainly going to upset plenty of people in the econ profession with this. But as with most partisan debates in recent decades, it’s a case of sauce for the gander. The public choice school has routinely represented economic arguments for government intervention as the product of rent-seeking by interest groups, and the economists who make such arguments as pawns or hirelings of these groups.

Still, this marks a striking shift in macroeconomics, where only five years ago, the leading figures were congratulating themselves on the convergence between saltwater and freshwater schools, under the banner of dynamic stochastic general equilibrium. As I argued in Zombie Economics, it’s precisely the centre ground of convergence that has been rendered most thoroughly untenable by the crisis. Yet that is still where the majority of academic work being published in journals is grounded.


  1. Pro tip from Krusty. Alliterative titles should always use an even number of K’s. 

{ 126 comments }

1

David J. Littleboy 08.18.13 at 8:26 am

I’m not sure how “recent” this shift is, if it’s a shift at all. He’s been yelling at the idiots for quite a while now. And people who don’t like having it pointed out that they’re wrong on the facts, theory, data and everything else have been whimpering about Krugman being shrill for an age.

2

Random Lurker 08.18.13 at 8:28 am

Though Brad DeLong was the first to point to the now famous Kalecki essay, and he, while leftish, is certainly not extremely leftish.

3

bob mcmanus 08.18.13 at 8:36 am

I am annoyed by people abusing one part of one Kalecki paper, and ignoring the rest. Can I ignore 90% of a Krugman model?

Would Krugman even commit to paragraph one of Kalecki 1943?

“1. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports.”

I doubt it very much. Krugman 1998 still buys Ricardian equivalence.

“This sounds funny as well as perverse. Bear in mind, however, that the basic premise – that even a zero nominal interest rate is not enough to produce sufficient aggregate demand – is not hypothetical: it is a simple fact about Japan right now. Unless one can make a convincing case that structural reform or fiscal expansion will provide the necessary demand, the only way to expand the economy is to reduce the real interest rate; and the only way to do that is to create expectations of inflation.”

4

david 08.18.13 at 9:25 am

@3

Probably not, even for Krugman 2013 August 16.

But I should point out that the quote you posted has exactly nothing to do with Ricardian equivalence. With RE, or without it, you can contend that a government spending program can increase the nominal rate and reduce the real rate. And what is distinctively New Keynesian is (of course) modelling Keynesian effects via the time-path of household consumption, so that everything functions via changes in the real rate.

5

Kevin Donoghue 08.18.13 at 9:34 am

…while Kalecki’s article is getting new attention, it’s not all that obscure.

Well, quite. I’m a bit puzzled by Roger Farmer’s grumpy letter to Krugman:

http://www.rogerfarmer.com/NewWeb/WebPages/letter%20to%20paul.htm

6

John Quiggin 08.18.13 at 9:53 am

@3 It’s the rule, not the exception, for writers to be remembered (not always accurately), for particular points, without much care about “what they really meant”, in general or in a particular publication. To take an example that occurs immediately, most CTers would recognise Marx’s quote about cattle raising and literature criticism, but only a tiny fraction could say how it fitted in to the general argument of The German Ideology. And, none the worse for that, in most cases.

Whether or not the point about full employment undermining the need for business confidence was central to Kalecki’s thinking doesn’t really matter -it would be just as important a point even if he had never said it.

7

andrew lainton 08.18.13 at 10:26 am

Perhaps the most decisive break is that he no longer believes in sticky wages, a comment Farmer got angry with as he claims priority. Also people have now been saying that privately he now believes in endogenous money. So on the key theoretical debates he has made a decisive break with the ‘New Keynsian’ orthodoxy.

8

bob mcmanus 08.18.13 at 10:44 am

Kalecki 1943

Obviously a great and famous paper, but the takeaway that opposition to full employment is derived more from class instinct or class prejudice rather than material class interests is not fully supported by the paper. Kalecki did try to make his Marxism palatable and the paper buries the lead.

II.4:” It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests.”

Footnote 2:” If full employment is maintained by government spending financed by borrowing, the national debt will continuously increase. This need not, however, involve any disturbances in output and employment, if interest on the debt is financed by an annual capital tax. “

Fer sure, Capital, especially finance capital, may overcome its irrationalities and jump aboard.

9

bob mcmanus 08.18.13 at 11:16 am

And in case I am not clear, or the Kalecki isn’t clear, the class interest of Capital is not power or freedom from gov’t interference or feudal privilege.

The class interest of Capital is accumulation.

10

David Kaib 08.18.13 at 11:45 am

It’s good to see this, but unfortunate it’s taken Krugman so long to get there. There was a moment when there was a real window for change both in terms of economics itself and in terms of policy, but we’re largely past that moment.

11

Curt Doolittle 08.18.13 at 12:28 pm

Politics is determined by morality not economics. People will universally endure hardship to punish immorality. The majority may like democratic candidates, but they prefer conservative morality. The conservatives understand this which is why they hold power.

I stopped posting thus mantra on left economic blogs in 2012, trying to persuade them to strike a bargain with conservatives on education reform. Which they would have bought. But the left us just as fanatical in their devotion as the right. So its not one sided.

You might also put Krugman in context: austerity worked. It worked in both Europe and the states. It achieved moral ends. And it taught lessons: the lessons the productive people wanted taught.

Communism failed. Socialism failed. And much of democratic redistibutive socialism is failing.

When socialism failed the left in academia created and promoted Postmodernism: anti-rationalism. Now that their only hope is failing. They will resort to reactionary tactics that are even less rational than Postmodern irrationalities : diversity and equality.

Humans all demonstrate the moral principle of proportionality. But proportionality is dependent upon your moral code, and your moral code on your family structure and social class. (Reproductive desirability.)

Democracy cannot work across heterogeneous family structures. In particular not across single mother, serial marriage and nuclear or extended family structures. Bucause the morality if property rights differs irresolvably between them.

Economic reality, political data, and scientific research dismantling the progressive and postmodern religious beliefs are combining to accomplish what a universe of conservative and libertarian think tanks could not.

12

Jeremy 08.18.13 at 2:39 pm

Due to the Times paywall, I don’t pay too close attention to Krugman, but he’s been on to Kalecki’s essay since back in May, at least. And I definitely noticed that even before then, he looked like he was heading in that direction. Like Bob McManus, I’m waiting to see if other aspects of Kalecki’s economics find their way into Krugman’s thinking. Somebody make sure to call me if he ever says that labor earns what it makes while capital earns what it spends.

I’m surprised Quiggin didn’t include yesterday’s piece by Krugman, where he brings up Corey Robin’s book as well as Kalecki’s essay to critique Mike Konczal’s Wonkblog piece on conservatism. I’ve thought for a while that there ought to be some good way to consider the Kalecki essay within the framework the The Reactionary Mind provides. If Krugman keeps up with this line of thought, that would be a very useful addition to our public discourse.

13

William Timberman 08.18.13 at 3:49 pm

I should’ve read the Krugman first. If I had, a lot of the above would have been clearer at the outset. Even after the long, slow windup that arguably telegraphed it, I find the final delivery of K’s mini-manifesto pretty startling, even though I’ve long suspected that reality has a not-so-well-known Marxist bias. And being largely ignorant of the economics, if not the politics involved, I took it for granted that recognition of said bias was forever to be confined to the cranky ideologues of the defeated left, and the dirty hippies who imagined a better world despite being beat up on daily by those (almost everybody) who were more or less happily invested in the status quo.

Even at this late date, I admit to being pleasantly surprised. Perhaps even more surprises, less pleasant, but ultimately better for our collective future, are in the offing?

14

Lee A. Arnold 08.18.13 at 3:56 pm

What Krugman is uncovering is NOT related to specific intellectual arguments or points. The reactions and recommendations within the economics profession over the economic crisis has revealed a profound split in “cultural cognition” among the economists themselves. It is the same type of split in cultural cognition that is to be found in the public acceptance/denial of climate change, as is being revealed in current studies by social psychologists of climate science communication. There is a large component of reversion to comfortable beliefs and group identity in the face of uncertainty, that is not corrected by more education on the subject (whether it is more facts about economics, or about climate) — in fact additional facts are enlisted to support the bias. It is not always in the same individuals; conservative economists for example may understand that climate change is happening and is deadly; and for another example, lefty environmentalists often become more opposed to nanotechnology, the more they learn about it. It doesn’t quite map over the traditional left/right distinction, but it appears that the left/right distinction (perhaps since its naming in France in the late 18th century) is also formed by this process. These are fascinating times in social psychology for this curious disfunction, not least because it has perhaps grown critical, since other things have grown large enough to involve it in the question of whether civilization will survive.

15

JW Mason 08.18.13 at 4:16 pm

Brad DeLong was the first to point to the now famous Kalecki essay

Sorry, but this sort of thing sticks in my craw. Among anyone connected with the Marxist tradition at all, this essay is not “now famous,” it has always been famous. I rad it when I was 19 or 20, right at the beginning of my exposure to political economy, and that’s not at all unusual. Brad was not “the first” to point to it in any way shape or form.

Whether or not the point about full employment undermining the need for business confidence was central to Kalecki’s thinking doesn’t really matter -it would be just as important a point even if he had never said it.

Disagree. Economics is not just a collection of aphorisms.

16

JW Mason 08.18.13 at 4:37 pm

In general I agree with this post — these recent Krugman posts have been very interesting and are in sharper tension with consensus macro than most of what he posts.

A couple caveats:

1. This is not a new development. If you go back to Krugman’s NYT magazine article from 209, you will find some very frank criticism of orthodox macroeconomics, including his own, at least as strong as this recent stuff. On the other hand, in his more recent NYRB piece, there is almost no criticism of the economics profession at all. The message is that economists got the important stuff right, and the whole problem is that politicians haven’t listened. There’s the same sort of wavering back and forth on his blog. So this is not any kind of road to Damascus moment. From my point of view the recent posts do represent real intellectual progress, but it’s very much of the two steps forward, one step back sort.

2. As with a lot of liberal economists, PK is much more orthodox in his scholarly work and his teaching than in his public interventions. For instance, in his international trade and finance textbook the discussion of exchange rate determination is entire in terms of uncovered interest parity (UIP), which students are told to assume holds at all times. For non-economists, this is the idea that in an efficient market the returns on bonds should be the same across countries, so interest rate differentials should be exactly offset by appreciation/depreciation. Needless to say, this is not even an approximate description of reality — there is no evidence that lower interest rates are associated with appreciating currencies, if anything the opposite is true. So why does Krugman teach this, not just as one theory among others, but as the only way to think about short-term exchange rate movements? Because it’s a way of getting students to “think like economists” — that is, to understand macroeconomic outcomes in terms of intertemporal optimization by agents who know the true expected future values of all variables.

This is my problem with people like Krugman. They themselves may have a reasonably realistic view of the world, but they are committed to a model of economics that really discourages that kind of realism, especially among younger economists.

17

JW Mason 08.18.13 at 4:52 pm

A final point — this is why I don’t agree with John Q. that there’s no reason to read Kalecki, that the fortune-cookie version is enough. Economics is hard!

There is not, somewhere out there, a useful, realistic, coherent, empirically supported macroeconomics. Not in the mainstream and not in heterodoxy. It is not the case that “we” know the answers, if they would just listen — not for any value of “we.” If you want something better economics than what we’ve got, it’s not enough to grab one or two insights from Keynes or Minsky or Marx or Kalecki and just bolt it onto the existing structure. We need to build up an alternative systematically, from the ground up, and that’s really hard. It’s really hard to know what logical relationships fit both the data and the kind of story we want to tell, which assumptions are critical and which we can ignore, and in what contexts. Insight is not cheap.

18

William Timberman 08.18.13 at 5:04 pm

Insight is not cheap.

Especially if we’re not disposed to countenance it until we’re actually forced to flee the scene of our complacency with only what we can carry on our backs.

19

Bruce Wilder 08.18.13 at 5:11 pm

Quiggin: “it’s precisely the centre ground of convergence that has been rendered most thoroughly untenable by the crisis”.

Krugman’s honest-conservative point of view has been a reference marker for a lot of people, including not-a-few economists outside the right-wing, a way of checking where true north lay, without actually doing any independent calculation or observation, let alone navigation. As Lee A Arnold notes, this could be quite disorienting. I don’t know how far Krugman could travel, before he begins to lose his attraction for people’s compass needles.

20

Kevin Donoghue 08.18.13 at 6:52 pm

“A somewhat belated response to Roger Farmer, who accused me of cribbing from his writings. The truth is sadder; I haven’t read any of his stuff. I’ve tried, a couple of times, but found it very hard to penetrate and gave up — and several other economists I’ve talked to had the same reaction.”

Ouch.

21

Kevin Donoghue 08.18.13 at 7:08 pm

That reply to Farmer mentions the fact that Keynes’s General Theory grabs the reader’s attention. I read recently that Keynes didn’t think his views changed all that much in the years while he was writing it. What really drove him on was the sense that people just weren’t getting the message.

I wonder whether Krugman himself feels he hasn’t moved all that much to the left? He’s moved a bit, obviously. Maybe more importantly, he feels he hasn’t been ‘shrill’ enough?

22

Ben 08.18.13 at 7:13 pm

Krugman’s argument in the third link squicks me out a bit, since it feeds into JW Mason’s point @ 4:52.

Krugman leaves out the broader political and institutional forces which affected the development of economics in the 70s and now: the mesh of private and quasi-public institutions, broader political dynamics, funding biases, all the stuff that affects how science (or science-like social activity, if that’s how you want to describe economics) actually proceeds.

And by ignoring that, in favor of a “my god aren’t those other people pernicious” explanation, it re-enforces the “we’re right, if only people would listen” notion and reduces pressure for the kind of shift in fundamental insight JW Mason talks about.

Which isn’t to say Krugman arguing in that manner is without (political) value, or that he’s wrong about the intellectual proclivities of right and left. But being more honest about the reasons for the black hole of scientific despair at the heart of economics right now leads to the same essential conclusion as Krugman without those consequences.

Konczal’s way of constructing the “bad faith” argument which Krugman links to in that post is much better.

23

In the sky 08.18.13 at 8:10 pm

I’m here to bat for the economics discipline. Although John Q is clearly a card-carrying member, I doubt he’d dispute that he is far in the tail of the distribution of economists’ opinions. I don’t attribute this to anything underhanded on his part, but rather to reasonable disagreement. (I hope he’ll extend the same courtesy to me.)

Endorsement of Kalecki’s argument (which he got via Konczal) that “hatred for Keynesian economics has less to do with the notion that unemployment isn’t a proper subject of policy than about the notion of shifting power over the economy’s destiny away from big business and toward elected officials.”

The “hatred” with Keynesianism among economists I know isn’t anything to do with political bias. Consider the simple multiplier idea, that people spend some fraction (the marginal propensity to consume, MPC, e.g. 0.8) of their income each year. Taken literally, this implies that lottery winners will spend 80% of their winnings within the next 12 months. On a more general (and relevant) note, the Keynesian approach does match the empirical evidence on consumption patterns at all. Friedman’s Permanent Income Hypothesis is far more in line with the data, albeit that the perfectly rational expectations idea is clearly much too strong. So you try and mix the two, and you get something like New Keynesian or behavioral macro. That’s where 90% of macro has gone for the past twenty years. There is no hatred of Keynes, and no politics in that.

Abandonment of the idea that the economics profession is engaged in honest intellectual debate, in favor of the conclusion that the rightwing of the profession, including leading economists, is characterized by denialism and bad faith.

Krugman’s portrayal of the economics profession as malevolent political hacks (be it claiming that the move from Keynesianism was politically motivated, or the outrageous suggestion that Reinhart and Rogoff actively behaved dishonestly with their data) is the clearest example of bad faith that I can see.

24

Lee A. Arnold 08.18.13 at 8:27 pm

“without actually doing any independent calculation or observation, let alone navigation”

That may help with some people, but not all. I think Krugman is a very unusual and exceptional person to be revising his views in this manner. It is a great thing, and deserves far more credit than some commentators here seem willing to confer.

I will get back to economics denialism, after starting from the analogous case in climate denialism: a new body of research demonstrates conclusively that the dominant assumption, “if people only knew more about climate change they would act differently,” is badly flawed.

What is happening instead is that the more people know about science and technology, the more politically polarized they become. This is especially true of the conservative right. For example, research shows that U.S. Republicans who are more educated, with high incomes, are reinforcing their denial of climate science.

Yet this result is not from simply liberal/conservative partisanship, though it is parallel to it.

There are emotions and cultural identifications that are challenged by issues that threaten certainty and existential survival, and many people respond, by retreating into defense of the comfortable patterns of the cultural status quo and of their own group: their own group of friends, their own group of economic connections. (In the West, this means “conservatism”, because the status quo is industrial capitalism. But research shows that it happens on the left, too. Indeed it is sometimes visible in these comments threads. Even inside communism, there was the same reaction among the apparatchiks until they could be absorbed into the new legislative order. Whatever system you are under, the need to combat uncertainty and existential anxiety is “system-justifying”.)

There is a long body of experimental research called “motivated cognition” that is being merged with newer research on “cultural cognition” (though it starts with the older “group/grid” distinction of Douglas and Wildavsky, 1982) and together they have begun to reveal something that goes beyond cognitive bias and epistemic closure.

It appears (to me) to be a sort of “social cognitive bias”, a widespread psycho-social condition, that is group-survival orientated (including the group that claims to put “individualism” foremost) and, since early modern times, has sorted-out into the Left/Right dichotomy, although it is far more than an economic phenomenon about inequality.

I think this same thing illuminates the battle within economics — between economists — about austerity and government action for the economic crisis, too. Consider the number of big names in econ that have still NOT bothered to acknowledge Krugman’s RATHER BASIC POINT that the ONLY thing that has survived an experiential test in this disaster (i.e., the only thing that has survived the Popperian notion of science!) is the zero-lower bound of Keynesian demand and the predicted lack of inflation. The list of denialists is actually quite astounding: Robt. Lucas, Prescott, the Chicago school, Mitt Romney’s advisors, the Euro’s economists, etc. etc. And these are merely the ones on record. All, claiming to be scientists.

The fact that their science deals with individual preferences has not helped many economists to distinguish their own social cognitive biases (nor to state them in the literature), at all. Instead, like the climate deniers, they make an implicit claim that they already know the correct direction (i.e. in this case, anti-general-welfare neoliberalism) — and THEN claim to be practicing science.

25

JW Mason 08.18.13 at 8:40 pm

On a more general (and relevant) note, the Keynesian approach does match the empirical evidence on consumption patterns at all. Friedman’s Permanent Income Hypothesis is far more in line with the data, albeit that the perfectly rational expectations idea is clearly much too strong. So you try and mix the two, and you get something like New Keynesian or behavioral macro.

This is simply false. New Keynesian macro involves much stronger claims of rational expectations than Friedman ever made.

26

Lee A. Arnold 08.18.13 at 8:44 pm

In the sky #23: “The “hatred” with Keynesianism among economists I know isn’t anything to do with political bias. Consider the simple multiplier idea, that people spend some fraction (the marginal propensity to consume, MPC, e.g. 0.8) of their income each year. Taken literally, this implies that lottery winners will spend 80% of their winnings within the next 12 months. On a more general (and relevant) note, the Keynesian approach does match the empirical evidence on consumption patterns at all. Friedman’s Permanent Income Hypothesis is far more in line with the data, albeit that the perfectly rational expectations idea is clearly much too strong. So you try and mix the two, and you get something like New Keynesian or behavioral macro. That’s where 90% of macro has gone for the past twenty years. There is no hatred of Keynes, and no politics in that.”

I am no economist, and I am probably (as usual) out on some orthogonal limb between the poles of this debate, but I hope you will defend this: If most economists are not hacks, why did they not speak out broadly, generally, and continuously against austerity in this economic crisis, which has put tens of millions of people onto lifelong expectations of lower incomes? Why did the economists NOT point out that both multipliers and the permanent income hypothesis are not simply long-term absolutes, but may go into short-term abeyance and eclipse, under such extraordinary circumstances? Because if you haven’t had the money, of course you do spend more. (Certainly it appears to be a possibility that M. Friedman himself was willing to entertain, and without these extraordinary circumstances to push him into saying so.) There are people who won’t think of this; are they more comfortably ensconced in careers in academia, or in the financial paper markets?

27

Kevin Donoghue 08.18.13 at 8:50 pm

In The Sky: Consider the simple multiplier idea, that people spend some fraction (the marginal propensity to consume, MPC, e.g. 0.8) of their income each year. Taken literally, this implies that lottery winners will spend 80% of their winnings within the next 12 months.

You might like to take another look at Chapter 8, Section II of the GT, with particular regard to the discussion of windfalls. Keynes wasn’t a fool, you know; or do you?

28

John Quiggin 08.18.13 at 9:19 pm

Friedman’s Permanent Income Hypothesis is far more in line with the data, albeit that the perfectly rational expectations idea is clearly much too strong. So you try and mix the two, and you get something like New Keynesian or behavioral macro. That’s where 90% of macro has gone for the past twenty years. There is no hatred of Keynes, and no politics in that.

As intellectual history, this is way off. The arguments about the consumption function took place in the 1950s, and there were plenty of behavioral ideas on the Keynesian side (for example, Duesenberry). The kind of compromise you want was generally accepted by 1958.

The big problems arose out of the Phillips curve, as I’ve discussed before. First it was oversold as a stable trade-off by Keynesians (I know about the caveats in Samuelson & Solow, but they weren’t given the stress they needed), then in reaction we got the natural rate and rational expectations.

29

JimV 08.18.13 at 9:25 pm

Re: “Krugman’s … outrageous suggestion that Reinhart and Rogoff actively behaved dishonestly with their data is the clearest example of bad faith that I can see.”

I thought I followed the R&R issue closely at several blogs, and have no recollection of this. What I heard Krugman and others say was that a) R&R were generally great economists; b) in one specific paper they did a bad job (not limited to the spreadsheet error; the whole “90% tipping point” was an artifact of bad analysis); c) the 90% result was widely seized upon and trumpeted by austerians; d) R&R in congressonal testimony did nothing to restrain the austerians but rather urged them on.

Further to d), as I recall, in the paper R&R noted that they did not establish a direction of causality (debt–>low-growth or low-growth–>debt), however their congressional testimony seemed to imply the former direction.

I did not take away from my reading the notion that R&R had deliberately fudged their data, or lied to Congress, but rather they had made a bad mistake and were humanly at first reluctant to acknowledge how bad it was.

30

Chris Mealy 08.18.13 at 10:00 pm

I don’t know, just the day before Krugman was taking shots the heterodox.

31

Walt 08.18.13 at 10:03 pm

JW, on his blog Krugman routinely invokes the expectations hypothesis for long-term bonds, which while being about domestic bonds only is karmically pretty similar to UIP. On the other hand, his Nobel prize winning work doesn’t use rational expectations. So he’s all over the map on the question.

In the sky, the idea that R&R deliberately cooked their data has probably literally occurred to every economist in the world. Krugman only said what everyone was wondering.

32

drjeff 08.18.13 at 10:53 pm

Seems the debate has narrowed beyond the point of productivity. Historically, when has a fiat currency ever escaped the trajectory we now find ourselves moving along? when unofficial estimates of debt to gnp combine with falling real gnp and rising deficit monetization, no system has ever escaped the event horizon once the central bank has lost its independence.

33

John Quiggin 08.18.13 at 11:06 pm

@Walt Looking at measures of expectations is very different from assuming rational expectations. In the case of bond markets, it’s reasonable to assume that any bias in inflation expectations will be upwards, so the fact that bond markets don’t appear to expect inflation is relevant evidence against those who claim that high inflation is imminent.

34

mud man 08.18.13 at 11:53 pm

thus bob mcmanus @9: The class interest of Capital is accumulation.

Ah, I love it. Smaug the Dragon. Scrooge McDuck’s Money Bin. Skyler White’s U-Store. My mind jumps to the “technical” definition of evolutionary fitness: how many progeny. Eg, at Berkeley, which doesn’t even capture survival through time, eg Coelacanths, let alone an ecology-friendly notion like “suitable for living in the actually present environment”.

I have never seen so clearly how Capitalism emerges out of Enlightenmentarianism. For a Post-Modern Communitarian such as myself, that’s a cheering thought.

35

In the sky 08.19.13 at 12:44 am

This is simply false. New Keynesian macro involves much stronger claims of rational expectations than Friedman ever made.

I don’t want to get into semantics here, but I didn’t claim that. I said “something like New Keynesianism”. NK is neo-classical with “problems” with money and price-setting that give you scope for government intervention. If consumers have “problems” with the complex decision-making, you get scope for government intervention.

It was not a false statement.

If most economists are not hacks, why did they not speak out broadly, generally, and continuously against austerity in this economic crisis, which has put tens of millions of people onto lifelong expectations of lower incomes?

To be quite literal: the reason why most economists did not speak out is because it is not most economists’ area of expertise. Accounting for econometricians, a little less than half of economists do micro and a little less than half do macro. Of those that do macro, you have people looking at everything from inflation to explaining long-term growth, the effect of trade with China on US employment to variation in inventories, etc. Why the fraction left over didn’t speak out about austerity? Well, I dunno. My best guess is because they under-estimated the importance of the zero-lower bound, partly because of a lack of appreciation for economic history. No doubt some did so because austerity sat better their political persuasions.

As intellectual history, this is way off. The arguments about the consumption function took place in the 1950s, and there were plenty of behavioral ideas on the Keynesian side (for example, Duesenberry). The kind of compromise you want was generally accepted by 1958.

I don’t dispute your claim but, to be fair, I wasn’t trying to chronicle the full history. I was giving an accessible example of why economists will state they “prefer” Friedman to Keynes, entirely separate to any kind of social democrat vs libertarian debate. I’m happy to accept that certain elements in macro are engaged in subconscious confirmation of prior political beliefs, but I dislike what appears to be the commonly held view that the entire profession is engaged in a political play. I think posts like yours unfairly continue to spread that view, John.

I thought I followed the R&R issue closely at several blogs, and have no recollection of this.

To quote Reinhart directly,
“You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts. Now you have doubled down in the New York Review of Books, adding the accusation we didn’t share our data… The accusation … is a sloppy neglect on your part to check the facts before charging us with a serious academic ethical infraction… Our interaction with scholars and practitioners working on real world questions in our field is ongoing, and our doors remain open. So to accuse us of not sharing our data is an unfounded attack on our academic and personal integrity. “

36

MapMaker 08.19.13 at 1:07 am

I love following this debate – as someone brought up above, I see this debate on austerity and the climate change debate to be two sides of the same coin. AGW isn’t a scientific question, it is an economics/politics one. Austerity vs. ??? isn’t an economics decision, it is a political one.

37

Lee A. Arnold 08.19.13 at 1:54 am

In the sky #35: “To be quite literal: the reason why most economists did not speak out is because it is not most economists’ area of expertise. Accounting for econometricians, a little less than half of economists do micro and a little less than half do macro. Of those that do macro, you have people looking at everything from inflation to explaining long-term growth, the effect of trade with China on US employment to variation in inventories, etc. Why the fraction left over didn’t speak out about austerity? Well, I dunno. My best guess is because they under-estimated the importance of the zero-lower bound, partly because of a lack of appreciation for economic history. No doubt some did so because austerity sat better their political persuasions.”

–I see, the answer is division of labor within the field. Of those that do macro, the people “looking at inflation” and “explaining long-term growth” presumed that these are unrelated to a short-term problem in which the two main austerian claims against action is that spending will lead to inflation and that the problem is really a structural problem in long-term growth. The “fraction left over” (that is not swayed by political persuasion) no longer underestimates the importance of the zero-lower bound, but is still missing from the debate because — why? — it isn’t their place to be in a debate?

How very unfortunate that they have not taken to heart Adam Smith’s observations:

“the division of labor is infinite, and every one’s thoughts are employed about one particular thing…. The minds of men are contracted, and rendered incapable of elevation. Education is despised, or at least neglected, and heroic spirit is utterly extinguished…

“The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging…”

38

MPAVictoria 08.19.13 at 2:01 am

“You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts. Now you have doubled down in the New York Review of Books, adding the accusation we didn’t share our data… The accusation … is a sloppy neglect on your part to check the facts before charging us with a serious academic ethical infraction… Our interaction with scholars and practitioners working on real world questions in our field is ongoing, and our doors remain open. So to accuse us of not sharing our data is an unfounded attack on our academic and personal integrity. “

He was just mad he got caught lying.

39

Colin Danby 08.19.13 at 2:09 am

The claim the R&R behaved dishonestly with their data is not limited to the question of sharing it.

http://www.peri.umass.edu/236/hash/31e2ff374b6377b2ddec04deaa6388b1/publication/566/

40

Bruce Wilder 08.19.13 at 2:20 am

JW Mason: Insight is not cheap.

But, we want to make good insight cheap, right? Isn’t that the idea of doing economics? To make the large, sunk-cost investments in deep thinking and careful observation, which can be distilled into reliable ways of thinking about economics, which can educate a democratic citizenry, politicians, activists, businessmen, labor leaders, and technocrats.

Thinking about economics as an industry, for a moment, it doesn’t seem like it is that different from any number of other industries engaged in (re-)producing a cheap product from an expensive, sunk-cost process. If the product were pharmaceuticals or iPhones, we would immediately notice the distinction between research & development to develop technical ideas and marketing to develop ideas into designs and designs into hype.

A lot of the business of economics is credentialing experts and certifying ideas. It’s the Wizard of Oz handing out diplomas instead of education, medals in place of courage. Derps and and the repetition of “strong priors” doesn’t cover it; the repetition is just a propaganda technique: it’s selling snake oil and cheap soap in a fancy wrapper. As in many industries, the cost of research and production is dwarfed by the costs of marketing and distribution. And, arguably, the value of marketing dwarfs the value of research, too, though that take on things may entail too much cynicism.

I sometimes make the basic point in other contexts, drawing from industrial organization, that the political or market power to secure economic rents may be a pre-requisite to the making of the sunk-cost investments required for innovation, because the rents enable a return on the investment. It is paradoxical. Economics may aim at fundamental insight, but fundamental insights, once achieved, can be hard to distinguish from simple, almost trivial points. Economics needs a modicum of esoterica, to give credibility to the process of initiating disciples into the discipline. The esoterica is a kind of artificial scarcity in the public good of knowledge.

The problem, as I see it, is that economics as a business, has found a ready market in selling bad ideas. Like an Italian pharmaceutical maker dedicated to producing patent medicines, it’s all marketing, and no genuine R&D. I see Reinhart and Rogoff in this light. I don’t think “malevolent” is too far from the mark — it was research fakery, in the service of enhancing the value of their fake product, to the buyers in the market. Austerity is a policy idea, highly desired by some rentiers willing to pay for it (including its legitimation and authentication by experts, as well as for its implementation by politicians).

“the centre ground of convergence that has been rendered most thoroughly untenable” is that area, where mainstream economics has long claimed to do its genuine research and production, and where a good deal of fakery has been substituted in. DSGE is just the extreme of esoterica, of academic socialization exercises crowding out the transmission of actual knowledge or expertise. But, I digress.

The point in response to JW Mason would be that economics may or may not need to start from scratch on the theoretical framework — there’s a lot of good stuff lying around — but, it definitely needs to find a better business model, one that incorporates regulatory quality control owned by someone other than vicious billionaires with a taste for bad novels.

41

John Quiggin 08.19.13 at 2:23 am

@35 I agree that this problem doesn’t directly involve the majority of the econ profession, but it does involve the two topics where the general public is most likely to be interested in what economists have to say – macro and finance.

And, on these issues, there has been a consistent refusal to face the evidence of the last five years. For the typical economist who “preferred Friedman to Keynes” in 2008, the last five years have been marked by consistent refutations of their preferred model. That ought to have provoked a substantial reconsideration, and ideally, some admissions of error. We’ve seen nothing of the sort. Hence, it’s reasonable to conclude that people are arguing in bad faith or else engaging in some form of denial.

To sharpen things up, I would certainly draw this conclusion with respect to Casey Mulligan, who’s a full professor at Chicago, and appears to have plenty of support there. Here’s what I had to say a few years ago, and there have been more examples since

http://crookedtimber.org/2010/02/26/zombie-economics-gets-a-mulligan-or-how-obamacare-caused-the-global-financial-crisis/

Do you want to defend Mulligan, or say that he’s atypical

42

Lee A. Arnold 08.19.13 at 2:40 am

MapMake #36: “as someone brought up above, I see this debate on austerity and the climate change debate to be two sides of the same coin”

That would be me, and I would take it one step further, because I think we are seeing something new and very dangerous. In both cases (A. economic crisis and inequality responses, and B. climate change communication) we are seeing four very different things combine:

1) They are about complex systems (i.e. n-compartment models).
2) Science cannot predict them precisely (for various rational reasons such as model uncertainty and n-body indeterminism).
3) Many people deal with uncertainty by denying reality and falling back on status quo beliefs (as above at #24, an enormous topic in itself, which, on both of these issues, happens to be a conservative failure). And,
4) Powerful interests are producing global propaganda to say that nothing is wrong (i.e. sowing confusion and denial to protect power and profit).

So we have reached a new historical juncture, with an identifiable psycho-social syndrome of some new type, that involves scientific limitation + emotional response + social power on two different issues, economics and climate, both of which IMHO are so big as to threaten civilization.

43

mud man 08.19.13 at 3:26 am

@40: … the political or market power to secure economic rents may be a pre-requisite to the making of the sunk-cost investments required for innovation, because the rents enable a return on the investment.

For innovation what is required is research, and research requires investment, in time and facilities. The return-on-investment is only motivation, and cheap-soap snake-oil motivation it is. What actually motivates engineers (I am/was one) is the chance to do engineering. It would seem really what motivates mangers is the chance to do managing, and so it goes. The time and the money for facilities are floating around generally, they are going to be used on something, fulfilling somebody’s desires. What the rents are required for is so that the forsaken Capitalists can do their sociopathic Accumulating.

44

Herman 08.19.13 at 5:04 am

@In The Sky 12:44 am (#35)

Reinhart is actively misleading about data sharing in the quote you give. The paper was published in Jan 2010 (NBER) and immediately became influential. Even going by her own claim, the earliest she can point to making her data public is Oct 2010

There is a 10 month gap when the paper was frequently quoted and affected policy and the data was *not* publicly available. Between Jan 2010 and Oct 2010 a number of economists are on record having asked R-R for their data so as to be able to replicate their results, and not getting any answer.

Even the data RR made available in Oct 2010 was just the raw data, not the excel code. Just because the file has a .xls extension does *not* mean it has any code. It is just raw data presented in the excel format. They were duty bound to make publicly available all data (including code) to replicate their results by Spring 2010 since that is an explicit requirement for publication in the AER(P&P). They did not.

Summing up, Reinhart’s claim about making the data publicly available is actively misleading, bordering on an outright lie.

45

Bruce Wilder 08.19.13 at 5:50 am

mud man @ 43 . . . research requires investment, in time and facilities. The return-on-investment is only motivation

I was thinking financing, but hey!

The time and the money for facilities are floating around generally . . .

Problem solved! I’ve heard of people floating a loan before, but I never made the connection. Thanks for that insight.

46

derrida derider 08.19.13 at 6:01 am

Moving back to the substance of Krugman’s Damascene conversion to Kaleckiism, I’ve always thought that Kalecki’s point in that essay is a deeply pessimistic one (it’s hardly unknown or disreputable in the prefiession – I had it as assigned reading as an undergraduate in an obscure university many years ago). For if the ruling class does indeed have an abiding vested interest in macroeconomic instability, even at the price of its own material welfare, then there is no remedy other than the overthrow of that class. And that is just not gonna happen.

In fact the paper has the deepest Marxist flaw of all embedded in it – that class interest is homogenous in any meaningful sense. Undoubtedly there are individuals who gain by becoming Very Serious People in a world racked by periodic crisis, and who therefore are unconsiously much less concerned to avoid such crises than they should be (such a phenomenon is, for example, commonplace among military men). But that is a long, long way from top-hatted capitalists hiring intellectual guns to keep the workers down.

47

Bruce Wilder 08.19.13 at 6:55 am

Financial capital only has one function: insurance. So, yes, increased financial volatility can enhance returns, even or especially when those returns derive from essentially extractive activity, which reduce the general welfare: casinos / loan sharks / health insurers / education reformers / pay day lenders / the people who want to rent you your entire life and put you in for-profit prison, when you cannot pay enough.

In a hierarchical society, elites have power, and people with power are not to be trusted. This is an, at best, imperfectly solvable problem. Even in a society not so corrupt and incompetent as to consider Larry Summers a viable candidate for Fed Chair.

You think Glenn Hubbard or Tyler Cowen or Greg Mankiw are working for free? That they are inspired by pure-hearted public spiritedness? No. Top-hatted capitalists have hired them to keep the workers down.

48

Curt Doolittle 08.19.13 at 7:30 am

I know its painful to accept, but politics like all other human behavior is bounded by morality more so than ignorance.

There is too much search for cognitive error in this thread, and too little understanding of morality.

Austerity worked in Europe. It is working in America. Because it
is accomplishing moral ends – according to the moral criteria of citizens.

Humans will suffer greatly to punish the immoral. And that is what they are doing.

It may be difficult to grasp but morality in the political context is as important as prices and incentives. If people do not think the world is moral, they will not act morally. And they hate the idea that the world might be immoral. Morality and norms are the original human currency. People are masters of its accountancy

Conservatives place higher value on norms than consumption. And their view is that empowering the government is rewarding immorality. Conservatives understand morality. They speak in moral language and they win moral arguments. And the control the public discourse with moral arguments.

I have been arguing since ’08 that the only way to push spending through would be to limit it to moral channels. And the progressive argument is always the same: morality doesn’t matter and its all nonsense.

But its not. Its as necessary as law. More so.

If you had told me this as a student I would have laughed. But there it is.

49

John Quiggin 08.19.13 at 7:47 am

@DD I agree that the most natural reading of Kalecki is pessimistic. And, as you say, that’s true of most Marxist writing once you abandon a belief that revolution is possible or desirable. I had a go at this topic a while back
http://johnquiggin.com/2011/06/19/marxism-without-revolution-class/

Given the experience since Kalecki wrote (the decades of full employment under Keynesianism, and the more recent experience), I think you can draw the lessons that
(i) powerful class interests are opposed to full employment for rational reasons
(ii) those interests aren’t all-powerful, and don’t encompass the entire “ruling class” however you define that.

50

Walt 08.19.13 at 7:47 am

Curt, every single one of us already understands the point you’re making. The moral angle is completely obvious and totally on the surface of the pro-austerity argument.

51

Martin Bento 08.19.13 at 10:49 am

As for R & R, they’re still trying to argue causation in increase of debt/GDP ratio as running largely from increase of debt on what seems to me a dubious basis: the longevity of increases in debt/GDP ratios once established. This is the “trivial” side of their terrific triviality two-step, but does even it stand up?

Hold the increase of debt standard over an entire period. Assume that initially debt/GDP ratio is constant so that the debt grows at the same rate the economy does. Then there is a recession. GDP goes down, debt accumulation remains the same, so the debt/GDP ratio increases. Three years later, growth returns to its previous rate. The debt/GDP ratio is again stable, but it has stabilized at a higher level due to the three lost years of growth. In this simple model, there is no reason to suppose the previous ratio would *ever* be regained, yet the driver has been entirely changes in GDP, not debt. Of course, recoveries do tend to have higher-than-average growth for a few years, but sufficient to erase the effects of the recession without any increase in debt during the downturn or recovery? I think that would need to be demonstrated. Just pointing to the longevity of the increased ratio doesn’t support that.

52

Martin Bento 08.19.13 at 10:58 am

In case it wasn’t clear, I think the implications of my argument are the R & R are either arguing in bad faith or under the spell of dogmatism, which would be consistent with much of the criticism of economists that has been made in this thread.

53

William Timberman 08.19.13 at 12:07 pm

John Quiggin @ 49

My take on your approach: the people who think that Marx was onto something aren’t all pessimists, nor are they all academics. Moreover, Marx went to war with the underclass he had, not the one he wanted, nor the one we have now, after another 150 years of capitalist evolution. That’s all he’s guilty of, really, which means that we probably let the Very Serious People put him back in the box too soon.

Perhaps something very similar is true of our retirement of Malthus. Brad DeLong’s recent summary of how — and why — that quintessential pessimist got directed onto a siding is a pretty good one, even if it only nibbles around the edges of Bruce Wilder’s insight that escaping Malthus’ dismal arithmetic isn’t in the end as simple as relentlessly reducing the cost of commodity production until hell \ agrees to give up the struggle and obediently freeze over.

We do need a novus ordo seclorum, one which necessarily recycles a lot of what we know now and what we used to know but have forgotten, and re-contextualizes it. What is production? What is justice? What is the Good Life? What have the division of labor and the relations of production actually done to the practice of family, community and civil society? How do we fit our aspirations on the planet without immiserating or killing 2/3 of its present human population?

Both in theory and in practice, we need a lot fewer Koch brothers and sisters, and a lot more Erik Olin Wrights. I’m tempted to say to economists, Now, see to it! but I know full well that it isn’t their job. I guess we’ll just have to see who and how many and what kind step forward to help.

54

Lee A. Arnold 08.19.13 at 1:54 pm

@Curtis Doolittle #38 — Government may hold a monopoly on the authorized use of physical violence, but that is rather a narrow argument. Government does not have a monopoly on the ability to make irrevocably damaging alterations in the state of affairs. Other people, for example, may clamor for austerity. Yet if austerity puts millions of people onto permanently lower lifetime income trajectories, as the data show it will, then that is immoral. Immoral by definition, because you wouldn’t want it to be done to you, and you should “do unto others as you would have them do unto you”. But we might not see an example of the damage until ten or twenty years down the road, and then perhaps you will say, “Oh, this person’s under-education, or inability to find opportunity, or lack of retirement security, or early death, was due to some other reason, (his own immorality perhaps!), but it is NOT due to austerity back in the econ crisis of the early ‘Noughts.” Yet you might very well be wrong. The reason that conservatives make a claim to morality is not because they are more moral, they wouldn’t know Jesus if he came up and bit ‘em on the ass, but because they want to get back to the status quo, and hewing to the status quo always gets the least people hurt, if the slaves will acquiesce and play by the old slave rules. You are using “morality”, the word, to describe the process of falling back upon comfortable beliefs in the face of confusion and uncertainty. That is not the definition of morality. But I agree that the process isn’t exactly a mere cognitive error, either, at least as far as “cognitive bias” is currently defined.

55

Guido Nius 08.19.13 at 2:28 pm

I don’t think Malthus was the quintessential pessimist. Actually, I do not think he was a pessimist at all. In what I read, he thought getting people better access to education was going to help them make better decisions whilst just giving them the charity rich people were willing to spare was going to create more misery. Education trumps charity. Maybe he was pessimistic about there being a real chance of people getting properly educated & getting beyond the view – which is becoming more and more popular again on the right – that the only thing poor people are entitled is charity. I guess so, but then he was at least not always right to be so pessimistic.

56

William Timberman 08.19.13 at 3:03 pm

Guido Nius @ 55

Point taken. But while he did propose a remedy, it was a dour one indeed, and not one likely to be accepted graciously by anyone on the receiving end of its ministrations. It was, in any event, not exactly what I would call optimism.

He has his modern analogues, of course — those who think eating only buckwheat groats and alfalfa sprouts, bicycling everywhere, and wearing only hemp will purify everyone’s intentions and save the planet. Like Malthus, such people do have things to teach us, and they do deserve respect, but they probably shouldn’t be put in charge of public policy.

57

Lee A. Arnold 08.19.13 at 3:06 pm

In #54 I should have written, “hewing to the status quo USUALLY gets the least people hurt,” because it is “always” only to the conservatives, and it is becoming demonstrably false in regard to growing inequality and to climate change.

58

mud man 08.19.13 at 3:16 pm

The Workers Arising in a Marxist revolution may be/is not possible, but (… speaking of Malthus ….) the collapse of an unsustainable system seems like a realistic imagining. That’s not Hell freezing, that’s just turning the compost, something we do at intervals.

Quite right that class interest is not “homogenous in any meaningful way”, in the sense that individuals won’t act/sacrifice for “the benefit of the class” … in evolutionary terms, that’s bad group selection. You have to get to species-level effects by considering the interests/motivations of individuals … which can be held in common by a class, although actually that’s backwards: the “class” is defined by common interests. So “workers” is too broad, but perhaps “accumulaters” is not. (Not that accumulating is needs to be seen as a rational motive, and the stuff accumulated need not be uniform.)

So the question is, can one reproduce Kalecki’s results as the result of a distributed strategy of Accumulating? I would think one can … eg, why “level playing field” arguments, which should succeed in a competitive meritocracy, fail in the real world … not as a matter of policy, but from a thousand points of local obstruction. … It does appear to me that the Accumulaters are the ruling class in the present ordering of the world, to a very large extent.

PS. Can’t imagine why anybody would think Kalecki’s paper is a hard read. Even I can do it.

59

JimV 08.19.13 at 5:02 pm

@35, quoting one side of a disagreement does not establish bad faith on the other side, especially when, as shown by subsequent commenters, the claims quoted are eminently disputable. I had read Dr. Reinhard’s Open Letter (and several responses to it) so it was included in my original assessment and does not change my opinion (which is that your claim of bad faith stands unproven).

60

Charles M. Smith 08.19.13 at 5:39 pm

I have always thought that public choice economics made no intellectual sense. Take James Buchanan for example. He should consistently argue that he is a rent seeker from the wealthy conservatives, who funded the two public choice institutes he started at Virginia Tech and George Mason. If he denies this (I know he is dead) then the argument does not hold for other economists or government employees, etc. If he accepts this, then the position is only the result of rent seeking and has no truth value.

This is the kind of thing that receives an economic noble! Paul Krugman ought to send his back.

61

Tim Kane 08.19.13 at 5:58 pm

@ Bob McManus

How is Marx unpalatable?

Or I should ask, is any part of Marx palatable?

As a philistine, I thought that the events of 1989-1991 (collapse of Soviet Union) would have buried Marx for good. But the man just won’t seem to die.

So, if we are still talking about him, and in recent years he’s seemed to gain some traction, I figure he must have got some things right.

But what?

Then I saw this 10 minute piece by (Marx scholar) David Harvey (animated excerpts from a larger lecture): http://www.youtube.com/watch?v=qOP2V_np2c0

In it Harvey confesses, “I don’t know the solution but I think I know something about the problem” (paraphrased).

Then it hit me.

Marx seems to be good at problem definition but proportionately bad at solution definition. (That, in my view, goes to Keynesianesque views, i.e. mixed economic system). The Russians have a joke: “Everything Marx said about Communism was a lie, unfortunately, everything Marx said about Capitalism was the truth.”

His failure at Solution Definition (kill capitalism and all the capitalist) shouldn’t keep us from acknowledging his success at Solution Definition (pure capitalism and “the inherent contradictions of capital/wealth accumulation”, [aka ‘the rich get richer and the poor get poorer] – i.e. extreme concentrated wealth in a society, not really new as it is considered the main contributing factor to the fall of the Roman Empire [See North, ‘Structure and Change in Economic History’ p 100-115]).

If I understand it correctly (and, again, I am philistine) Kalecki is an important contribution: the link or the perhaps better expressed, the wedge between problem definition (Marx) and solution definition (Keynes) and the difficulty of going from point A to point B.

But if Marx is not palatable because he was wrong on solution definition, doesn’t that get in the way of arriving at proper problem definition? And if we find Kalecki unpalatable because of his proximaty to Marx, doesn’t that get us in the way at arriving at solution definition? And then, doesn’t that leaves us with a great big mess?

62

Metatone 08.19.13 at 6:11 pm

@JW Mason

On Krugman and politics, I think he is someone realising how broken the political system has become. This fairly recent blog was really the piece of someone horrified by the possibilities present in the system:

http://krugman.blogs.nytimes.com/2013/07/05/on-the-political-economy-of-permanent-stagnation/

Is it right that he’s gone from critiquing his profession to critiquing the failings of politicians in sourcing from (as he sees it) the economists who got it right? Probably not, but lets face it, there’s no fixing economics any time soon – the R&R supporters in this thread alone illustrate that. If there’s any way to improve the politics more quickly, it’s worth shouting for.

63

Metatone 08.19.13 at 6:13 pm

A general comment on R&R.

Researchers in other fields who have behaved similarly have been subjected to disciplinary proceedings and investigations. In some (psychology, engineering) tenured professors have been sacked for similar offences. It says something about the low standards in the economics profession that the knee-jerk response of so many academic economists is to defend R&R rather than look after the integrity of the profession.

64

Ian Maitland 08.19.13 at 6:21 pm

“The public choice school has routinely represented economic arguments for government intervention as the product of rent-seeking by … the economists who make such arguments as pawns or hirelings of these groups.”

Can you name names? Call me slow, but I am having trouble coming up with cases where public choice economists have said that other economists fronted for special interest groups.

That is more Krugman’s style.

As for Kalecki, I can read that sort of drivel any day on Daily Kos or Krugman’s comments section. You are joking, right?

65

Peter K. 08.19.13 at 6:24 pm

“The public choice school has routinely represented economic arguments for government intervention as the product of rent-seeking by interest groups, and the economists who make such arguments as pawns or hirelings of these groups.”

Maybe they could be thought of as the product of rent-seeking on behalf of scientifically-minded, democratic, Rawlsian interest group(s), that is, everyone but the one percent, the public choice school’s constituency.

66

Peter K. 08.19.13 at 6:40 pm

I commented before reading 62’s comment. Coincidently we quoted the same paragraph. I have no knowledge of the public choice school but they sound like your garden-variety conservatives.

Regarding Krugman, in the Clinton years he was horrified how Congressional Republicans went after Clinton on the flimsiest of bases. In the Bush years he was horrified at the Bush administration’s blatant dishonest over the budget numbers and the Iraq war. Krugman was an international trade expert and his 1999 book “The Return of Depression Economics” was prescient as DeLong recently mentioned. Bernanke and the economists at Greenspanfest 2005 saw the “Great Moderation” while Krugman had already taken note of the many international economic crises. and their similarity to the Great Depression.

67

Robert Waldmann 08.19.13 at 6:49 pm

Sometimes I bore myself but I must object to John Quiggin

“The big problems arose out of the Phillips curve, as I’ve discussed before. First it was oversold as a stable trade-off by Keynesians [citation needed].”

Which Keynesians when ? We agree that those Keynesians do not at all include Phillips or Samuelson and Solow in 1960. Such a claim should be supported by citations. I think it just will not do to say that everyone knows it is true. There are many things which are generally agreed to be true and demonstrably false. I refer you to James Forder at Oxford.

http://www.economics.ox.ac.uk/index.php/academic/james-forder

He claims to have looked and looked or Keynesians selling the Phillips curve as a stable tradeoff. I think he found a report to the Canadian commission on price stability or something.

I will just google.

Also. by the way, I ask what does the PIH fit which aren’t fit by a model of habit formation and myopia ? Is there any evidence that expectable changes in aggregate income affect aggregate consumption ? I am quite serious and ask for information.

68

John Quiggin 08.19.13 at 8:06 pm

@RW I admit that I’m going from memory here. I first learned my economics out of Samuelson’s intro textbook (in 1970, but we were probably using an older edition), and I learned to believe that
* History showed the existence of a stable Phillips curve trade-off
* To the extent that the Phillips curve had shifted it was the result of “cost-push” associated with corporate monopoly and union power

Rather than using Google, I’d suggest digging up some 1960s-era textbooks to see how they present Phillips.

I don’t think you can argue from absence of evidence here. Lots of people who were around at the time have the same recollection as me, so if you are going to show that’s wrong you need to cite evidence showing that Keynesians generally worried about expectations between 1960 (S-S) and 1968 (Friedman).

69

John Quiggin 08.19.13 at 8:10 pm

@RW On PIH, I broadly agree, though I think you could find some rule-of-thumb behavior that reflects expectations about wage profiles. For example, young people buy houses that are bigger than optimal, given their current income, on the (tacit or explicit) assumption of higher incomes in the future. Of course, that doesn’t imply that temporary increases in income are saved, as in PIH.

70

paine 08.19.13 at 9:19 pm

kalecki never confronted in that great essay

the wage price spiral that the entire advanced hunk of the global economy
experienced with more or less severity in the roaring 70’s

each firm’s drive for profit is indeed a barrier to all firms tooting along at full blast

if the various “national subsystems ” fail to occasionally and spontaneously convulse
then under the present institutional arrangement
they must be convulsed
by state action or once the elders of macro
have their “innocence ” breeched
by a bi play of action and inaction

71

bob mcmanus 08.19.13 at 10:04 pm

61: I meant Marx was somewhat unpalatable to Kalecki’s western audience.

Basically I think the 1943 paper is political. Although it does not contradict Kalecki’s economic system, it doesn’t reveal much of the details of it. As I remember, there was a dispute at the time between Keynes and Kalecki (although by no means only them) on how to finance the British War effort, with Keynes tending toward more taxes and Kalecki more toward deficits and borrowing. The “Kalecki side” won.

More generally, I see the 1943 paper and Kalecki’s project before he moved back to Poland as a) of course prosperity and growth and business cycle etc, but b) sneaking mixed capitalist economies toward socialism and communism. Kalecki was a Marxist and full employment and managing effective demand and the rest were tools toward political democracy and socialization of investment as much as stabilization and growth policies. So, for instance, maintaining full employment via continuously increasing national debt with interest paid by taxes on capital would lead to the “euthanasia of the rentier class” in a few generations. If you can manage the politics.

I have been spending some time this week reading papers, especially Marxist papers, on Kalecki. Michael J Roberts and Dumenil & Levy have some available work. Consider me halfway between Marx and Kalecki right now.

This A Phillips Curve Retrospective, 2009, ed Luhrer, et al. Includes an intro by Samuelson, a roundtable between Mankiw, Solow, and Taylor on the history. Nobody seems to admit to the “stable trade-off.” “Some folk somewhere” kinda stuff. The Lawrence Ball on hysteresis and the article on Israel CB were good.

72

Tim Kane 08.19.13 at 11:19 pm

@ Bob McManus.

Thank you. Also, again, I am philistine. I’m in the process of moving overseas this week (to teach comparative law in Korea) – but I will look at “Understanding Inflation…” after I get settled.

Again, much thanks.

73

James Haughton 08.20.13 at 12:22 am

I’d rather like Prof Krugman to discover Sraffa next. The core insight that I took from Production of Commodities by Means of Commodities is that the division of surplus between labour and capital is determined by factors exogenous to production/distribution/consumption, not the “marginal productivity” of the various factors. Sraffa thus provided a rigorous way to incorporate non-economic power into economic analysis. Krugman still seems to struggle with this issue when he needs a rebuttal for those like Mankiw who say “if the 1% have grabbed the lot, it must be because their marginal productivity is huge” (not a direct quote, obviously, but not far off). The only explanations he has put forward for the declining labour share of GDP are
“capital biased technological change” and an increase in monopoly power. From his column “Robots and Robber Barons”: http://www.nytimes.com/2012/12/10/opinion/krugman-robots-and-robber-barons.html

“Why is this [declining labour share] happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.”

Now I would have thought just about anyone could come up with a third plausible explanation, which is the US’s relentless smashing of organised labour since the Reagan era (including/combined with increased use of illegal migrant labour, offshoring, etc) has dramatically weakened worker bargaining power and led to a macro shift in the distribution of surplus. Furthermore, the evidence for the war on the US working class and their organisations can be seen everywhere and in every newspaper, unlike automation-gone-mad or the reincarnation of massive monopoly trusts. But that means letting Sraffian extra-economic class power dynamics be a macroeconomic determinant. And Prof Krugman doesn’t seem capable of doing that yet. Maybe if he reads some more Kalecki. Still, Samuelson was at least partially convinced by Sraffa, so there’s hope.

74

JW Mason 08.20.13 at 3:39 am

Then there’s this new post from Krugman, which is also very good. Business cycles are not symmetrical deviations around a trend, they are shortfalls of different degree below full capacity.

One could be annoyed that he’s presenting a central idea of Keynes, that became conventional wisdom (I think; I wasn’t around) in the 1960s and 1970s, as if it was a new discovery. But relative to consensus macro its a major step forward. Partly, as he says, because it implies that the costs of recessions are much larger than in conventional New Keynesian models, since output is lost and not simply misallocated across time. But also, because it renders the notion of a long run independent of the short run nonviable. Unless demand-induced deviations from the trend are symmetrical, you cannot speak of a long run which is invariant to short-run variation in aggregate demand. If Krugman is serious about this, he is going to have to abandon his belief — reasserted just a month or two ago — in the long-run neutrality of money. Permanent income also has to go — it is logically inconsistent to think of consumption decisions as the intertemporal allocation of lifetime income if income even in the long run depends in turn on consumption choices.

75

JW Mason 08.20.13 at 3:48 am

Re Samuelson and Solow, I don’t know how 170s-era textbooks presented it (that would be a great research project!), but I do know that in the original essay, they gave equal weight to supply-side adjustments as to shifting expectations, as reasons for the tradeoff to be unstable. In other words, it’s just as possible for the Phillips Curve to be more or less horizontal in the long run, as it is for it to be vertical. This is supported by more recent work on hysteresis.

So if the idea of a stable Phillips Curve tradeoff was wrong, it may have been in the exact opposite direction as claimed by Friedman and Lucas. It may been, in a sense, undersold rather than oversold.

76

JW Mason 08.20.13 at 3:49 am

I have been spending some time this week reading papers, especially Marxist papers, on Kalecki. Michael J Roberts and Dumenil & Levy have some available work.

I am a big fan of Dumenil and Levy. But you do know they hate Kalecki?

77

bob mcmanus 08.20.13 at 4:04 am

75: From what little I have read, I am not a big fan of Dumenil and Levy. I do read stuff I disagree with, and I did realize that people I listed, including Roberts, were critical of Kalecki. Why don’t you try the Michael J Roberts threads on the inevitability of the falling rate of profit? Carchedi and Kliman showed up. I was impressed.

78

John Holbo 08.20.13 at 4:14 am

Bob McManus: “I do read stuff I disagree with”

Understatement of the year!

79

Bruce Wilder 08.20.13 at 4:14 am

On Samuelson, Solow and the Phillips Curve, the non-existent controversy over whether the Phillips Curve was ever thought to represent a stable trade-off is a bit of a distraction. The main event, taking place behind the curtain, was the import of the Solow Growth Model into macro, where it remains a very poorly examined feature of all mainstream macro reasoning about aggregation, investment, “equilibrium” and the scope for government policy.

Quiggin has the date right for when it all went wrong, but misidentified the poison pill: the poison pill was the Solow Growth Model.

Everything that one might reasonably expect to have mattered in the experience of the last 70 years is obscured: the continuing struggle over income distribution, the role of energy (aka petroleum), the importance of taxing economic rents to the fiscal regime, the importance of rentiers to the politics, the role of money and financial institutions. All one has is a completely faulty, fairy tale relation of capital to technology to “growth” undifferentiated as to income distribution. And, then the Phillips Curve is presented as the appearance of a tradeoff between the interests of capital and labor, in a managed political tradeoff between wages and inflation, and declared to be a mirage!

80

JW Mason 08.20.13 at 4:21 am

The main event, taking place behind the curtain, was the import of the Solow Growth Model into macro, where it remains a very poorly examined feature of all mainstream macro reasoning about aggregation, investment, “equilibrium” and the scope for government policy.

Agree. It really bugs me how so many macro textbooks take Solow (or Ramsey) as the starting point.

That’s one reason I think this new post by Krugman is so encouraging. Once you abandon the idea that fluctuations are symmetrical deviations from the long-run growth path, it’s much harder to think the Solow model is a relevant description of real economies.

81

Herman 08.20.13 at 4:22 am

@Quiggin vs Waldmann

Oddly enough, I can point to claims of a stable PC after 1968, but not before. It is almost as if Friedman’s strawman argument made his critics harden their position thus breathing life into the strawman — a sort of self-fulfilling prophecy.

1. James Tobin (1972):
Inflation and Unemployment
Cowles Foundation Paper 361
American Economic Review, 62, 1972

2. Gardner Ackley, who was a member and head of the CEA in the 1960s:

“However, the notion that there was a *stable* Phillips curve tradeoff did not capture the support of the economists most closely associated with formulating monetary and fiscal policies, at least in the United States. The writer believes that a careful study of the Annual Reports of the Council of Economic Advisers for the years 1961-1968 will discover no reference to any such stable trade-off.”

However, he continues …
“However, it did creep into the 1969 Annual Report — see Chart 8, page 95″

Macroeconomics: Theory and Policy
Gardner Ackley (1978)
Pg. 440, fn. 15

It would be interesting to explore the question whether Friedman 1968 was actually the genesis of the belief in a stable PC — by making his opponents harden their position.

82

Bruce Wilder 08.20.13 at 4:27 am

James Haughton @ 73

There’s a fourth story staring us in the face, which is the diversion of income through accumulating financial capital. Whether it is college students facing debt peonage or payday loans or any number of financial schemes driving health care cost inflation or cities being forced into bankruptcy or vulture capitalists harvesting the organs of their industrial victims, the power of financial grift to alter income distribution should not be overlooked.

83

Jeremy 08.20.13 at 5:27 am

@JW Mason, this reminds me of what you were writing about a while back about Harrod’s knife edge and the dynamics of long-term growth:

I think the vision of cycles and crises as endogenous to the growth process, indeed constitutive of it, is a better, more productive way to think about the evolution of output than a stable equilibrium growth path occasionally disturbed by exogenous shocks. The idea of accelerating demand growth that sooner or later hits supply constraints in a more or less violent crisis, is just how the macroeconomy looks.

This seems to me to be a productive direction for mainstream economics to move towards, to the extent that they’re not just hacks in service to the ruling class. Especially because it seems that the troughs of the business cycle are highly dependent on government policy.

Since we’re discussing Kalecki, and I happen to have come across this while looking to make a point about the pessimism of his work (I’ll get to the below), this discussion of his differences with the Harrod-Domar model is interesting:

The idea of steady growth was well known in classical economics: savings are accumulated and transformed into investments which in turn generate growth. Innovation, which is prominent not only in Domar but also in Harrod, takes for its starting-point not accumulation changed into investment, but investment decisions, and then it is argued that investments below the requirements of balanced growth cause a breakdown, disturbing the equilibrium and giving rise to a cumulative downward movement.… Domar’s theory can be interpreted as a pure demand model, but then it ceases to be a growth theory. If balanced growth appears in fact unstable, then it really is non-existent.… According to Harrod, this shows with cyclical fluctuations around the trend line, but I have tried to show that it ends in cyclical fluctuations around a quasi-static position and exogenous factors are required to ensure a lasting long-run development.

I’m not sure I’d go as far as Kalecki does in calling all factors that cause growth exogenous to the dynamics of capitalism. But I’d rather err on that side, rather than the mainstream side that Krugman seems to be abandoning.

@Bob McManus, @Tim Kane, on the subject of Kalecki’s pessimism, I’d recommend the book Kalecki’s Economics Today, and specifically the chapter by Tadeusz Kowalik “Kaleckian Crucial Reform of Capitalism and After.” Kowalik collaborated with Kalecki on the latter’s final paper in 1971. At that time, Kalecki had apparently become uncharacteristically optimistic about capitalism as it then existed, coinciding with probably the high-point of working-class power within the system:

Let us imagine that the strong pressure of the masses leads to such a radical reform of the system, in spite of the opposition of the ruling class, that, without abolishing existing relations of production, a new valve is opened for the development of forces of production. There will then be a paradoxical situation: a ‘crucial reform’ imposed on the ruling class may stabilize the system, temporarily at least. As we argue below, we have to do with just such a system in contemporary capitalism.

Kowalik’s article gives a good overview of how history actually panned out in terms of Kalecki’s ideas of “the regime of the political business cycle,” “capitalism of full employment,” and “crucially reformed capitalism.” That first two are discussed in “The Political Aspects of Full Employment,” and the last one was what he was developing at the end of his life. Seems to have been something of a pipe dream, alas.

84

Jeremy 08.20.13 at 5:30 am

Err, I should specify that that was in response to JW Mason’s #74, as it seems that several more posts have snuck in while I was writing.

85

James Haughton 08.20.13 at 6:06 am

Bruce Wilder @ 82
Good point, although I normally think of the rentier FIRE sector as taking their pound of flesh out of gross profits/surplus rather than out of wages most of the time – that is, it’s all within the income-to-capital side. Perhaps this isn’t as true as it once was given the 1980s-2010s boom in consumer credit.

The broader point is that Krugman recognises the evidence for these alternate stories (the private debt boom and bust, assaults on unions by Republican governers, etc) as bad at a social and micro-sort of level, but doesn’t seem to be able to connect these to macro distributional shifts – to explain those, he still wants a politics-free New Keynesian story about technological change and/or market monopoly power.

Now Krugman seems to be groping around for a way to incorporate political power into his framework so as to explain the blocking of fiscal policy, but falls back on another “technical” solution of “macroprudential” policy – which is presumably supposed to be administered by the same institutions (the Treasury, the Federal Reserve, the SEC, etc) which have all been captured by the interests they were supposed to regulate this time around. I don’t see why he thinks a new era of macroprudential regulation wouldn’t be repealed or neutered, just as the old one was, as soon as the lessons of the crisis can be swept under the carpet. He’s just setting up the dominos for another Minsky-type growth-boom-bust cycle with this approach.

86

John Quiggin 08.20.13 at 7:17 am

I kind-of agree on the Solow growth model, though I don’t think the fusion of growth theory and macro took place until after the rise of RBC.

I might crosspost some stuff I’ve written on comparisons between Australia and New Zealand, making the case that macro failures have permanent effects, so that there is no long-term Solow growth path.

87

Guido Nius 08.20.13 at 7:51 am

@56: no, I don’t think it would be good to be governed by somebody like Malthus, not at all. I don’t get your analogy to do-gooders though. I really believe Malthus was sincere in thinking that first and foremost people should get education and – once they got it – that they would make better personal & public decisions. That’s in itself not harsh and it’s also in an admittedly warped way very optimistic. What is harsh is the thought that things will need to get worse before they get better.

88

David Woodruff 08.20.13 at 7:54 am

FWIW, Kalecki actually had three reasons why capitalists would only support enough stimulus to get out of a slump, not enough to bring a out full employment. This is from memory, so apologies for any imprecisions:
1. Full employment removes the state of business confidence as a constraint on government policy, reducing the political power of capitalists–this is the one getting all the play
2. Full employment strengthens workers’ bargaining power, reducing workplace discipline and profitability
3. Stimulus policies involve allocating income in ways contrary to the fundamental of capitalist morality, namely, that one should earn one’s bread in the sweat of one’s brow.

I think the third of these is especially important in the present crisis and might deserve more play. The first two arguments seem to depend on capitalists actually believing that full employment policies are possible, just contrary to their interests. The third takes ideas more seriously. As an empirical description of how capitalism works the sweat-of-one’s-brow position is totally ludicrous. But it’s very important to the self-image of a lot of people, including the super-rich.

89

reason 08.20.13 at 8:06 am

Jeremy @83,
I don’t particularly like this formulation (admittedly from JW Mason – but you quote approvingly):

“I think the vision of cycles and crises as endogenous to the growth process, indeed constitutive of it, is a better, more productive way to think about the evolution of output than a stable equilibrium growth path occasionally disturbed by exogenous shocks. The idea of accelerating demand growth that sooner or later hits supply constraints in a more or less violent crisis, is just how the macroeconomy looks. “

It sounds too like “Austrian” business cycle theory, and in fact I think the wall that gets hit is often financial not supply (not that I deny that energy constraints didn’t contribute to the current problems – but I don’t think this extends to past crises). I also don’t believe that sustained “balanced” growth is possible (I think that every industry goes through a hysteresis curve so that there are bound to be periods of heavy investment and periods of heavy disinvestment in each industry). This doesn’t necessarily cause swings (as different industries don’t have to be in phase with one another) but I also believe as you are hinting that the structure of the economy is not independent of its macro history (i.e I don’t like the global equilibrium paradigm). We need a more dynamic, more disaggregated macro. But we shouldn’t forget my first point – financial stocks and flows drive most of the fluctuations in the economy.

james haughton @85

“The broader point is that Krugman recognises the evidence for these alternate stories (the private debt boom and bust, assaults on unions by Republican governers, etc) as bad at a social and micro-sort of level, but doesn’t seem to be able to connect these to macro distributional shifts – to explain those, he still wants a politics-free New Keynesian story about technological change and/or market monopoly power. “

I understand your point, but I also understand Krugman’s view. Ultimately, money flows in a cycle. If it is accumulating at one point, it is missing somewhere else. Banks and governments can (subject to political constraints) inject new money into the cycle to maintain full employment. The question is always (without market monopoly power), if wages are falling (i.e. purchasing power is falling), why aren’t price falls offsetting it. Just talking about labour politics is not quite enough to fully explain what has happened.

90

Robert 08.20.13 at 8:10 am

I would like to second or third the suggestion that that Kalecki essay was always considered of great interest to heterodox economics. In fact, my name below links to a summary I put up in March 2007.

James Galbraith, in Created Unequal: The Crisis in American Pay (1998), has the increased inequality in income coming about because of persistent instability and more frequent recessions in the 1980s and 1990s. He notes the prevalence of ideas arguing that the Fed should abandon its dual mandate and concentrate on inflation.

In some sense, anti-labor political interventions, increased power of financial capital, and the lack of government policy interest in stabilizing an unstable economy are all compatible with Sraffa’s model. His model is open. I think of the Harrod-Domar model as part of an analysis of what conditions are necessary to achieve stable growth, not as a model of where a capitalist economy will naturally converge to. For this analysis, I am not uncomfortable with a overdetermined model. Conventions on real wages and on expected rates of return may need to both exist in a prosperous economy, even though they cannot be specified independently. Joan Robinson’s models of metallic ages are good to look at here.

I think good economists have recognized for decades that almost anything can happen and nothing need happen in mainstream economic models. For some reason, as far as I can tell, many mainstream economists seem to think failures of competition, information asymmetries, and second-best arguments are needed to reach this conclusion. Yet, I think it is a corollary of the Cambridge Capital Controversy and of the Sonnenschein-Mantel-Debreu results, which are about, to a first approximation, perfect competition. Yet mainstream economists often seem to argue if perfect competition prevailed, everything would be fine. They seem to argue as if the question is whether freed markets could approximately reach this ideal or whether some market imperfections are just incapable of being removed by appropriate government policy.

So here too is another seeming division among mainstream economists that makes no sense to me.

91

Peter T 08.20.13 at 12:19 pm

I’m impressed by the work of secular cycle theorists in sociology – people like Peter Turchin, Jack Goldstone and Michael Mann, who tie together the ways resource availability, innovation and social structures interact. I’m less sure what one would do with this knowledge – as with population, where it’s easy to make remarks about too many people, less easy to see what to do about it.

reason at 89 – “money flows in a cycle”. Maybe, but there is good reason to think it’s not a closed cycle, so what is missing in one place need not show up in another.

92

Rakesh Bhandari 08.20.13 at 3:33 pm

Once Krugman says that macroprudential regulation can’t in itself prevent financial crisis, and is unlikely to be implemented due to the same power imbalance that has worked against the neo-classical synthesis, then what separates Krugman from Paul Sweezy on macro-economic questions?

I must say that Kalecki leaves me puzzled.
Say that the national union leadership finds that many of its workers are
unemployed while industrial capital is suffering from excess
capacity. Kalecki’s theory implies that the profits of industrial
capital would be higher if the govt props up effective demand; the unions
should understand that full employment can be achieved through
macroeconomic policy within the capitalist system as long as it
responsibly contains real wage gains.

So now you have the basis for social democratic politics. Industrial
capital provides the money for and workers the votes for a social
democratic party. Such party should be able to win over one led by
rentiers fearful about inflation.

Yet such a social democratic politics is in retreat, and the rentiers are winning
I don’t think Kalecki’s theory solves that political puzzle; in fact it seems to
deepen it, no?

93

Random Lurker 08.20.13 at 3:53 pm

@Rakesh Bandhari
Your hypothesis implies that workers are idle in a crisis because their wages are too high, but I think that in Kalecki’s theory crises happen because wages are too low, and in fact when the government pumps demand in the system it tends to empower workers (who are less dependent on private capital) .
I think that, both in Kalecki and in Marx, an high profit share on total income leads to a low profit rate on total capital (since capitalists are supposed to reinvest profit in new capital goods).

94

Dan Gay 08.20.13 at 3:53 pm

I don’t think Krugman speaks for the whole of mainstream economics, and I don’t see a bit of name-dropping as a wholesale shift to the left. He may be questioning a few of his old shibboleths: the neoclassical synthesis, sticky prices and the power of ideas, but apart from the famous 1943 paper it’s not clear that Krugman has read much Kalecki. He certainly hasn’t shown any sign of understanding Kalecki’s main contributions or wider methodological stance: ie. his rejection of utilitarianism, marginalism, equilibrium and methodological individualism. Kalecki’s opposition to monoeconomics allowed him to look for different solutions in different contexts. Krugman’s cherry-picking is a long way from the acknowledgement of the truth of any broad heterodox system.

95

Lee A. Arnold 08.20.13 at 6:32 pm

Well the problem is that Paul Krugman (as a representative of standard economics) wants to retain access to mathematical modeling for disprovable hypotheses, i.e. “science”. But we are not going to be able to “math up” Kalecki, or Herman Daly or Dierdre McCloskey or John Kenneth (or indeed James) Galbraith or… name anyone else whom YOU think has import into this discussion. Indeed, the mathing-up would already have been done, by now. Kalecki’s “rejection of utilitarianism, marginalism, equilibrium and methodological individualism” [Dan Gay #94] doesn’t leave us with much that is possible to model: those very things are the necessary prerequisites to making the “equals” and additive and multiplicative properties, in mathematical EQUATIONS. Purely logical relations (e.g., to model “social power” conditions) won’t give you quantitative predictions; at best you end up with lattice theory or topology, and they are not conducive to realworld policy, to say the very least. They don’t even get theoretically very far, without veering off into sterile intellectual exercises (look at the slowdown in the recent new growth theory). I think Krugman understands this, and much of the criticism of Krugman for not going all the way into Saving-the-World is fatuous, because that criticism ignores the huge critical philosophical discussion of the method that Krugman is hoping (against hope) to save. It is a philosophical discussion that Krugman himself appears to have barely read up on, though he seems (to me) to be heading in that direction. And he is heading that way because we are ALL quickly approaching the vast and damning reality that we must idealize a complex system that contains, not only money running in defined channels, but also power relations, changeable human preferences, innovations, the emergence of new ideas, and last but certainly not least, outer environmental problems (which has its OWN different complex system). All of these things, every one of them, is stuff that mathematics can hardly model: certainly not to any useful, predictive result. Even before you throw them all together. It doesn’t even matter if you put it into a computer. We are getting to the point where we have to find a way to change everybody’s preferences quickly. We are not merely approaching it, we are being forced into it, because it has gotten so large that it threatens global social and ecological stability.

96

Bruce Wilder 08.20.13 at 6:42 pm

Robert @ 90

I think good economists have recognized for decades that almost anything can happen and nothing need happen in mainstream economic models. For some reason, as far as I can tell, many mainstream economists seem to think failures of competition, information asymmetries, and second-best arguments are needed to reach this conclusion.

There’s a natural, human tendency, when trying to think with analytic models, to favor models with a solution, and a process akin to semantic generalization sets in, to support the false intuition that the actual economy is, ideally, a model in the form of a calculating engine, with a solution set. Economic policy is, then, the moral imperative of a mechanic tending the calculating engine, which is the economy: lubricate here, tighten the bolt there, re-arrange the parts of this subcomponent of the engine. Walrasian General Equilibrium is a calculating engine, with a lot of little mechanics like Sims in a game of SimCity (love it!), doing their tatonnement thing. The “solution” is the equilibrium, where every little market thru tatonnement, clears, and, thus, the whole vast engine achieves, a solution. Yippee!

I’ve pointed out to economists enamoured of Walras, that lots of actual “markets” are structured in a way that they do not clear. Not now. Not ever. The market for movie tickets. The market for scheduled passenger travel on airlines. And, lots of other “markets” (none of these are actual markets, by any stretch of metaphoric imagination) clear only because of administrative fiat, the “price” is not being bid at all, let alone subjected to the double-auction of Walrasian tatonnement: the price of an iPhone or a can of soup. You’d think I was shining my headlights on a deer in the middle of the road, late at night — there’s no movement, no recognition that their whole worldview is roadkill in the making.

Sonnenschein-Mantel-Debreu just says that even if the little mechanics each get their little market to clear, that process doesn’t endow the resulting general equilibrium with the unique goodness and light of a rational solution usually attributable to a single market reaching equilibrium in perfect competition. That indeterminacy doesn’t address the problems that arise from even a single market, which cannot clear. Remember, Walras says, if a single market fails to clear, then there’s no general equilibrium — nada. When you realize that lots of markets are institutionally incapable of clearing, it kinda leaves general equilibrium as a curious artifact of analytic thinking. What’s the point? And, that observation is not a bit of mathematical esoterica, like Sonnenschein-Mantel-Debreu; it is a fact staring at everyone from every supermarket shelf.

Observation, and comparison with the analytic models, should lead to the realization that the actual economy is a calculating engine, working with, and around, a number of insoluble[!] problems. Arrow-Debreu-McKenzie was a great intellectual achievement and milestone. They showed that a general equilibrium was possible in a market economy even in the presence of uncertainty and incomplete information, of at least a stylized sort. What economists should have gotten out of that exercise is that such an economy doesn’t look at all like the actual economy. General equilibrium under uncertainty requires perfect insurance provided by complete futures markets: the limits of individual human knowledge are overcome by projecting god-like powers of information-processing onto financial markets of infinite scope. It sounds ridiculous, as a description, but analytic models are not about describing anything — only economists ever think they make good maps of the world; analytic models produce insight about the relation of concepts. Just seeing that the incentive problem juxtaposes risk and reward, and that institutional mechanisms for absorbing and filtering uncertainty are going to be key to coordinating activity ought to be educational (in the Platonic sense).

The (Platonic) idea of a self-equilibrating economy, coordinated by market price, is a seductive one, not least because it seems to achieve moral qualities in resolving conflict and uncertainty: it can be shown to be efficient and fair and optimal in formally definable senses. Even if we realize, as even the most ideological Chicago-types do, that the real world is, as they say, “messy”, general equilibrium with its moral qualities, seems more like a reliable beacon than a dangerous siren. Sonnenschein-Mantel-Debreu doesn’t do much to disabuse anyone of the illusion that equilibrium matters at all, in practice. You can realize, like In the Sky @ 23, that “perfectly rational expectations idea is clearly much too strong” (really, ya think?) and feel perfectly comfortable mixing up a sauce with some other analytic model(s), and never consider whether this method makes any sense as a way of building a diagnosis or outlining a prescription.

Rational expectations is equivalent to an assumption of efficient financial markets. You can see it as an assumption that people collectively see thru the money illusion with the x-ray vision of fantastic powers of calculation, or as an assumption that people let financial markets combine their individual subjective evaluations and idiosyncratic bits of incomplete, private knowledge into prices, and then accept those prices as objective facts, which they substitute for their idiosyncratic assessments. The price of x is what x is worth; remaining differences of opinion on the value of x no longer matter; everyone acts as if they agree with the price (and the whole implicit model of the world that rationalizes that price as “right”), because they see that they cannot profit at the margin from disagreeing — equilibrium!

It is, obviously, “too strong an assumption”. The “messiness”, the “frictions” will matter. But, how? How much? As a practical matter, what matters is not whether expectations are rational or adaptive, but that expectations will be disappointed, and that differences of opinion and knowledge will never be extinguished in market equilibrium, even in actual financial markets (which like horse races, thrive on differences of opinion). Do not try and bend the spoon – that’s impossible. Instead, only try to realize the truth. There is no spoon. The “failures of competition, information asymmetries, and second-best arguments” are necessary not to the realization that there may be many possible equilibria, but to the far more profound and disturbing realization that there is no equilibrium at all; neither the little, individual markets nor the general market economy are processes tending toward equilibrium. Instead, they are coping, imperfectly, with insoluble problems of disequilibrium, problems like increasing returns from unrealized economies of scale.

I’m sorry if it rocks any one’s world, but if marginal cost is less than average cost and declining, there’s going to be no equilibrium in market price. And, this is the case in a great many important industries. (Tell me again why S-M-D matters?) Dynamism of capitalism, and all that, if you like. Instead of a market-clearing price, one sees administrative pricing incorporating schemes of price discrimination. Hence, the sticky prices that allow New Keynesians their tenuous claim to have at least one foot in the real world. And, if you want to think about it for more than 2 minutes, a great potential for debt-deflation, when people find their expectations mistaken.

97

Bruce Wilder 08.20.13 at 7:20 pm

Lee A. Arnold @ 95

Yes, the economy is something people do, and not something that does itself.

Random Lurker @ 93: an high profit share on total income leads to a low profit rate on total capital

I cannot speak to Marx’s thoughts on this, but there’s definitely a paradox at work. Certainly, we should expect that a high wage share would be associated with a high rate of investment — one would beget the other; the causal relationship is reflexive. And, a low wage share in total income might beget a high profit share financed by net disinvestment, which is where I think the U.S. is, at the moment.

Speaking of a profit rate on capital, as a parameter, may be a bit misleading, since profit rates and such are financial artifacts. It would be better to think of the normal situation of capital accumulation as a bowl of money filled to overflowing. The lip of the bowl represents the sometimes indifferent efforts of the financial sector to contain the flow of funds, and not so much find productive applications in assembling resources in real investments, as to avoid pouring the funds into toxic investments with negative net present value. The argument for something like a Minsky cycle is that the financial sector profits from gradually lowering its power of resistance to bad investments. With the help of Greenspan and Bernanke, the present cycle may have gone even further than usual into the territory of parasitic financial investment, as I pointed to @ 82 above, creating vast quantities of financial investments, like student loans, which are toxic (aka have a negative social rate of return and net present value — their nominal financial returns to investors represent costly transfers of income, not net additions to income).

98

Bruce Wilder 08.20.13 at 7:27 pm

I hope I’m not being misleading above: I’m not saying that investment in education has to be a net social bad. I’m saying that, given the incidence of returns on education — that the returns on education diffuse away from the student — financing with student debt is a toxic transfer of income from the productive student-become-worker to the parasitic rentier.

99

mattski 08.20.13 at 10:01 pm

and much of the criticism of Krugman for not going all the way into Saving-the-World is fatuous

Thank you, Lee. I think Krugman is keenly aware of the difference between facts and desires. He grounds his thinking in facts and that means using models to make tractable arguments. He understands that his personal opinion about what is fair is just that. It only carries the weight his audience gives it. But my idea of what is fair, like anyones, is merely an opinion and ultimately a desire.

And I think a hazard of human nature is that when people of similar minds congregate, like on Crooked Timber, there is an inevitable tendency towards one-up-manship. People gotta out-lefty each other, and that really makes insularity a problem.

100

In the sky 08.21.13 at 1:50 am

@35 I agree that this problem doesn’t directly involve the majority of the econ profession

Great.

[The past five years] ought to have provoked a substantial reconsideration, and ideally, some admissions of error. We’ve seen nothing of the sort. Hence, it’s reasonable to conclude that people are arguing in bad faith or else engaging in some form of denial.

Are you claiming that there has been “nothing of the sort” by economists in general, or just to specific subgroups of people you don’t like?

Do you want to defend Mulligan, or say that he’s atypical

Neither? I don’t want to defend every word Mulligan has ever said: what I have read of his blog doesn’t impress me, but I can’t claim to know his serious stuff that well. Nonetheless he has published exceptionally well on some macro topics. I’d consider Mulligan as part of a small group who holds contrary views to most. I think he’d accept his views are at variance with the majority of the profession’s, so taking him as a representative is misleading. (Didn’t Henry blog about this a while ago? That the general public will most likely hear unrepresentative views?)

Mostly, I’m satisfied with your admission that the political critique does not apply to the majority of economists, and even the majority of people involved in macro. I have always accepted that there are outliers whose public comments represent some convex combination of cognitive dissonance and political play (and I include Krugman in that). Mind you, I’d be more concerned if there were 100% consensus all of the time.

Reinhart is actively misleading about data sharing in the quote you give…

Summing up, Reinhart’s claim about making the data publicly available is actively misleading, bordering on an outright lie.

Thanks, Herman, I didn’t know this.

101

reason 08.21.13 at 8:07 am

Peter T @91

I think we do know what to do about excess population. It is just that people are in denial, because the powers that be don’t like it. Population falls with a combination of aged pensions, compulsory education (especially of girls) and modern medicine (in particular enabling contraception and decreasing child mortality). In the right wing dialog this is changed to increasing wealth reduces population growth (whereas the story seems to be more the other way around). Saudi Arabia and Kerala are good counter examples to the right wing story.

102

reason 08.21.13 at 8:17 am

Bruce Wilder @97
Great comment!

To clarify a bit regarding population growth rates, it seems to me that egalitarian middle class societies provide a sustainable model, growth rates are highest amongst the very rich and the very poor. The very poor, accumulate hardly any capital – and so substitute with the creation of human capital. The very rich have capital to burn. The middle class life style requires large per capita capital – and so reduces the per capita divider (this particularly manifests itself in the burden of housing and education costs).

103

MPAVictoria 08.21.13 at 1:17 pm

“Thanks, Herman, I didn’t know this.”

But you still felt the urge to attack Krugman over a situation you had not researched? Well that is interesting…..

104

Robert 08.21.13 at 1:41 pm

As far as I can tell, the first and most strongly held proposition of mainstream economists is that you should listen to mainstream economists.

They seem to be encouraged to be actively ignorant of the history of their discipline, including the succession of purges of many economics departments, the sources of external funding of major areas of research, and the willingness of economists to join with outside political interventions into their discipline. (I have recently started to reread Fred Lee’s history of heterodox economics.)

105

mark blyth 08.21.13 at 2:34 pm

Interesting discussion. For what its worth I teach Kalecki’s 1943 piece every year right after my class reads the General Theory. David (at 88) gets the three points right, but if you pay attention to the first two, what they add up to is full employment leads to costless (near) job switching, which in the context of a unionized labor market, not only reduces the fear of the sack, it hits firms profits hard, especially if the line can be held on cost push inflation. This dynamic came home to roost in the 1970s and the result was precisely the remobilization of business and the clear out of demand side economics as a part of that revanche. If anyone is interested I did a book on this once but swapped out the Kalecki for Knight. Given today’s developments, that may have been a mistake!

http://www.amazon.com/Great-Transformations-Economic-Institutional-Twentieth/dp/0521811767

106

Barry 08.21.13 at 2:45 pm

“I’d consider Mulligan as part of a small group who holds contrary views to most. “

Mulligan is a liar, pure and simple. At that point, his published work doesn’t matter, unless it’s been independently verified.

“Summing up, Reinhart’s claim about making the data publicly available is actively misleading, bordering on an outright lie.”

R&R:

1) Deleted data points which were contrary to their hypothesis – and didn’t mention this.
2) Weighted in the most extreme manner, favorable to their hypothesis – and didn’t mention this.
3) Made multiple statements implying causal effects (WSJ and Congressional testimony), and later lied that they had made no such claims.
4) They withheld their data for three years, despite numerous credible economists telling them that they had been unable to replicate their work. Nobody could, because they weren’t selectively deleting and weighting data.

At this point, it’s no longer a matter of ‘an Excel error’, or any sort of honest mistake.

107

Barry 08.21.13 at 2:47 pm

“Mulligan is a liar, pure and simple. At that point, his published work doesn’t matter, unless it’s been independently verified.”

BTW, Noah Smith on Noahpinion had a nice piece, showing that Mulligan’s claims about unemployment and the Great Vacation Depression are pretty much in violation of the laws of economics, pure and simple.

108

Lee A. Arnold 08.21.13 at 3:06 pm

In the Sky #100, you wrote previously that the macro relevant to the economic debate “is not most economists’ area of expertise” (#35), and your “best guess” is that the “fraction” of macro for whom it is, didn’t speak out about austerity because “they under-estimated the importance of the zero-lower bound, partly because of a lack of appreciation for economic history. No doubt some did so because austerity sat better their political persuasions.”

With so little relevant expertise for you to rely upon, what is the basis for the contention (#100), “I have always accepted that there are outliers whose public comments represent some convex combination of cognitive dissonance and political play (and I include Krugman in that)”? Surely you implied in #35 that there is not enough good information available for you to make that judgement. Is it cognitive bias?

109

Eclectic Observer 08.21.13 at 3:32 pm

The Economics Profession in the US has historic ties to business as it’s main supporter, so it’s not surprising that there has been a bias to analysis. It’s somewhat akin to how hard it was for philosophy in Europe to wean itself from religion.

Krugman does great work in weighing in on forums not particulary friendly to an Economist with progressive leanings. I don’t always agree with him, but he’s a refreshing break from the usual pundit class.

110

Eclectic Observer 08.21.13 at 3:38 pm

WRT Casey Mulligan, I stopped wasting my time on his Economix Blog submissions as it was pretty much a autonomic Chicago School reflex spew. Even Dean Baker doesn’t waste his time for the most part on him (Beat the Press blog). I guess Economix felt they had to put some different philosophical perspectives and they ended up with him.

111

Ronan(rf) 08.21.13 at 5:05 pm

To Curt and BW’s moral judgements in economics, this came up recently in a forum here

http://ser.oxfordjournals.org/content/11/3/601.full.pdf+html

112

Paine 08.21.13 at 6:18 pm

The better source on wage price complications to any perpetual full employment program
Is obviously abba Lerner
Abba was ” on to” this problem in the late 40’s

His considered solution an alternative to NAIRU taboo lines and expectations voodoo
For Taming the spiral

A mark up warrant market

A mechanism design that might well fit under the rubric
of krugmans
New regulatory theory

113

Rakesh Bhandari 08.21.13 at 7:14 pm

The exchange noted in 107 looks very interesting indeed; I will find the time to read it! One should not underestimate the depths of the moral crisis. In Boltanski’s language the little people don’t see how the great people are of use to them: the great people do not make any contribution to the common good, and it is difficult to see what investments that they have made or difficulties overcome to occupy one of the few great positions. The great people are understood to be investment bankers, shadow bankers, hedge fund operators, currency manipulators, inside traders, hostile take-over artists all of whom are highly leveraged and bearing little risk of their own while they play to their advantage zero-sum games. The populist moral opposition is, in my opinion, more likely at this point to become fascist: it will scapegoat immigrants as hostile and parasitic others and financiers as the sole putatively Semitic, intellectualist embodiment of capitalism. The “moral” opposition is thus likely to be anti-intellectualist and unthinkingly nationalist as well as ineffective and dangerous.

114

John Quiggin 08.21.13 at 8:28 pm

Mulligan isn’t an outlier. The views he presents are those of the New Classical School in general, including big names like Lucas and Meltzer. It’s just that, unlike most, he has actively tried to defend the New Classical position in the face of overwhelming evidence to the contrary.

I should mention that those who have changed their views include Posner (not exactly an economist, but important) and Kocherlakota, at least re structural unemployment

http://online.wsj.com/article/SB10000872396390443890304578008713419920352.html

There may be others, but not many

115

Bruce Wilder 08.21.13 at 11:51 pm

Some good stuff at what I presume is the tail end of this thread.

Rakesh Bhandari @ 113 — I have some tiny quibbles and trivial extensions to offer to your excellent comment.

I think hierarchy — the vertical contract between the great and the small — can be mutually beneficial: a positive-sum game. It doesn’t have to be. And, with regard to the banksters and the globalizing elite, it would be more accurate to call it a negative-sum game, not a zero-sum game. Their characteristic intervention is to break a contract, ending a mutually beneficial, productive relationship. They are disemploying people, and stealing pension funds and the like, in order to reap a transfer payment. Vulture capitalism. Vampire Squid. Parasites careless about the health of their host.

As for the fascist option, I think this might be a time to remember that history doesn’t repeat, though it may rhyme. In the early and mid-20th century, there was tremendous scope for a positive-sum game between great and small, elite and masses, as millions could man the novel industrial machinery of mass production. Even the pathological fascist and communist gambits contained at their core attempts to realize those positive-sum possibilities from hierarchical organization and cooperation.

What’s different now is that we have over-reached the carrying capacity of the earth. The elite — the “Deep State” is the internet buzzword this week — are cashiering democracy, by which elite governance was legitimated by liberal Enlightenment standards from the beginning of the industrial revolution in the 18th century, for a total surveillance state, hoping that the computer and communication revolutions make possible cheap control and that control can be managed from on-high (without enlisting all that many into the new Stasi — automation of those functions through Google and Facebook, iPhones and credit cards is what Snowden revealed) with the purpose of repressing the resource demands (if not the carbon emissions) of the masses, as productivity begins to plummet with a collapsing ecology, peak oil, etc.

The moral problem is the pathological irresponsibility and lack of empathy among the Masters of the Universe, who are driving all of this forward. As political legitimacy declines with the realization that democracy is no longer responsive or operative, the Masters of the Universe, despite their mastery of teh Google and associated apparatus, may well underestimate the emergent appeal among the formerly Middle Class of the bob mcmanus option.

116

Bruce Wilder 08.22.13 at 12:01 am

If Mark Blyth revises his excellent book, I hope he’ll spend more time on the power to shape our institutions of bland and stupid ideas of interest only to misguided geeks, like Solow’s Growth Model, or pointlessly mathed-up ideas like Lucas’ Rational Expectations and intertemporal optimization, . What Lee A. Arnold has been saying in this thread about the role of economists in weaving a web of denial over the emergent, capital problems of the global economy can be traced to that kind of thinking, which simply doesn’t admit useful categories for critical analysis and assessments. You cannot think about the role of oil price and supply in Solow’s Growth Model, because energy, somehow, isn’t in the production function (it wasn’t in Sune Carlson’s microeconomic production function in 1943 or Wicksteed’s first production function in 1895(?) so Solow was continuing tradition, I guess. Even though it has been obvious since 1973 that oil matters a lot, economists — even Krugman — cannot articulate much that’s useful. Many narratives of the recent GFC leave out the huge resource price spikes that resulted from Bernanke’s attempts to flood the world with precautionary liquidity. Krugman tells us about the zero-lower bound, but takes little cognizance of that other little problem: global resource limits. (We can print money; we can’t print oil or atmospheric carry capacity.)

If economists in the academically legitimated mainstream center of the profession have little expertise and too much ideological or partisan committment, and much of their energy is being lent to the service of denying not just unemployment, per se, but the whole factual and institutional context of political choice, it is a remarkable achievement of a peculiarly negative kind.

117

Mao Cheng Ji 08.22.13 at 2:28 am

“the Masters of the Universe, despite their mastery of teh Google and associated apparatus, may well underestimate the emergent appeal among the formerly Middle Class of the bob mcmanus option.”

I don’t think it’s likely to be the mcmanus option, but rather a popular hero a-la gaius julius caesar.

118

Peter T 08.22.13 at 3:55 am

re Bruce and reason’s comments, again I would point to historically-minded sociologists like Turchin, Tilly and Goldstone. Sure we can identify solutions to overpopulation or an elite/mass imbalance, but implementing them in the required timeframe in some relatively peaceful manner is another story. One point they make is that mass discontent rarely gets anywhere while the elites are united. At the moment – see the response to the Occupy movement or the degree of cooperation against “terror” – that seems to be the case. Watch out when some elite faction starts to look for a mass following in support of radical change. That’s when the fur will fly.

119

Random Lurker 08.22.13 at 8:50 am

Re : incoming fascist overlords

In my opinion, any social system has some fundamental moral rule, without which the system would crumble.
For capitalism it is “work ethics”, the idea that people should be valued by how hard they work.
However, because of the way a capitalist system works, only workers (and maybe really small entrepreneurs) are really subject to work ethics, and then in a uneven way.
When the system goes into crisis mode, the people tend to search a scapegoat, and search for someone who doesn’t follow the ethical rule.
Those people are:
– unemployed people, unless a clear message that they are involuntary unemployed is heard (although when unemployment is really high everyone has a relative or a friend who is unwillingly unemployed);
– people we presume don’t follow our moral codes, such as immigrants or minorities (so immigrant unemployed are always lazy criminals);
– powerful people whose power isn’t linked clearly to hard work, such as politicians and bankers (but not capitalists of the “real” economy, who hide behind the hard working small entrepreneur character).

Those are in facts the “bad guys” historically identified by fascism.

But, since most people don’t really want to change the system radically (in fact most people don’t think that people like hideous bankers are a normal result of the system, but a corruption of it) the result is that some popular hero (to use Mao’s wording) who embodyes the symbols of morality shows up and beats the “culprits” in the name of the volk and of that part of the elite who is not identified as the problem .

So I think that it is very likely that we’ll get some nice fascist overlord before the bolsheviks, unless most people realise that all those figures are just scapegoats and the problem is simply that wages, in a capitalistic system, don’t keep pace with productivity.

120

bob mcmanus 08.22.13 at 1:53 pm

When the system goes into crisis mode, the people tend to search a scapegoat

And the most recent scapegoats have been? Mubarek, Morsi, Ghaddafi, Assad.

No, I do not see the rise of a Leader, nor do I see a collectivist option. The center did not, cannot, and will not hold. We are post-mass-politics, and very likely post-politics at all. Chaos and anarchy, with emergent local perturbations.

“the bob mcmanus option”

“Burn shit down and take their stuff”

I find the resistance to this amusing, or tragic.

There is nothing there advocating violence against persons, and I should hope anyone who considers themselves left-of-center holds property rights sacred. We can’t take their stuff, as in taxation, or is the problem with the word “we” as in “we,” since “we” are not the state don’t have the right. All very interesting.

What there is, of course, is the immediate reaction that the State won’t like this, and that the State will initiate violence against persons. And somehow this would be our fault?

New Yorker has a long article Aug 12 on the use and abuse of civil forfeiture laws. Impoundment authorizations look like:

United States v. One Pearl Necklace
United States v. Approximately 64,695 Pounds of Shark Fins
State of Texas v. $6,037

121

bob mcmanus 08.22.13 at 1:55 pm

“considers themselves left-of-center holds property rights sacred”

should be “does not hold”

I hate wasting space when my intention should be obvious, but should have gotten it right the first time.

122

JW Mason 08.22.13 at 1:58 pm

We are post-mass-politics, and very likely post-politics at all.

Pessimism of the intellect is fine, comrade, but don’t forget the optimism of the will. Circumstances are never favorable for radical politics. Some people keep at it anyway, some people give up.

Post-politics is a choice you make, not a state of the world.

123

bob mcmanus 08.22.13 at 2:18 pm

122: Post-Politics does not at all mean “giving up”

124

Mao Cheng Ji 08.22.13 at 2:43 pm

Expropriation doesn’t necessarily leads you where you want to go. If I’m the Leader, I say: my people, we have parasites among us, speculators, leeches. I take their property and I give it to you! Make sense? But then everything remains in place, more or less. What you need is not ‘proprty is not sacred’, but a different concept of property. That different concept should then become sacred.

125

William Timberman 08.22.13 at 2:49 pm

The bob mcmanus option. I like it. One way to slip around the NSA’s hoover nozzle might be to declare ourselves members of the Bob McManus Society. What’s that? they’ll say. A social service organization, we’ll say, like the Lion’s Club, or the Odd Fellows. See…no little red book here.

Seriously, I gather from their collected CT comments that I’m in the same boat with bob and Bruce, where, in all modesty, I should probably confine myself to the rower’s bench, and leave the steering and navigating to those who’ve actually trained for it. I’m also sympathetic to JW Mason’s attempted resurrection of the optimism of the will, but I find it hard to see where that will can find any purchase these days, especially if we’re talking about the collective will.

But maybe that’s the whole point. Given our very late re-emergence in the U.S., and in the West generally, from the illusions of the Cold War and the Great Moderation, I’m still in shock, and I’d prefer to wait a bit before adopting a new set of illusions. The truth is, it’s a lot easier to comprehend what didn’t work in the past than what might work in the future. Age and experience are, after all, one of the strongest depressants known to medical science. I tell myself I’ve been there and done that, and I’ve got the scars to prove it. Therefore I know that this new thing isn’t really all that new, despite the hoopla, so what’s the point in going through it all again? Etc., etc….

I think I’d be better off keeping quiet and letting the young folks have a bash. Sometimes I think I know what they’re up to, but it’s a good bet I don’t know everything. I just don’t move fast enough these days to keep up.

126

Bruce Wilder 08.22.13 at 4:49 pm

Conservatives make revolutions, comrades.

Comments on this entry are closed.