Brad DeLong is Seeing Red

by Henry on April 25, 2016

Brad DeLong has a post where he looks to be trying to resurrect the Left-neoliberalism wars, issuing minatory warnings about the dangers of a perspective in which:

There is a Movement, the Movement is good because the Movement is supported by the class whose interest is the general interest and by Correct Ideological Thought, and all progressives must support the movement.

He furthermore quotes an old post of mine so as to revive his previous suggestion that I’m a card carrying member of this purportedly disastrous tendency. I’m a genuine admirer of much of Brad’s work – but not of when he gets on his full Redbaiting (which usually seems to happen when he is personally exercised, or when someone says something that could be construed as being rude to Larry Summers). Some clarifications, in response to Brad’s post:

1) Contrary to Brad’s suggestion, I’ve never argued or even hinted that I believe there is a universal class whose interest is the general interest. Indeed, I vehemently disagree with the proposition. For better or worse, I’m a Weberian rather than a Marxist, and a social democratic squish to boot. The last time that Brad attributed that claim to me, I took some pains to politely tell him that he was mistaken and to explain what I in fact believed. It’s rather puzzling that he is still suggesting that I hold these views after I (and his own commenters) explained that I did not and indeed after I explicitly and publicly disavowed the position that he claimed I held.

2 ) As a corollary to (1), I do not believe that there is a “Movement” associated with that class, which all progressives must support. My understanding of US politics is similar in broad outline to e.g. Paul Pierson, Jacob Hacker, Paul Krugman and Thomas Piketty, somewhat more towards the populist end than Elizabeth Warren, and somewhat less so than Theda Skocpol. Broadly speaking, I take these people to argue that the US is characterized by profound inequality, and that there is an urgent need for politics to address these problems of unequal political influence. Movement building would be one way to help achieve this, but it would involve movements (often clashing and arguing) rather than a Movement, and arguments and disputes between people from different socio-economic positions, with different perspectives on race, gender etc. In short – political change involves politics with all of its usual messiness and disputation.

3 ) I do not adhere to “Correct Ideological Thought,” much less demand that people need to knuckle under to it, and suppress their own views when they dissent from it. I would also strongly disagree with Brad’s broader proposition that there is some uniquely problematic groupthink happening on the left. Consider Larry Summers’ famous advice to Elizabeth Warren that she could either be

“an insider or … an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders. I had been warned.”

Summers’ advice here displays just the politically opportunistic approach to truth telling that Brad seems to worry about on the left. As I’ve noted above, criticism of Summers tends to upset BdL so I should explicitly acknowledge that there is a political case one could make for Summers’ approach (just as one could for its manifestation among left organizers). Still, Summers is explicitly saying that you need to shut-up-and-go-with-the-party-line if you want to get anything done.

I should say explicitly that I’m writing this to clarify my own position, given Brad’s erroneous post, rather than trying to incite further hostilities. Indeed, the reason that I’m pushing Brad hard on this is a specific form of intellectual selfishness. If good politicians want stupid opponents whose stupidity they can exploit, good intellectuals (or intellectuals, like me, who would like to be good, or anyway better) want brilliant opponents, who can show them the weaknesses in their own positions and hence force them to improve them. Brad can be quite brilliant when he wants to be, even (and perhaps especially) when I don’t agree with him. But he also has a tendency to treat people to his left whom he’s feuding with as indistinguishable questing pseudopodia from some vast amorphous protoplasm of Stalinism and Correct Thought. Hence, for purely self-interested reasons, I’d like to see Brad be his own best possible self, so that he can criticize my actual positions, and make me think them through, rather than confusing me for a votary of the Group of Seventeen as he seems to be doing …

{ 167 comments }

1

Robert Waldmann 04.25.16 at 5:23 pm

Your post is admirably courteous in tone. I admire but am not able to emulate.

First I think I could make the polite debate between you and Brad even more polite. I didn’t get the impression Brad claimed you are a Marxist. I think he suggested that Doug Henwood is a Marxist. Your quoted post explained an objection to left neo-liberals and said it had some merit. I think that perhaps you and Brad can agree that you see some merit in Marx’s arguments (in any case he sure does).

However, I have some rude things to say about your writing as quoted by Brad. I don’t like the word “theories”. I don’t think that anyone including left neo-liberals needs a theory of change in order to achieve change. Trees have no theory of photosynthesis, but they grow all the same. You can’t really be surprised if an appeal to theory in the context of politics made Brad think of Marx. In any case, your interpretation of Henwood’s argument appears to be that there is no convincing explanation of how the policies developed by Yglesias at all will actually improve the world, since they won’t be implemented.

” This means that vaguely-leftish versions of neo-liberalism often have weak theories of politics, and in particular of the politics of collective action. I see Doug and others as arguing that successful political change requires large scale organized collective action”

OK now I create straw Doug Henwood who argues that Yglesias (and Brad, C and D Romer, Ezra Klein, Larry Summers, David Cutler, and Jon Gruber) are off in their ivory towers designing policies which will never be implemented because they haven’t thought enough about class struggle. The problem with Straw Henwood is too obvious even for a comment on a blog. The neo-liberals I listed have achieved political change (even though I resisted the temptation to include the neoliberal wonks named Barack Obama and Bill Clinton on my list).

It seems to me that your current post is an excellent critique of your earlier post. You explain Summers’s theory of change — he says the key is to get ahead by getting along and influence powerful people. I hazard the guess that this wasn’t his first approach (OK I hazard dozens of vivid memories). Technocrats have power (by the definition of the suffice ‘crat). They exist. Politicians seek their advice. This is the way political change has occurred (lest I seem to celebratory I think the most influential interaction of an intellectual of sorts and a politician who achieved change occurred when Arthur Laffer sketched a curve on a napkin).

Yglesias clearly has a plan. He argues that good policies are good politics — that voters re-elect incumbents if things are going well even if the voters opposed incumbents policies when they were implemented. So, he argues, listen to technocrats — we will tell you how to win re-election — oh and also serve the people which, of course, is the reason you got into politics in the first place. Look what happened to B Clinton when he listened to Robert Rubin and raised taxes on Robert Rubin et al.

Now I don’t know if there is any theory of history such that this plan is anything other than a pipe dream. But I do know that it works. Klein at least, hob nobs with the President of the United States. That president has achieved a lot (even if much less than one might hope). I’d say actual change trumps theories of change.

Hmm is Robert Waldmann to Brad DeLong as Brad DeLong is to Larry Summers ? Maybe.

2

Chris Mealy 04.25.16 at 5:35 pm

I always let BdL’s attacks on the left slide because they are nothing compared to the way he talks about the right, but obviously Henry deserves as much consideration as somebody like, oh, Tyler Cowen.

When I read conservatives I’m thinking, “Why exactly is this wrong?” It’s good exercise and it sharpens your mind, but I swore it off soon after reading Corey Robin’s book, because the answer almost always is, “Because conservatives think some people are better than others, and I don’t.” I’m sure that’s not exactly what Corey intended, but I’ve paid my dues reading right-wingers and life is too short. However, when I read Jacobin (I subscribe, you should too) or whatever else is to my left (not that there’s much to my left anymore, oh wait, David Graeber), the question is, “Am I wrong?” That’s a question I’m comfortable with, but not everybody is.

3

RNB 04.25.16 at 5:52 pm

I don’t read this as being primarily about Henry Farrell but about what Gerald Friedman (who I think Brad DeLong said was a former teacher) and JW Mason are suggesting Sanders’ fiscal proposals would yield.

4

Henry 04.25.16 at 5:56 pm

Robert – I actually did think about writing a bit along the lines of “A more astute counter-argument against my criticism of left-neo-liberalism is that in fact Larry Summers has a plan, and insider politics can sometimes work,” maybe referring back to and building on some of the arguments in this post. But then decided that I didn’t want to reopen the wars, and/or look like I was trying to have my cake and eat it all too, so left most of it out (a hint survives). I do disagree with your suggestion that you don’t need a theory of politics as politics grows like a tree – the alternative you articulate seems to me to be a deliberate strategy on the part of people like Summers, and perhaps a defensible one. I think the next question though would be – have the underlying rules of politics changed so that insider politics no longer work as they did? The kind of insider politics referenced presumably flourishes best in the context of a ‘sensible bipartisan consensus’ (scare-quotes deliberate) which doesn’t really exist at the moment. And on the Yglesias theory – maybe – but one could also do a “Sir, I refute you thus” back to him and link to this. I’m a democratic cautious optimist – which means that I think that voters will do a better job most of the time in making choices that meet their interests than obvious alternatives – but my optimism is based on the presumption that there’s a semi-functional party system, which presumption doesn’t apply in the US at the moment.

5

RNB 04.25.16 at 5:56 pm

The irony is that those who believe in the self-emancipation of a Universal Class being in the Universal interest probably don’t want people to have hope in the ability of left Keynesian technocrats to deliver astounding growth on a sustained basis; this would obviate the need for the self-emancipation of said class whose fate could safely be put in the hands of technocrats, albeit lefter than neo-liberal ones.

6

Paul Reber 04.25.16 at 5:57 pm

Curiously, I read both blogs daily and didn’t see the BdL post as an attack at all. Brad just published a book arguing that all good economic policies emerge from practical decision making and never ideology. I read the Henry reference as a good counter-point that it takes collective action to move politics, which is a problem for his approach because it doesn’t build towards collective action.

I read both as agreeing that bad things happen if you only focus on the Movement, however, and forget about the policies you are trying to accomplish.

Henry’s elegant description of the Summers/Warren exchange also points out nicely that there is sort of an implicit Movement even within ‘technocratic neoliberalism’ probably for both better and worse. Better because it raises the possibility of passing good policy, but worse in that it already shows the hallmarks of Movement-ism (don’t criticize other insiders).

I’m probably missing something but I see a lot more agreement than argument here to a very difficult problem without an obvious solution.

7

politicalfootball 04.25.16 at 5:58 pm

The standard — even clichéed — critique of left-leaning neoliberalism is that it fails to take into account political economy. (Yes, that critique goes, maybe we could structure the economy to favor the already-wealthy, then redistribute the windfall, but politics being what they are, this is never going to happen.)

Henry says this explicitly in the post DeLong cites:

To be more precise – Neo-liberals tend to favor a combination of market mechanisms and technocratic solutions to solve social problems. But these kinds of solutions tend to discount politics – and in particular political collective action, which requires strong collective actors such as trade unions.

There are answers to this critique, but DeLong doesn’t seem to have noticed its existence. He sometimes reminds me of libertarians who deal with the issue of collective action problems by failing to understand that collective action problems exist.

8

Henry 04.25.16 at 6:01 pm

RNB – that’s certainly what the Noah Smith post that he’s referring to talks about, but the extensive quotation from an old post of mine, and bits about a Universal Class etc are picking up a particular beef with me from long ago.

9

William Timberman 04.25.16 at 6:44 pm

People who hobnob with the President are more influential than those who don’t? More influential in the narrow sense, perhaps, but in a broader sense, I’m not so sure that all the peacocking and scuffling really matters. The danger is always, as the Summers quote about insiders and outsiders suggests, that the savvy courtier will find himself being displaced by the scheming courtesan, and I suspect that in the course of recent history, Summers himself has at times been scarcely sure himself which of the two roles he’s been playing.

Maybe, given the imploded politics of the present, this is all that the best and brightest can think to do with themselves, lest they wake to the sound of breaking glass in their own neighborhoods, but if they wanted to, I think that they could do a whole lot better. We wouldn’t necessarily know their names, then, of course, but….

10

Francis 04.25.16 at 7:10 pm

Paul at 6: I think that the idea that good economic policies are non-ideological is just absurd. What makes a policy good? Are we seeking the largest possible GDP, or does distribution matter? Do we care at all about the impacts of our policies outside our borders? Should we maximize wealth now, even if it comes at a terrible price to future generations? What is the appropriate distribution of effective taxation?

I submit that these questions can only be answered in reference to some underlying ideology. Or, as the climate change folks argue, everybody has a model; some people just refuse to admit it.

11

Dwight Cramer 04.25.16 at 7:13 pm

Too much inside baseball here. But if you dig deep enough and remember your Gramsci, I think it’s understandable. Only from outside the dialectic, of course.

12

engels 04.25.16 at 7:24 pm

good intellectuals (or intellectuals, like me, who would like to be good, or anyway better) want brilliant opponents, who can show them the weaknesses in their own positions and hence force them to improve them

Ime they tend to want this in roughly the same sense that capitalists ‘want’ competitive markets (present company excepted of course)

13

Ronan(rf) 04.25.16 at 7:27 pm

The problem with not having a broad based political movement on your side , imo, is the problem you see now. Two of the technocrats favourite policies (trade and immigration ) are challenged by left and right (plausibly shifting preferences within the major parties), which means the technocrats ability to influence policy positively (by their perspective) has also shifted.
Throughout Europe you have the rise of similar movements, turning against globalisation, European integration and immigration. All favoured policies of global technocrats (and, more or less, me)
Now, a little parochially, shift the emphasis to Ireland, where there has been a broad based left part (Sinn Fein) which has picked up those dissatisfied, angry voters , and has channelled that anger against “the elite” , policy makers, “the establishment”, rather than immigrants or hated outgroups. There are other reasons specific to Ireland’s political economy and demography why some topics became salient and others not, but the basic truth still stands, you(technocrats) will get populism , at specific moments, whether you want it or not. Do you want populists you can work with (who enable you to implement good policies) or trump.

How does this apply to the Nordic countries though? Which are, afaict, the closest thing to technicalities we have, and get the best policy outcome?

14

RNB 04.25.16 at 7:42 pm

About DeLong, one thing I would emulate his willingness to mark his beliefs to market; he is quite self-critical about his previous beliefs, more so than anyone else I can think of on the internets
Check on DeLong’s attacks on Harvey (who feared inflationary consequences of post-crisis stabilization policy; wrongly as it turns out), Chomsky and now going back even farther Paul Sweezy whom he dismisses as a Stalinist.

But the thing about Sweezy–who spoke of a theory of stagnation rooted in the growing power of monopoly, the consequent rise in profits despite anemic net investment,and the political obstacles to full-employment Keynesianism–is that Krugman and even Summers sound like they are riffing off of that close friend of Schumpeter’s at times.

Myself, I always been more the FROP guy than the monopoly or underconsumptionist theorist.

15

engels 04.25.16 at 7:58 pm

It’s a long time since I’ve paid much attention to Delong but what used to annoy me want his politics (which iirc are in the same ball park as Krugman’s) but the gratuitous abusiveness of his drive-bys on Sweezy, Chomsky, Harvey, whoever-was-lefty-of-the-week. Iirc these were of a different mind from his attacks on Chris and Henry whom he tendee to treat as fellow, if errant, VSPs.

IMO this kind of red-baiting / libsplaining isn’t unique to Delong – it’s in the DNA of American dudes of a certain generation and I’ve always felt a special admiration cut those (eg. – for all his faults – Krugman) that manage to avoid it.

16

Jim Harrison 04.25.16 at 8:24 pm

Before the universal class was supposed to be the proles, it was supposed to be bureaucrats. The professionals who supervise so much of the world may not think of themselves as constituting a Movement, but maybe they’re just obeying the First Law of Fight Club or have fallen into the elementary mistake of thinking that vanilla isn’t a flavor. I’m not proposing that Brad is secretly a member of an international neoliberal conspiracy, but he does get a might touchy when anybody intimates that he has an ideology and that’s usually a reliable spoor of some sort of movement. His over-the-top outrage at David Grabber is also telling. There are surely plenty of criticisms to make of that lad, but if a fragment of a single peanut makes you swell up that badly, you’re a kid with a serious allergy.

17

Lord 04.25.16 at 8:58 pm

Is it just me that interprets “criticizing insiders” as personalizing attacks rather than debating policy?

18

Bill Murray 04.25.16 at 10:00 pm

engels @ 16 — DeLong was also a huge Tyler Cowen fluffer back in the day, and was very good at personal abuse like every time someone criticized one of his pro-globalization posts, he would respond by asking why the criticizer hated the Chinese.

19

William Berry 04.25.16 at 10:15 pm

I am struck by Robert Waldmann’s grotesque analogy.

A tree doesn’t just grow; its growth is governed by constraints that are narrower than those of any theory, and that is the set of epigenetic processes that are mediated by the complex interactions of gene expression and the influences of a very particular environment.

And there is no such thing as a political movement without doctrinal discipline (i.e., theory) of some kind.

Trees and political movements are surprisingly similar.

(I haven’t yet closely read the whole thread, which I will now proceed to do. If someone else has made the same or a similar point, I apologize.)

20

T 04.25.16 at 10:39 pm

What always struck me odd about DeLong’s alleged technocratic, non-ideological view was his former sympathy toward the role of the financial sector. Several of his admirable mea culpa concerned his wrong-headed belief that finance was lowering risk, diversifying risk and effectively matching long-term lenders with short-term borrowers before the Great Recession. That belief was not model based. As everyone in closed-economy macro conceded, none of their models had a financial sector, certainly nothing to capture the behavior of the banks and bankers at the heart of the recession or the effects of a banking collapse on the real economy. Ex post, Summers talked about the “siloing” of the profession as an explanation of the failure of macroeconomics. So how were DeLong’s per-recession views on banking formed by anything other than ideology?

With Respect to Waldman’s “Technocrats have power (by the definition of the suffice ‘crat). They exist. Politicians seek their advice. This is the way political change has occurred…”, I think you can make a very strong argument that he has the direction of causation backwards a lot of the time. The whole right-wing technocrat apparatus is constructed to supply justification for predetermined political positions. To say it gently, the neo-liberals have not been immune.

21

Rich Puchalsky 04.25.16 at 11:13 pm

I once argued with DeLong in this thread about the radical abolitionists, and I don’t think it’s red-baiting so much as he just doesn’t seem to understand the mindset of radicals. I think that thread’s well worth re-reading, if anyone cares.

22

LFC 04.26.16 at 12:36 am

R. Puchalsky @22 — That was a good thread; I’d largely forgotten it. (Might re-read it properly at some point; too zonked right now.)

23

Mike Furlan 04.26.16 at 12:55 am

I would not have believed Brad was a “red baiter” until recently. Found him promoting a member of an Extremist Neo-Confederate group on twitter. He blocked me when I pointed out this association. So yes, there is a right wing kooky side to him.

24

Rich Puchalsky 04.26.16 at 1:06 am

An argument about radical abolitionists has a lot of advantages from a contemporary standpoint: everyone pretty much agrees that their cause was right, so only their methods and forms of belief are called into question, and they still have a useful number of similarities with present-day radicals.

25

T 04.26.16 at 1:13 am

DeLong’s series of Grauber posts were a bit over the top.

26

Chris G 04.26.16 at 1:29 am

> The last time that Brad attributed that claim to me, I took some pains to politely tell him that he was mistaken and to explain what I in fact believed. It’s rather puzzling that he is still suggesting that I hold these views after I … explained that I did not and indeed after I explicitly and publicly disavowed the position that he claimed I held.

For whatever reason that’s one of his schticks. (If I recall correctly he’s also had a go or two with Chris Bertram.) That’s also why I stopped paying attention to him.

27

js. 04.26.16 at 2:04 am

That Brad DeLong piece is seven disasters rolled into one. (He’s not always this bad, no?) So much to pick from! But one thing that struck me was this:

People should say that policies are good if they tend to do good things–to make people freer and richer.

Yikes! Leave aside the blindingly obvious counterexample for one second. I don’t think one could defend NEA funding on these grounds and maintain intellectual honestly. My most charitable reading here is that he doesn’t understand how em-dashes work (I realize that’s not actually an em-dash, and given the CT formatting gnome, I suspect it’ll show up as an en-dash—what it is is two hyphens stuck together—but the thing BdL is aiming for is an em-dash, obviously).

28

js. 04.26.16 at 2:05 am

Gah! “…maintain intellectual honesty”.

29

ZM 04.26.16 at 2:28 am

From the OP:

“Consider Larry Summers’ famous advice to Elizabeth Warren that she could either be

“an insider or … an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders. I had been warned.”

Summers’ advice here displays just the politically opportunistic approach to truth telling that Brad seems to worry about on the left. “

This reminds me a bit of something our Shire Council said here a while ago. I can’t recall exactly who said it but the Council was running a Sustainability Round Table where people could discuss sustainability issues quarterly at the golf club.

What they said was the top-down and bottom up ways of creating change were outdated and in the future it will be an “inside-out” process where we are all at the table.

The insider / outsider perspective is really based on a top down model of thinking I think, which is bit bureaucratic, whereas the inside-out model is more participatory.

I am pretty sure this inside-out idea is taken from recent business management concepts about encouraging performance at work.

Chris G,

OT but your blog post about your kids is hilarious, it made me laugh.

30

Tabasco 04.26.16 at 2:46 am

Outsiders can say whatever they want. But people on the inside don’t listen to them.

That is not always true. In the mid 70s, in Great Britain, the Institute of Economic Affairs, who basically invented Thatcherism as a political and policy manifesto, were as outside as it gets but were listened to by Tory politician Keith Joseph. And then Thatcher listened to Joseph.

If you’re the right outsider at the right time, it’s an advantage to be an outsider, because you are not burdened with being a failed insider. But it doesn’t happen very often.

31

Gabriel 04.26.16 at 3:12 am

I, too, was disappointed in DeLong’s red-baiting. In its defense(?), it is far, far preferable to Krugman’s recent race-baiting in favor of an oligarch, but it seems to be the season for the liberals to snarl a bit at the upstarts to the left who won’t get with the technocratic program.

(Was going to write ‘show their true colors’. I’m still not certain the change was for the best.)

32

bruce wilder 04.26.16 at 4:07 am

There are several ways in which left neoliberalism depends on both cultivating a symbiosis with the libertarian right as the folks with they agree respectfully to disagree, and on maintaining a delegitimizing hostility toward alternative varieties of leftist politics. I won’t even try to enumerate them, but I think the deranged quality of Brad’s rant and its emphasis on moralizing insults of the “I try to be ethically superior to what I am accusing others of” variety indicate both that this is a boundary policing issue and also a potential existential threat to Brad’s political identity/place.

I wonder if there is any living political view or movement or “movement” to Brad’s left that he could respect. And such a respectable chimera emerge, could left neoliberalism survive the emergence.

33

david 04.26.16 at 4:36 am

he seems to tolerate analytical Marxists and post-Keynesians, at least when the p-Ks are not going on about the economics-is-not-a-science thing

but, yes, only people in the analytic tradition. Confabulating (say) capital-as-machines and capital-as-power deserves only the most sneering contempt. And political economy is to operate in a kind of “presuppositions of Harvey Road” space: policy is, and should be, formed by rational discussion of abstractions between social elites

34

david 04.26.16 at 4:54 am

take, e.g., BDL’s latest update

It is bad economics and ultimately bad politics in the long run to lie to your voters about what you believe your policies will accomplish.

Bad economics? Well, sure. But bad politics? Was the Thirty Glorious Years founded upon a social-democratic consensus, at least anywhere outside of Benelux?

35

reason 04.26.16 at 8:11 am

Chris Mealy @2
“because the answer almost always is, “Because conservatives think some people are better than others, and I don’t.” “

Did you really mean that?

I think some people are better than others, but I the difference is that I don’t think
a. that explains the differences in power and influence that exist in the world
b. that it justifies treating people with more or less dignity.

That is surely not the same thing as what you are saying (and I don’t believe it is what Corey is saying either).

36

reason 04.26.16 at 8:24 am

I think there seems to be a bit of an understanding problem here because of the labels “left” and “right”. The division as say Brad Delong and Paul Krugman see it, is between reality based and fantasy based politics, not left and right. They want to be able to have fact based discussions and see some on the left as undermining that possibility. It is not a question of “where do we want to go” it is more of a question about “how should politics work”. And sure, it is only natural that they want their expertise to be respected. They would be much more comfortable if the opposition was Bernanke and Bartlett. They think US politics has gone mad.

37

Soullite 04.26.16 at 9:20 am

This thread, and the people in it, are the reason why a lot of working class people will never support the Democratic party. You can invent phantoms of racism to justify it. You can call people stupid. But it’s pretty clear that most of you are just inventing rationalizations for the complete and utter abandonment by the Democratic party of any economic policy that might hurt the donor class.

I don’t believe that even half of you believe the things you’ve written. The people who aren’t just paid by someone to spew this shit on the internet, are neoliberal ideologues trying to blow smoke up everyone’s ass.

This is why the liberal blogosphere is dying. Nobody under 35 buys the hot load of horseshit you’re selling. Be the party of Ezra Klein and Matt Yglesias. See where that gets you.

38

reason 04.26.16 at 9:48 am

Soullite
“But it’s pretty clear that most of you are just inventing rationalizations for the complete and utter abandonment by the Democratic party of any economic policy that might hurt the donor class.”

You mean like tax increases and environmental regulation?

39

Rich Puchalsky 04.26.16 at 10:00 am

BW: “I wonder if there is any living political view or movement or “movement” to Brad’s left that he could respect.”

Strike the “living” part of that, since (e.g.) the abolitionist movement is not a living movement. Social change often requires people who just don’t respect technocratic values and don’t have any of the technocratic virtues.

Since those people have an awfully hit-or-miss approach (by technocratic standards) it’s supposed to be the implicit job of technocrats to keep society functioning well enough so that the radicals aren’t necessary. And this the technocrats have been signally failing to do.

40

JoB 04.26.16 at 10:05 am

“They think US politics has gone mad.”, they would seem to have the facts on their side.

41

Robert 04.26.16 at 10:06 am

RNB @3: “I … read this as being … about what Gerald Friedman (who I think Brad DeLong said was a former teacher) and JW Mason are suggesting Sanders’ fiscal proposals would yield.”

I don’t. I read this as about what Noah Smith says Gerald Friedman and JW Mason are suggesting. And Paul Krugman is doing the same. It is a game of telephone.

It seems silly to me to suggest you can talk about means without discussing ends and their priorities.

42

Chris G 04.26.16 at 10:13 am

ZM @ 30: Thanks. They make me laugh too.

43

ccc 04.26.16 at 10:20 am

Brad DeLongGrudge!

I suspect some of his weird, grudgy red panics are in part signalling schticks. “Look at middle me, axing down madness both left and right”.

44

Robert Waldmann 04.26.16 at 11:16 am

I wonder whether commenters in this thread are talking about the Brad DeLong I know.

What’s this about disagreeing “respectfully” with libertarians ? Brad tends to say they are insane idiots (including the ones with Nobel Memorial Prizes in economics).

The outrage at Friedman and Mason follows from their conflating C Romer and R Lucas.

Friedman wrote “liberal economists have virtually abandoned Keynesian economics.. ” This is utterly absurd completely wrong nonsense. Liberal economists have recognized that Keynes has a lot to teach us. Krugman noticed decades ago, others caught on more slowly. The fact is that Krugman, DeLong, C Romer and L Summers are effectively paleo Keynesians. Their approach is very similar to that attempted by Friedman. However, the get the arithmetic right. Friedman’s assertions
http://ineteconomics.org/ideas-papers/blog/why-liberal-economists-dish-out-despair
are nonsense which has to offend all of the influential left of center Keynesian economists who criticized his effort.

This has nothing to do with left and right or theories of change. One can believe that anything short of a dictatorship of the proletariate is a red herring and distraction but not come up with insane idea that C Romer isn’t Keynesian.

Many commenters here equate harsh criticism of Friedman with rejection of anything to the left of Clinton. Have you read what the guy actually wrote ? Are you sure that people aren’t criticizing him because all sensible assessments of his contributions are critical ?

On the other hand, what the hell did he do to deserve such a chorus of criticism ? He isn’t all that important. It is hard to say anything nice about his forecasts or his contribution to the debate about them, but it would be nicer to write nothing at all. I have been trying (I have erased several comments typed in this box).

Having gone so far, I will add I am very disappointed by the quality of this comment thread. Commenters seem to be discussing a stereotype left neo-liberal wannabe technocrat and naming this figure “DeLong” and discussing a stereotype leftist who thinks there is something to the idea of workers acting as a class (that would be the real live actual Brad DeLong). The actual words written by actual people are not often quoted in these comments. If you want to say that someone writes something or says something or seems to think something, shouldn’t you present evidence ?

On Brad’s alleged respectful disagreement with libertarians.
I googled lucas site:Delong.typepad.com and get

“Robert Lucas provides an annoying defense of his brand of economics”
“Robert Lucas’s rejection of the very idea of microfoundations:”
“”Huh!?”–No, Department of “WTF!?!?!?!?”: Robert Lucas …”
Here he admits that Lucas is even crazier than he though http://delong.typepad.com/sdj/2011/12/delong-smackdown-watch-what-does-robert-lucas-believe-edition.html
What Planet Does He Live on? Robert Lucas on Mortgages …
Yet More Corruption at the University of Chicago…

now Prescott

Do Chicago Economics Nobel-Prize Winners Live in the Consensus Reality?

“Prescott says nutty things–very nutty things, hugely nutty things, completely nutty things–about what is supposed to be the core area of his expert knowledge on a regular basis. “

you can accuse Brad DeLong of many things, but respectfully disagreeing with libertarians isn’t one of them.

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Robert Waldmann 04.26.16 at 11:26 am

Oh and Brad DeLong overlooks political economy, except here
http://www.bradford-delong.com/2016/04/the-phrase-political-economy.html

Why was he interested in the upturn after 1950.

Brad is the chair of the Berkely Political Economy Group Major (odd job for someone who overlooks political economy). Hmm what does he think that means ?

“Berkeley Political Economy “Concentrations”
From: Brad DeLong, Chair, Political Economy Group Major
To: Current and Future Political Economy Majors and Other Interested Parties
Subject: Political Economy Major “Concentrations”
Date: June 8, 2008

The concentration requirement in Berkeley’s Political Economy major is meant to force students to deepen their understanding of the nature of the relationship between politics and economics as it relates to a particular issue. “

here is Paul Krugman ignoring political economy

I googled Krugman Labour unions (google was smart enough to change it to US spelling)

“Once upon a time, back when America had a strong middle class, it also had a strong union movement.

These two facts were connected. Unions negotiated good wages and benefits for their workers, gains that often ended up being matched even by nonunion employers. They also provided an important counterbalance to the political influence of corporations and the economic elite.”

Do you people read what the people you criticize have written ?

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Rich Puchalsky 04.26.16 at 11:47 am

Robert Waldmann: “Commenters seem to be discussing a stereotype left neo-liberal wannabe technocrat and naming this figure “DeLong” “

Since I’m included in the set “commenters”, I’ve been pointing to an actual argument I had with DeLong. I think that it’s permissible to represent him with his own words!

Look at his treatment of e.g. Frederick Douglass in that thread. It’s not “red-baiting”: Douglass wasn’t a red.

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engels 04.26.16 at 11:50 am

Iirc in the beginning of the blog era disagreeing productively with libertarians was CT’s thing – I don’t think BDL went in for it. As I said, I think the digital McCarthyism or whatever it is is common among older Americans generally and this blog and comments section is hardly a stranger to it. I agree this kind of pile on is an ugly spectacle and I probably shouldn’t have commented.

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Robert Waldmann 04.26.16 at 12:02 pm

Sorry Rich Puchalsky. I should at the least have written “some commenters” (I am a commenter up thread too and wasn’t referring to myself). But really, I should have named and quoted the few commenters I was criticizing.

I actually haven’t read what Brad wrote on Douglas or your comments on it (I will soon). I shouldn’t have carelessly insinuated that your criticisms of Brad on Douglas (which I haven’t read) are careless criticisms of something you haven’t read.

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Rich Puchalsky 04.26.16 at 12:12 pm

to make a long thread shorter at the risk of misrepresentation, BDL seemed to think that the later Douglass who supported Lincoln was smarter than the earlier Douglass who opposed Lincoln. Aside from the obvious problems with judging people in the past for not having perfect foresight, this ignores how the earlier opposition of people like Douglass was necessary in order to create the Lincoln that we know of.

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Robert Waldmann 04.26.16 at 12:43 pm

Sorry Rich Puchalsky. I should at the least have written “some commenters” (I am a commenter up thread too and wasn’t referring to myself). But really, I should have named and quoted the few commenters I was criticizing.

I actually haven’t read what Brad wrote on Douglas or your comments on it (I will soon). I shouldn’t have carelessly insinuated that your criticisms of Brad on Douglas (which I haven’t read) are careless criticisms of something you haven’t read.

@political football uh Brad has noticed the problem. He writes often about political movements and political economy.

T on Brad on his past sympathies for high finance. First as far as I can tell Brad has no respect at all for current mainstream macro models (by which I mean new Keynesian DSGE models) his arguments are basically never model based. His sympathy for big banks was based on the Q (market value divided by book value) of firms which appeared in a figure illustrating JP Morgan’s role in the US economy (which figure looked like a octopus). It was pure empiricism. He was also impressed by the equity premium (which provides a very strong case for partial public ownership of the means of production as explained by John Quiggin who has convinced Brad and me). But always data and words and never formal models or anything related to economic theory.

Oh and what about his now faded crush on Robert Rubin ? well it might have had something to do with Rubin’s enthusiasm for a Tobin tax. Rubin was relatively eager to regulate finance.

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Ronan(rf) 04.26.16 at 12:55 pm

Well, we have 5 clear claims arguing how technocrats exert change:

(1) The neo-liberals I listed have achieved political change (even though I resisted the temptation to include the neoliberal wonks named Barack Obama and Bill Clinton on my list).

(2) Technocrats have power (by the definition of the suffice ‘crat). They exist. Politicians seek their advice. This is the way political change has occurred

(3) I think the most influential interaction of an intellectual of sorts and a politician who achieved change occurred when Arthur Laffer sketched a curve on a napkin).

(4) Yglesias clearly has a plan. He argues that good policies are good politics — that voters re-elect incumbents if things are going well even if the voters opposed incumbents policies when they were implemented. So, he argues, listen to technocrats — we will tell you how to win re-election — oh and also serve the people which, of course, is the reason you got into politics in the first place.

(5) Now I don’t know if there is any theory of history such that this plan is anything other than a pipe dream. But I do know that it works.

(3) seems to me to be at least arguable. Did laffer influence policy or was he used as a justification for a policy change ?
(4) seems to me to be wrong, or at least half baked. Voters respect incumbents if things are going well needs to be supported by an argument more than “listen to technocrats — we will tell you how to win re-election “
(1) and (5) are probably true at a trivial level. Electing democratic presidents get better policies from a left perspective is certainly true. The question is (a) are these policies enough and how do you shift presidential and party preferences most effectively , and (b) why are “technocrats” seen as being the important causal factor here.
(2) needs a definition of technocrat , some sort of argument about how much power they have, how/when/why they exert power, and some sort of evidence-based comparison to other options (ie outlined in the Op) for bringing about political change.

Is this mostly speculation and anecdotes or is there a sophisticated body of research showing the mechanisms and contexts technocrats use to bring political change, what kind of change they lead to, so on and so forth ?

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Lee A. Arnold 04.26.16 at 1:29 pm

Not sure that I agree with either side on this one.

Economists are in search of an analytical science to describe and predict a synthetic N-compartment complex system. A methodological impossibility.

Having themselves ascertained that this method is impossible (although somewhat after the goading of their internet commenters, over the last 15 years or so), economists now espouse a pluralistic methodology of using the most apt “model” for each circumstance.

What they mean by “model” is a set of mathematical equations, used in hope of precision. Things like “intuition pumping” and “self-awareness” are meant to ensue.

Indeed, some of their occasionally-applied mathematical models appear to contain symbols that stand for things like predilections, attitudes, hopes, desires, spirits and vapors.

Whether this is science or art, is up to you. YKMV (your kilometerage may vary).

As for me, the whole enterprise has the distinct odor of Western medieval scholasticism.

As if this were not bad enough, economists are also trapped in a public position.

What the prominent (or perhaps it’s “publicized”) economists say, matters to society’s movers and shakers. Not because it is either true or false. But because these opinions may accrete, and then become a part of the social rhetoric, and then change how people vote. The movers and shakers know that, in a democracy of any sort, the rhetoric rules the day, and truth takes a very distant second place.

Thus, anything that economists say, automatically marks an ideological position to be derided or affirmed.

Some of the cagier economists know this, and don’t mind espousing wafty clouds. It is difficult to read a book such as “First Principles” (not by eternal Origen, but by transient Taylor), without exclaiming, “Wholly ideology, Batman!”

As for the more responsible economists? We have no idea WHEN to believe them. In both the ’70s stagflation and the ’07 crash, they were caught with their pantaloons down near their slippers.

We now read that economists had plenty of historical evidence and theories that financial deregulation leads to asset-masturbation and disaster. We now read that economists never really bought into supply-side Thatcher-Reaganism.

How are economists any different than pure political ideologists of left and right? The main distinction appears to be that left and right are particularly bad about learning the technical meanings of the terms in economics. (In fact, they really don’t want to learn anything they wouldn’t already like to learn.) Thereon hangs a frequently heard economists’ hook: arguing with political ideologists about the technical meanings of the terms; and now, arguing about who believed what, when. And so on.

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Lee A. Arnold 04.26.16 at 1:31 pm

Some questions. Do I understand this correctly?

The technocrats believe that potential GDP is going to stay far below its pre-2008 trend line?

And the reason that they believe that potential GDP is going to stay far below its pre-2008 trend line, is because the labor market is tightening and core inflation is rising?

But wait a minute. Couldn’t the labor market tighten and core inflation rise, because some people who want jobs have stopped looking for jobs (the 24-54 employment population ratio is still down) — particularly those who took retirement early, but would like some additional income after getting their pensions trashed — and because rents are likely to rise in a situation where residential construction is still way below the last peak?

So then, let’s look at the employment population ratio for 16-19 year olds. It’s even worse than 24-54: https://research.stlouisfed.org/fred2/series/LNS12300012 Why wouldn’t massive programs of residential construction and repair, of solar energy installation, of caregiving for the elderly, etc. pull less-educated young men and women in off the street, and get them employed right away? In their own neighborhoods?

You don’t think we could get 3.5% growth for several years? You are going with the “standard multiplier”, here?

Yet, the technocrats still believe they can explain to politicians and voters why a more modest fiscal stimulus is desirable, because Clintonian mediocrity is all we can achieve? Because they can convince voters that we can waddle along and pay off the extra debt handily, at 2% growth?

Whatever happened to all the preferences and desires lurking in these equations?

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engels 04.26.16 at 1:37 pm

Progressive American punditry is like pretty much everything else in America from high school on up: a rigid caste system held together by brutal violence and mutual hatred.

At the top you’ve got the VSP’s – people like Thomas Friedman – the Brahmins of American culture. They’re neoliberals, have serious money and connections on Capitol Hill. They can hippie-punch anyone they want, but usually don’t bother.

Next rung down are VEPs (very educated people), Krugman, Delong, academic bloggers, high-ranking professionals with an interest in policy, etc who tend to be left-liberals/social democrats/Keyseans as well as white, male and upper-middle-class. They get hippie-punched by the VSPs but are allowed to hippie-punch the VAPs (see below).

Below that are the VAPs (very angry people), white American men in their 50s or so (often possess own homes and advanced degrees) who instinctively distrust and fear the Left but feel furious and impotent with the direction the country is taking. Account for 93% of all blog comments and tend to be populists (left-liberals with an anti-elitist twist). They get hippie-punched by the VSPs and VAPs but they get to red-bait and hippie-punch the hoi polloi.

At the bottom is the hoi polloii: working class people, poor people, women, people of colour, non-Americans, people under the age of 40, people who didn’t go to grad school, non-voters, anti-capitalists, socialists, Marxists, anarchists, Stalinists, Trotskyists, pacifists, people who don’t have an internet connection, Latin-Americans, Europeans, people who don’t know who Ezra Klein is, … , who can get red-baited and hippie-punched by everyone in America but mostly by the VAPs mainly because they tend to be angrier and have more time on their hands

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awy 04.26.16 at 1:43 pm

real talk, at some point it’s necessary for the left to look at the soundness of policy. much of sanders policy platform is simply counterproductive or very negative in the short term for poor people. delong’s point is that reflexive defense of movement based on ideological identification is sometimes counterproductive, and these situations are when reality contradicts the practice framing factual beliefs of the movement.

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Rich Puchalsky 04.26.16 at 2:23 pm

“real talk, at some point it’s necessary for the left to look at the soundness of policy.”

Real talk: large social changes are hardly ever driven by people who look at the soundness of policy.

If you don’t want radicals who could care less about soundness of policy changing your society, you’d better have actually sound policies. You don’t? All right then. Don’t complain about the radicals when it was your failure that caused the problem, not their success.

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T 04.26.16 at 2:28 pm

@55
Interesting take.

But it isn’t just the progressives. All the smart guys were for the free flow of capital and goods; laxer antitrust enforcement; and deregulation of finance. Your VAPs feel played by the technocratic consensus. Take a look at DeLong’s mea culpas post the Great Recession — his major admissions include not understanding the effects of financial deregulation (or, in fact, how the financial system worked) and not understanding the effects of free trade agreements.

The technocratic bargain was never explained as making the Chinese richer while radically increasing inequality in the US. So either the technocratic consensus was honestly derived but wildly incorrect, or the technocrats were just the lickspittles of the .01%. Well, too harsh — it was a combination.

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engels 04.26.16 at 2:35 pm

T – thanks. I admit it probably needs a bit of refinement…

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A H 04.26.16 at 3:27 pm

The problem with Brad’s position is that it is not marked to market! How to explain the stunning success of the right in the US over the past decade. Despite declining demographics, they have majority control of all levels of the government except the presidency. How is a technocrat supposed to stop that?

Now take the great success of the Obama presidency, the ACA. It used to be the left technocratic consensus that single payer is superior (prior to Sanders supporting it…), but then why did it fail to get passed? Why would it not be better to have an ideological left movement that would actually allow something like single payer to pass?

With the coming Clinton administration there will be a real test of the left liberal technocrat ability to implement progress. If Hilary gets us into a war or strikes a grand bargain that shrinks social spending, the technocrats will have lost all credibility.

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Cranky Observer 04.26.16 at 3:46 pm

Not sure why you’re attributing neoliberals’ positions and influence to progressives, who so named themselves to have a banner other than small-l liberal (at that time reviled: since redeemed) to fight against not only the hard Radical Right/neoconservatives but also the neoliberals within their own party (with some success! given that even Asst Treasury Secretary Delong has admitted some neoliberal theories didn’t work out quite as had been expected).

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T 04.26.16 at 4:12 pm

@51RW

I apologize for missing your reply before I posted again. But now I’m a bit confused. Are you saying his views on finance were not model based or his views on macro/macro policy were not model based? If the later, that’s a real split with the likes of Krugman and Romer. What am I missing? If the former, casual empiricism regarding the equity premium and Tobin’s Q is pretty thin gruel for participating in the dismantling of financial regulations that worked pretty well since the 1930s.

And we split a bit on technocratic culpability. This was not a theoretical exercise. He vigorously continued the 1980s technocratic tradition supporting the free flow of capital/goods and the deregulation of finance that caused a not insignificant share of this mess. The repercussions were all too real for literally hundreds of millions of Americans. So now it’s back to Crips and Bloods with Lucas/Prescott? And blowing off the Left?

Well Clinton is looking like the next president. Time to put the band back together?

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david 04.26.16 at 4:23 pm

as far as successes/failures go, the Doha round died to developed-world farmer lobbies rather than alt activists; after the drama of Seattle, I don’t think anyone saw that coming

also: in between Clinton and Obama, the Bush years happened; they are what turned Slate Krugman into NYT Krugman and Dpy Asst Treasury Secretary Delong into Shrillblog Delong. This did mark the political weakness of the left-technocratic consensus, but not in any way hospitable to the radicals. The great pre-GFC battleline was supposed to be drawn over Social Security and Medicare and debt cuts, remember. And when you are rallying to defend a center-left deficit-reduction plan, the “actually, it’s about the crisis of capitalism” crowd are worse than useless.

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A H 04.26.16 at 4:32 pm

” And when you are rallying to defend a center-left deficit-reduction plan, the “actually, it’s about the crisis of capitalism” crowd are worse than useless.”

Since delong is hippie punching JW Mason, who is explicitly making a government expansion argument, this doesn’t seem to be relevant.

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RNB 04.26.16 at 5:05 pm

The problem with Marxist types like me is that we were wrong about Bush. DeLong and Krugman less so. The logic was overaccumulation of capital => idle capital in search of returns=> struggle for control of colonial outlets for export of capital coupled with speculation that would provide only a temporary source of aggregate demand = war and eventual financial crisis=capitalism in a structural crisis.

Many Marxists saw Bush’s policies as structurally imposed by a capitalism in crisis, but it turns out that much of what Bush did he did not have to do and that he was ruining capitalism or at least making it much worse than it had to be, not acting out its structural imperatives. It could still be true that we are in something of a structural crisis as for example David Kotz argues in The Rise and Fall of Neo-Liberal capitalism, but Bush’s policies are not best understood as structurally imposed. They were an optional political project as DeLong and Krugman understood.

Also DeLong and Krugman and Friedman and Mason are closer to each other than they are to the Marxist other in that they are searching for the right policy mix to make the system operate in the broad interest while respecting its individualist, private enterprise nature. That is, they are all Keynesians, not the type that really thinks history depends on a Universal Class acting towards its self-abolition, i.e. overthrow of the system that produces this class as a class.

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RNB 04.26.16 at 5:39 pm

Thinking about war in Iraq, deregulation of financial sector using the economic activity from a financial bubble as a source of aggregate demand.

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RNB 04.26.16 at 5:44 pm

Also regressive taxation and anti-labor policy to bolster otherwise declining after-tax returns on industrial investments in the US. A certain kind of Marxist would think this structurally imposed, not simply Bush’s political project. Wrong. I think I was wrong.

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RNB 04.26.16 at 5:48 pm

and weakening of anti-trust policy to allow mergers and acquisitions that would bolster profits for the surviving firms.

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Robert Waldmann 04.26.16 at 6:33 pm

@T I meant both. I think that Brad’s views on economics don’t have much to do with models. He certainly has little respect for mainstream macroeconomic models. Now he is very good at inventing and solving models, but he’s very skeptical.

I think that Brad and Krugman have very different views on models. Their academic work is very different (notably Krugman has a bit more recognition). This is sometimes explicit “First, it doesn’t come out of the models. As Brad says, the map is not the territory; but guesses about such things are, well, guesses.” Brad says the map is not the territory. Krugman says yes *but*. I think that Krugman too has changed. He obviously used to take formal models very seriously, but less so recently.

As to Romer uh which Romer ? I don’t know them very well but I think that Christine Romer is less interested in models than David Romer. Obviously they get along fine, but there other than joint work is quite different. I note that C Romer is an economic historian and Brad DeLong is an economic historian.

@Ronan Yglesias’s argument that good policy is good politics is based on the work of political scientists such as Doug Hibbs (and actually an economist named Ray Fair). The argument is that presidential vote for the candidate of the incumbent presidents party can be predicted using data on economic performance in the year of the election (for example the growth rate of real per capita personal income). The models also always include 1) is the candidate the incumbent president 2) for how long has that party had the presidency and often 3) something related to war and peace. If it is really true that economic performance is the key to re-election then the rest follows. The claim isn’t just talk — it is based on simple regressions.

This doesn’t satisfy a particular technician’s desire to be a technocrat — the technician has to convince the politician that he or she knows how to obtain good economic performance. Also the Hibbsian argument may be incorrect — its about as easy to get the result you want out of a regression with a few dozen data points as out of a purely verbal argument.

I am not entirely convinced, but it is a theory of change. It certainly is a fact that academic economists who are considered at the top of their profession by other economists, can obtain influence and even power (Bernanke, Yellen, Summers). It must be possible, because it happens.

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politicalfootball 04.26.16 at 6:34 pm

@political football uh Brad has noticed the problem. He writes often about political movements and political economy.

Well yeah, sure. His discussion of “the Movement” is itself a discussion of political economy. I never said that DeLong is unaware of political economy, just that he seemed unable to acknowledge the existence of the specific argument about political economy in relation to left-leaning neoliberalism. (Really! Read the comment again!)

So tell me: why are you and DeLong unable to even acknowledge the existence of this particular argument about political economy? How can you and he have utterly failed to notice its existence, even after having it described in clear English?

To be more precise – Neo-liberals tend to favor a combination of market mechanisms and technocratic solutions to solve social problems. But these kinds of solutions tend to discount politics – and in particular political collective action, which requires strong collective actors such as trade unions.

Where do you get DeLong’s “Movement” from anything Henry wrote? Where is DeLong’s response to Henry’s actual argument? Where is yours?

(This seems like the kind of thing that DeLong must have addressed somewhere. As I said, it’s really a standard argument — not something so exotic that he couldn’t be expected to have thought about it. And DeLong is clearly not as clueless as he makes himself out to be in this post. Does anyone have a link?)

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Ronan(rf) 04.26.16 at 6:46 pm

Thanks Robert, I’ll check those out .

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Ronan(rf) 04.26.16 at 6:51 pm

But just to add, I’m not really disputing that ” economic performance is the key to re-election ” (which I’ve heard before but will stay agnostic on)More the idea that this provides a mechanism for change from technocratic politics, or that presidents will automatically search out policy (if such a thing exists) that will provide consistent positive economic performance.

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Ronan(rf) 04.26.16 at 7:08 pm

And I’ll add one more thing then give it a rest for the day. I’ve no problem with bdl or “technocratic politics” (although I’m not really sure of the distinctions being drawn, it seems to work as a catchall term like neoliberalism at this stage ). I’m glad there are intelligent, civic minded experts like delong willing to put himself out there, and that any functioning political system needs these experts. I just don’t see how far they get in (1) pushing good policy (2) influencing politicians (3) putting important topics on the agenda.
And I don’t think he dealt with Henry’s original post in any meaningful way (personally).

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Rich Puchalsky 04.26.16 at 7:22 pm

The headline crises of our time (global warming, biodiversity loss, income inequality, etc.) have nothing to do with “positive economic performance”. In fact, economists have taken pains to define metrics for economic performance that exclude these things. If the theory is something about “economic performance is the key to re-elction” then happily you have just defined our most pressing problems out of existence, so I suppose that that’s good.

And insofar as economists have tried to address these kinds of problems (carbon taxes, tradeable pollution permits, a global tax on wealth, etc.) their solutions have overwhelmingly not been adopted in any way that meaningfully solves these problems., for reasons that I think are fairly obvious to people who study how and why political solutions are adopted. But reality does not grade on a curve. These problems do not actually go away because economists have defined them out of existence or have suggested solutions that would theoretically work if they could ever be implemented, although they can’t be implemented.

What’s the use of being an insider if being an insider does not allow you to solve important problems? If insiders can’t, their compromises are useless.

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LFC 04.26.16 at 8:22 pm

Ze K @70
bullying and provoking Russia, a country with at least 4 thousand nuclear warheads. Iraq war is a very modest ‘policy’ in comparison…

In the California Republican Senate primary of 1962, a right-wing candidate named Loyd Wright “advocated an offensive nuclear strike against the Soviet Union” (R. Perlstein, Before the Storm, p.166). He was not the only one at the time to do so, of course, but this is the example that comes to hand at the moment.

That kind of ‘policy’, had it been implemented, would have had more similarity to the invasion of Iraq in ’03 than the Obama admin’s policy toward Russia does, inasmuch as both Iraq ’03 and a hypothetical offensive nuclear strike c.1960 (or whenever) both represent instances of, not to split hairs, outright aggression.

Btw, one (admittedly minor) result of the world’s having avoided nuclear destruction during the Cold War is that we now have the opportunity to read Ze K as he trains for the gold medal in the Trolling Olympics.

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Tom 04.26.16 at 8:46 pm

I see Rubin mentioned favorably in few comments. Let’s see:

a) in the 1990s while at the Treasury he refuses to regulate over-the-counter derivatives.

b) did not oppose and maybe even advocated the repeal of Glass-Steagall.

c) after leaving the Treasury, he joins Citigroup (which had pushed for the repeal of Glass-Steagall). As a side, apparently the revolving door stinks only when Republicans go through it.

d) stays at Citigroup during the 2000s, in the midst of the financial craziness that shaped those years.

e) when stuff hits the fan, he negotiates with Obama the bail-out of the too big too fail banks. Curiously, while the government could have taken a more punitive approach toward banks (remember Krugman talking about nationalization?), nothing of the sort happens. Also unrelated, virtually nobody involved in the financial crisis goes to jail.

I would be happy to be corrected on this. But, as I see it, if Rubin is your poster child of technocracy (or left neo-liberalism), then you will have a lot work to do to support your case.

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Collin Street 04.26.16 at 8:59 pm

> when stuff hits the fan

My experience has been that the sort of prissy, over-fastidious approach to personal morality that leads people to find themselves unable to write bad words is generally associated with a prissy over-fastidious approach to political issues that concentrate more on providing pretexts by which a person might claim that their hands are clean over, you know, actually minimising harm.

I really don’t expect you to respond to this; there’s no real response you can make. It’s just something I want to convey to you that you might want to think about.

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Layman 04.26.16 at 9:04 pm

“Like I said, this administration’s ‘policy’ of bullying and provoking Russia, a country with at least 4 thousand nuclear warheads, seems to me a far more dangerous ‘policy’ than previous administration’s ‘policy’ of invading and occupying Iraq.”

Wow, ‘bullying’ Russia sounds bad! Did we beat them up for their lunch money, or was it something worse?

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bruce wilder 04.26.16 at 9:34 pm

I think it might have something to do with Western sponsorship for overthrowing the government of neighboring Ukraine and trying to draw Ukraine into the EU or NATO sphere of influence. Just a guess on my part.

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Layman 04.26.16 at 9:38 pm

If that’s what was meant, that sort of thing has been going in for decades. Doesn’t make it right, but it also doesn’t make this administration particularly egregious or extraordinary.

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T 04.26.16 at 10:15 pm

@71 RW
Too many Romers! I was referring to Paul Romer. Both PR and PK explicitly endorse model-based based approaches. PK often simple models, an approach he credits to MIT and Solow in particular. (He seems to start thinking about every issue with a stripped down model often of his own devising.) PR, well I’m sure you’ve read his “mathiness” posts where he goes after Lucas.

I’m looking for evidence that Brad took a technocratic rather than ideological approach to financial deregulation. It appears to an outsider, in an administration littered with high finance types and neo-liberal inertia, that the policies put forward would almost certainly benefit and were designed to benefit the finance industry. I’m less convinced that the technocratic effort was put forward with respect to the economic effects. It copuld be bit of “what’s good for GM is good for America.”

One might think is supported by the meas culpa of both Brad and Greenspan. (Sorry Brad.) Greenspan was shocked shocked that the finance industry would take actions that would eventually bring down the banks. Brad was shocked shocked that the sector was increasing systematic risk. Was that because it contradicted their careful analysis of how the sector really worked or ideological assumptions? This might be particularly true for a closed-economy macro guy (Brad wrote a bunch w/Larry as you are aware, he’s not just an economic historian) where the financial sector was essentially absent. Seems that is what the DSGE guys started working on furiously after 2009. Your thoughts appreciated.

Finally, I thought the Ray Fair model wasn’t working as well over the last several elections. In any case, if the model predicts victory based on the preceding year’s economic performance, that’s not necessarily a recipe for sound economic management, it’s a recipe for juicing the economy one year prior to the vote. Arguments for the independence of the monetary authorities is often based on just this reasoning.

81

bob mcmanus 04.26.16 at 10:24 pm

Oh, for just one example try googling “Russian Planes US Ship Baltic Sea” The ship was an electronics platform, for supporting invasions, just on joint exercises with Poland. Here’s Patrick Armstrong at SST. Russia is rebuilding a tank army to defend against the buildup of NATO forces in Eastern Europe. Lots and lots of American provocations everywhere.

82

The Temporary Name 04.26.16 at 10:50 pm

Oh, for just one example try googling “Russian Planes US Ship Baltic Sea” The ship was an electronics platform, for supporting invasions, just on joint exercises with Poland. Here’s Patrick Armstrong at SST. Russia is rebuilding a tank army to defend against the buildup of NATO forces in Eastern Europe. Lots and lots of American provocations everywhere.

And the US, with that ship, was going to invade the Donetsk People’s Republic, the Luhansk People’s Republic, the Pridnestrovian Moldavian Republic, the Nagorno-Karabakh Republic, the Republic of South Ossetia, or maybe the Republic of Abkhazia.

83

bob mcmanus 04.26.16 at 11:09 pm

Off topic; no more

84

Rich Puchalsky 04.26.16 at 11:25 pm

Whee let’s all go on about provocations between two nuclear-armed states who survived a whole Cold War full of provocations because both of them had nukes and so clearly neither was going to use them just because Ze K brought it up.

The argument that good policy is good politics because economic performance causes you to win elections is a bad, bad argument. It’s like running a company to boost the stock price. What’s the policy *for*? If it’s for short-term economic performance because that helps people, then OK. Then the goal of boosting performance is boosting performance, which is a little short-sighted but at least direct. If the goal of boosting performance is to win elections so that you can boost performance to win more elections, you don’t actually have a goal other than staying in office.

What about the actual problems that we have? We’re supposed to be doing something about GHG emissions within ten years. Is anyone actually leveraging their insider-dom to fix anything? Or are they, on the contrary, breaking more things because fixing problems would hurt economic performance and they might lose the next election?

85

Joseph Brenner 04.26.16 at 11:52 pm

RNB@15: Do you mean to say that at some point Delong has walked
back his attacks on Chomsky? I’ve never seen him do anything but
double-down on them myself, though he seems to have given up on
the periodic Chomsky-punching in recent years.

(Criticism of Chomsky is an interesting genre: considering the
length of time Chomsky has been writing, and the many and various
intellectual traps the left has fallen into along the way,
Chomsky has actually been remarkably level-headed all along, so
the attacks on him tend to involve exaggerating very minor
(sometimes non-existant) mistakes from decades before.)

86

Ronan(rf) 04.26.16 at 11:54 pm

Imo below is an example of the main problem with ygelsias’ argument (from.a paper by William Clark). Why would the knowledge that a decent economy in year four of your admin would help you get re-elected lead to “good policy” , rather than the below:?

“The Federal Reserve Bank behaves very differently when the White House is occupied by a Democrat than when it is occupied by a Republican. The Fed Funds Rate, the primary lever used by the Fed to manage the nation’s economy, tends to rise during Democratic administrations and fall during Republican administrations (See Figure. Note: Blue=Democratic, Red=Republican). This pattern may help explain why Republicans have controlled the White House more frequently than Democrats in recent decades. In a forthcoming paper in Economics & Politics, Vincent Arel-Bundock and I argue that the Fed behaves as if it prefers the election of Republican presidents. We argue that such a preference is consistent with existing theories about the link between central bank independence and inflation. Further, differences in Fed behavior cannot be easily explained by the fact that Democratic presidents preside over different macroeconomic conditions than Republicans, because the differences in policy remain after we control for macroeconomic conditions. We also argue that the Fed’s ability to lean in favor of Republican incumbents is not in spite of, but because of its independence of direct political control.
An examination of movements in the Fed Funds Rate between 1953 and 2008 suggests that as elections draw near, the Fed adopts a looser monetary policy when Republicans control the White House. In contrast, it adopts a tighter monetary policy when Democrats face re-election. This suggests that independence allows the Fed to lean against the use of macroeconomic policy for electoral purposes if and only if the incumbent is a Democrat. In other words, the Fed appears to be a conditional inflation hawk – it tends to deny incumbent demands for looser policy in the period before elections, but only if the incumbent making such demands is a Democrat.”

87

bruce wilder 04.27.16 at 12:00 am

In the spirit of a return to topic, could we just gaze for a moment on the thesis of Brad DeLong’s post (emphasis added):

People should say that policies are good if they tend to do good things–to make people freer and richer. People should not say that policies are good if they tend to build the Movement, for there is neither Correct Ideological Thought nor a universal class whose interests are identical to the general interest. And people should, especially, not misrepresent what policies are likely to do in the interest of building the Movement.

And where the Movement is good, the policies that advance it will also be the policies that make technocratic sense…

In particular contemplate the contradiction inherent in the sentence I bolded.

I realize DeLong is attempting to affect a stylized voice in order to convey a faux irony, but he’s doing so in order to attack people, who are earnestly trying to address what they regard as real and serious problems. So, let’s put the fractured satire aside and just contemplate the fractured logic of DeLong’s thesis. Either there is Correct Ideological Thought or there isn’t. For my own part, as a good liberal, I vote, no. What follows from this answer — logically — ought to be humility and self-doubt. If others do not know the the True and the Good, well then I cannot claim that privilege for myself and remain consistent. But, Brad doesn’t embrace this logically imposed humility — instead he turns around and does claim the privilege of extra-special knowledge of the Good . . . for technocrats like his only lovely self.

The arrogance née narcissism is breathtaking.

If you honestly think no one has a patent on The Correct Answer or esoteric knowledge of the One True and Universal Good, then it follows that politics will entail disagreements that cannot be entangled by sweet reason alone. Christina Romer’s projection of the future is no more a “fact” than Gerald Friedman’s. And, no, Christina Romer’s arithmetic is not likely to be any better. (Was Rogoff’s and Reinhardt’s?)

And, also, no Christina Romer is not without an ideology of her own. She’s a pretty conservative economist and if she is as far left as Democrats are allowed, then we really should just light the torches and burn, baby, burn.

88

Robert 04.27.16 at 12:09 am

I’m a fan of Kalecki and Steindl myself. I’m not sure how endorsing their thesis that politicians have it in their self-interest to create a political-business cycle USA defense of neoliberal technocrats.

Krugman has mentioned Kalecki favorably. I understand that he cannot continually and explicitly praise Marxist analyses in his NY Times column.

89

Robert 04.27.16 at 12:10 am

s/USA/is a/

90

Rich Puchalsky 04.27.16 at 12:17 am

BW: “In particular contemplate the contradiction inherent in the sentence I bolded.”

That’s not the particular contradiction I would have picked out. There are lots to choose from.

A Movement is a technology, sort of. A tool for making things happen. Movements, unlike elections, have goals, and building a Movement means building political power to be used towards that goal. What good are technocratic solutions if they can’t be implemented? What people have been trying to tell left neoliberals for as long as they have existed is that some kind of mass political power is necessary in order to get (presumably good) policies actually enacted.

So when people say that “policies are good if they tend to build the Movement”, they are saying that policies are good if they help you to actually reach your communal goals. That seems pretty uncontroversial.

BDL does talk about “the Movement”, as if there is only one, but that’s a rhetorical flourish. A more serious question is whether the traditional technology of Movements still works, or whether elites have successfully defeated it. That’s a tactical kind of question that can’t even be approached if you don’t understand why people say “policies are good if they build the movement” in the first place.

91

Tabasco 04.27.16 at 1:24 am

@92

This pattern may help explain why Republicans have controlled the White House more frequently than Democrats in recent decades.

Beginning with the Reagan election of 1980, it’s five Republican terms to four Democrat; hardly a slam dunk. Or if you define recent decades to start with Clinton 1992, it’s four Democrat to two Republican.

If the Fed has been trying to get Republicans into the White House, it hasn’t succeeded.

92

Rich Puchalsky 04.27.16 at 2:05 am

That is why all of the American movements that have existed are still around.

93

Chris G 04.27.16 at 2:52 am

> It’s rather puzzling that he is still suggesting that I hold these views after I (and his own commenters) explained that I did not and indeed after I explicitly and publicly disavowed the position that he claimed I held.

Back to Henry’s statement above: Why does someone in a position of authority who’s academic work is well-regarded and who’s a good debater when he chooses to be misrepresent other people’s positions? Read the comments here. Spend fives minute doing a Google search. It’s apparent that misrepresentation of others’ views is a regular thing for him. (I don’t serious consider the possibility that he doesn’t comprehend the arguments he misrepresents.) What possesses someone to do that? Why not honestly engage the opposing view and knock it down rather than a misrepresentation of it? That’s not a rhetorical question. Why behave that way? What’s the underlying pathology?

94

JW Mason 04.27.16 at 4:25 am

Is there any value in responding to this? Probably not, but:

The outrage at Friedman and Mason follows from their conflating C Romer and R Lucas.

Read this and tell me with a straight face that “better policy, particularly on the part of the Federal Reserve, is directly responsible for the virtual disappearance of the business cycle” doesn’t bear a family resemblance to “the central problem of depression-prevention has been solved”. The second line is of course R. Lucas. The first in C. Romer, in the fall of 2007.

Similarly someone going by Progrowth Liberal is very angry at me for misrepresenting DeLong … by quoting from one of his posts. My general experience of this conversation is that I am being called a liar because I refer to things people actually said, instead of what various people wish they’d said.

95

Ronan(rf) 04.27.16 at 7:18 am

97, Well here’s the argument

themonkeycage.org/2012/10/independent-but-not-indifferent-partisan-bias-at-the-federal-reserve/

Make of it what you will.

But the argument doesn’t have to be a “slam dunk” neccesarily , it’s just an example pointing out that political and economic institutions are.. Politicised. And That the mechanism yglesias has identified (good economic performance equals reelection )doesn’t automatically mean “good policy”, as it can also be manipulated.

96

RNB 04.27.16 at 8:43 am

@101 I do not really see the difference between Mason and Romer that JW Mason wants us to see.

Romer raised questions about huge deficits that for example Bush was running up; one would think that she was absolutely right to do so because such a debt overhang could constrain what a government could do in the face of deep downturn. So then Romer in fact sees the need for a big stimulus after the financial meltdown. Exceptional circumstances call for exceptional measures. Mason does not quote anyone using Romer’s previous writings against her when she called for a big stimulus in the face of an unexpected crisis.

Mason wanted a bigger stimulus; so did Romer. But does this mean that there are no limits to government deficit spending before it rocks the confidence of investors as Romer reasonably worries? And even if not counterproductive after some point, is Keynesian deficit spending a panacea? Japan’s government debt at this point is something like 250% of GDP, yet Japan suffers through deflationary pressures and slow productivity growth.

I am imagining that this is what Noah Smith had in mind when he wrote about the radical fiscal proposals of Friedman and Mason:

‘I think economists have a duty to look at the facts as objectively as they can, regardless of their emotions and desires. You shouldn’t prefer Model B over Model A just because one leads to “hope” and the other to “hopelessness”.

Suppose you’re a doctor, and your patient has knee pain, so you prescribe some anti-inflammatories. The inflammation goes away and the knee pain gets somewhat better, but doesn’t go away entirely, and you conclude that inflammation wasn’t the only thing that was causing pain. You don’t prescribe a 10x dose of the original anti-inflammatory just because doing otherwise would mean abandoning hope. That would be silly! Even if the patient has an evil boss who doesn’t want him to recover, you still don’t recommend the 10x dose of anti-inflammatories.’

This is of course not to say that Japan should raise its sales tax or not experiment with some more stimulative fiscal policy; but the faith in it as a panacea if only tried at a radical enough level seems unwarranted.

97

RNB 04.27.16 at 9:00 am

@91 I don’t even know what DeLong’s criticism of Chomsky was–perhaps about the origins of the Korean War? I do remember his criticism of David Harvey for expressing skepticism of the possible effectiveness of a big government stimulus given how the Chinese government may respond to it. He fought vigorously fought for a fiscal stimulus against all critics, left and right. I did not see that battle as anti-Marxist as much as pro-Keynesian. He wasn’t pro-Keynesian as a result of negating the Marxian negation; he was first affirmatively pro Keynesian, which led to him negating radical criticism. So I would not characterize him really as red-baiting.

98

RNB 04.27.16 at 9:05 am

Noah Smith also cites recent Japanese evidence to question the operation of Verdoorn’s law on which Gerald Friedman’s high projected growth rates seem to depend, i.e. tightening of labor market in Japan does not seem correlated with sharply rising productivity.

99

Robert Waldmann 04.27.16 at 9:25 am

I see that JW Mason has bet all of his credibility on the claim that C Romer and R Lucas are basically the same, or at least so similar that it is not a mistake to conflate them.

I am fairly confident that crooked timber readers can draw the sensible inference.

100

Robert Waldmann 04.27.16 at 9:36 am

@William Berry I agree my effort to explain with an analogy was unsuccessful. But I will focus on it, since you do.

In “A tree doesn’t just grow; its growth is governed by constraints that are narrower than those of any theory, and that is the set of epigenetic processes that are mediated by the complex interactions of gene expression and the influences of a very particular environment.”
you argue that there can be a valid theory of tree growth. I agree. My point is that the tree doesn’t think about that theory (being a tree it doesn’t think). Similarly there may be a valid theory which explains why some political movements are effective, there could even conceivably be a valid theory of history. For the sake of argument I will assume that there is.

Effective political agents (including technocrats) do not have to understand the theory which explains why they are effective. They don’t necessarily have to even think about it. If there is no valid theory of change such that my actions are effective, then they are ineffective. If I don’t think about theories of change at all, my actions can be effective.

There is a difference between “there is a valid theory of change” and “there can be no change without theorists of change”. I think my problem is that my claim is so obvious for the charitable reader must assume I meant something else. I’m just saying that something can be described by laws without having a conception of those laws — that doing something which works does not necessarily imply having a theory about why it works.

I’d stake my claim on the claim that F D Roosevelt didn’t have a theory of change. But he caused things to change. Also that quinine worked before people had any idea how or why it worked.

I think the problem is that

101

Tom Bach 04.27.16 at 11:47 am

“I’d stake my claim on the claim that F D Roosevelt didn’t have a theory of change. But he caused things to change.”
FDR said, didn’t he, to supporters of some left-wing policy: Make me, by which he meant lets have some massive public pressure to justify the policies you want. All of which seems like a theory of the politics of change.

It’s true that medicine that works works whether the theory behind it is true or not. On the other hand, try getting people to take the pox vaccine without some kind of a coherent, even if wrong, theory and see where it gets you.

102

engels 04.27.16 at 12:29 pm

#61 I was using ‘progressive’ in a loose sense. Substitute ‘left-of-centre’, ‘left/liberal’, ‘liberal’ or ‘Democratic’ if you prefer

103

JW Mason 04.27.16 at 12:36 pm

Robert-

I haven’t bet all my credibility. Blog comments are lower stakes than that. Nor have I said they are essentially the same. I’ve said there is a problem they both share, namely a complacency about the success of modern macroeconomic policy.

I think the space for expansionary policy is greater than you do. I think this because the evidence has convinced me it’s true, not because of any nonsense about The Movement or The Universal Class. I also think that conservative politics benefits from a belief that the space for political choice is tightly limited.

I also have to note, Robert, that you and I have had productive exchanges in the past. I don’t see your anger at me now as motivated by anything I’ve done or said or written. As far as I can tell here, you are simply echoing DeLong’s response to Noah Smith’s response to ProGrowthLiberal’s version of some some comments I made in an interview. I’m confident that when you return to responding to things I’ve actually written you’ll find we have plenty to learn from each other.

104

Lee A. Arnold 04.27.16 at 12:55 pm

I don’t suppose any technocrat will do me the favor of explaining why I misunderstand the situations leading to the questions I posed in #54. Technocrats rarely seem to be truly interested in having outsiders understand. And not a few of them are incompetent at the rhetoric of clear explanation.

And of course, both lefty and righty ideologues don’t much understand these situations, and so a request for explanation there, is likely to bring forth nonsense.

But I will add another question, since the topic was broached above:

Why does anybody think the US government debt is an important issue?

Where else in the world are investors going to put their money? The rest of the countries in the world are going to be in trouble for another 20-40 years. There’s corruption, political incompetence, — and overinvestment — everywhere.

Investors tried putting their money into mortgage derivatives, instead of Treasury debt (both are suitable for repo collateral), in order to pump-up the knuckleheaded consumers in the US and elsewhere. We saw how poorly this Greenspanish dream turned out. What other pieces of shadowbank paper can possibly become trustworthy?

So again I ask, if the US increased its federal debt tomorrow by 50%, what harm would come of it? How?

Federal debt projections are ALREADY probably massively overstated, as it is. Why? It’s all calculated on higher interest rates which now appear inconceivable. Healthcare costs are likely to plummet everywhere, due to technological change.

Yet everyone is running around a-scared of debt. Are you all living in an insane asylum (soon to be cured by pharma advances, no doubt)?

105

engels 04.27.16 at 1:12 pm

I don’t even know what DeLong’s criticism of Chomsky was

That he’s a “nut-boy loon” (in Harvey’s case it was “intellectual masturbation”.

106

engels 04.27.16 at 1:14 pm

107

bob mcmanus 04.27.16 at 1:16 pm

Yet everyone is running around a-scared of debt.

Tell it to the Greeks.

Debt has become a primary mode of social control, of subjugation, oppression, exploitation. From student loans to sovereign wealth funds, debt rules. It doesn’t really matter, if like race or gender, debt is mythological, it remains a social fact that organizes and structures human relations.

But we don’t need to talk about debt at all, because one man’s debt is always another man’s … Capital.

108

Rich Puchalsky 04.27.16 at 1:41 pm

I’ll just go on more about what I’m interested in — why not, right? — and point out that movements aren’t really organizations. They require a kind of mass enthusiasm and although they may leave organizations in their wake, they predictably go away when crowds of people go away. I realize that BDL is using Movement as a kind of shorthand for something he dislikes, not as describing any real social movement, but in actuality they don’t have this kind of nebulous ever-continuing quality. Calling it “the Movement” is something I associate with the 60s (unsurprising that BDL would be continuing this usage) when for a while social movements were supposedly merging into a counterculture that supposedly might replace the traditional culture. But that didn’t happen.

The counterargument would be something likethis: “The result of jettisoning Marxist analysis, the editors argue, is a “fragmented theory” that treats social struggles as “discrete and disconnected instances of protest”.” But that just points out the obvious: if BDL is supposed to be critiquing Marxism, Marxism doesn’t generally have any strong theorization around movements as such. (Whenever I make any generalization about Marxism, someone writes that Marxism does too and theorist X wrote about this in 1974. I’ll take it as read that Theorist X exists.)

109

T 04.27.16 at 1:50 pm

@106RW and JM

RW: “I see that JW Mason has bet all of his credibility on the claim that C Romer and R Lucas are basically the same, or at least so similar that it is not a mistake to conflate them.”

Yes and No. Before the Great Recession, pretty much all mainstream economists thought they had the problems of recessions solved — Lucas, Blanchard, Romer, — the whole cast of characters. They all thought monetary policy and monetary policy alone was enough to stabilize the economy. In this regard, JW is correct and Waldman is wrong.

Further, as Blanchard noted, no one thought financial regulation had macroeonomic effects: “With the neglect of financial intermediation as a central macroeconomic feature (before the Great Recession), financial regulation and supervision focused on individual institutions and markets and largely ignored their macroeconomic implications.” https://www.imf.org/external/pubs/ft/spn/2010/spn1003.pdf

Ex port the Great Recession, of course, RW is correct — to say DeLong and Romer were the same as Lucas, Corchrame, Fama et al is nuts. Once it became clear that monetary policy was not enough, the Keynesians became, well, Keynesian. That includes Romer, Bernanke, Krugman, DeLong, Waldman, and on and on. At that point, the argument was not the prescription but the size of the prescription. And that became a debate about the size of the multipliers among the more conventional Keynesians ( and between the Keynesian and the goof-ball “Treasury View” guys.) And, as we have here, between the traditional Keynesians and the more heterodox economists such as JW. Between them, it is necessary a debate about mechanisms more fundamental than the size of the multiplier in a traditional model. Hence the hostility.

My hobbyhorse was the failure of the profession, and particularly the Keynesian wing, to understand the role of the financial sector in macroeconomic stabilization. And a lot of that was ideology pure and simple. Financial deregulation was a disaster and the Keynesians in the Clinton administration were complicit. And the financial sector types pushing for those changes had every reason to believe it would generate a windfall for themselves. They were right Rubin walked away with a $250M. This little screed should not take away from the earlier discussion about Romer and Lucas: that JW and RW are both right — JW before the crash, RW afterwards.

110

JW Mason 04.27.16 at 2:10 pm

R-

Good thing my criticism of Romer was specifically about her 2007 comments then! Good thing my post explicitly explicitly acknowledged her positive role in the 2009 stimulus debate! Wouldn’t it be nice if people criticized you for things you actually wrote, instead of things they’d made up?

As you say, there are still debates about how much space there is for further expansionary policy. I’m planning to write a larger piece this summer making the case for greater space more systematically.

111

JW Mason 04.27.16 at 2:16 pm

Sorry, “R” should be “T”. Can’t imagine how I got confused…

112

Lupita 04.27.16 at 2:22 pm

Where else in the world are investors going to put their money? The rest of the countries in the world are going to be in trouble for another 20-40 years. There’s corruption, political incompetence, — and overinvestment — everywhere.

Actually, investors started speculating in the West and indebting Western consumers and students only when it became clear that it was the only place left where they were still permitted to do so. After speculators crashed country after country from the 90s to the 00s, third world countries understood the game (neoliberalism) and started amassing foreign reserves in order to protect themselves from Western hedge fund vultures. In other words, 3rd world countries gave the West no other option than to start blowing bubbles in the West itself.

This has been a great victory for non-Western countries, for 3rd world economists who studied, explained, and devised policies to prevent further crashes, and for the peoples of these countries who had to see their schools and hospitals underfunded for decades in order to amass defensive foreign reserves.

To be clear: the West cannot crash many non-Western countries, not because they are “in trouble”. The West is in trouble. It is crashing. And, judging from comments here, its economists remain clueless.

113

Brett Dunbar 04.27.16 at 2:35 pm

engles @ 114

Sounds like an pretty fair assessment of Chomsky on DeLong’s part.

I’ve never seen anything about Chomsky that inclines me to view his politics as anything other than a lunatic far left conspiracy theories and occasional genocide apologetics.

114

T 04.27.16 at 2:54 pm

@ 118 JW Mason
I think you misinterpreted my comments. And looking back at my post I can understand why,. I’m agreeing with you. I think you were either misinterpreted or misrepresented by the RW quote. Your Lucas/Romer comment plainly referred to the pre-recession era, and in that period Lucas/Romer/the profession were basically on the same page about policy.

Of course, post recession, they were not on the same page. My point was. post-recession, big distinctions appeared among the group that was previously on the same page regarding policy. NOT that you failed to see those distinctions. To the extent that RW was implying that you saw no distinctions between Lucas and C Romer ex post, he is wrong. I hope that clarifies my comment.

@119 Also, take a look at my previous posts on this thread. I don’t think my comments can be confused with RW’s.

115

JW Mason 04.27.16 at 4:06 pm

OK fair enough. Sorry for misreading you. Have not read whole thread. (And not going to — vita brevis.)

116

RNB 04.27.16 at 4:10 pm

@117 Actually T I think it read as if you were saying JW Mason was nuts for conflating Lucas and Romer, post-crisis, even if that is not what you meant to say. But I don’t think JW Mason was wrong to read you that way. JW Mason argues that the same reasons for concern about big deficits pre-crisis were the same kinds of arguments used against the bigger deficits that she wanted to run post 2008. This argument is not very persuasive.

1. JW Mason does not cite any evidence pro 2008 that Romer thought in the case of a big crisis fiscal policy would not be needed in a big way and that a big blow out could be handled by monetary policy alone.

2. There were plenty of reasons to be concerned about reckless deficits in the Bush era. For one, the run up of debt could constrain what a government could do by way of fiscal policy in the face of serious downturn.

3. JW Mason cites no one using Romer’s previous writings against her when she proposed big spending during the downturn.

4. One reason Romer did not get the bigger spending package she wanted was not her theoretical conservatism but obviously Republican political opposition, so why talk about Romer being too mainstream in terms of theory when that was not the reason the spending package was smaller than she herself wanted.

5. I think the arguments against the rosy projections of a Friedman and Mason-style fiscal bing bang are persuasive. There is evidence against the use of Verdoorn’s Law and the multipliers seem highly exaggerated. So we may not be talking about Romer’s conservatism here but reality.

117

Lee A. Arnold 04.27.16 at 4:29 pm

Bob McManus #115: “Debt has become a primary mode of social control, of subjugation, oppression, exploitation.”

And you think this is what a technocrat would say?

118

Brett Dunbar 04.27.16 at 4:44 pm

Greece is a in a position which a monetary sovereign which borrows in its own currency cannot be in (e.g. USA, UK, Japan). If you have to borrow in a currency you don’t issue (either you don’t have your own currency or you lack credibility on inflation) then you can end up unable to repay debt.

119

JimV 04.27.16 at 4:48 pm

“Wouldn’t it be nice if people criticized you for things you actually wrote, instead of things they’d made up?”

It’s not all one way. If people get the wrong impression from what they read, that can be the fault of the reader, the writer, or both. I had exactly the same reaction (as quoted above) in a previous discussion here a couple of years ago when JM took a BDL quote and made what I thought was an obvious wrong interpretation of it.

One of the reasons that I think computer programming would be a useful discipline to teach in high school and/or to college freshmen is that the computer does what you said, not what you meant.

120

engels 04.27.16 at 4:50 pm

lunatic far left conspiracy theories

On this particular trope, see Chris’ Hillsborough post

121

engels 04.27.16 at 4:53 pm

One of the reasons that I think computer programming would be a useful discipline to teach in high school and/or to college freshmen is that the computer does what you said, not what you meant.

And because anyone who has spent a lot of time on the ‘net knows, computer programmers the clearest writers and most sensitive readers of other people’s writing there are

122

JimV 04.27.16 at 4:54 pm

Every time I proof-read that I thought I saw “obviously wrong” instead of “obvious wrong” – until I saw it posted. I make a good illustration of my own point. “Living proof” as they say.

123

JimV 04.27.16 at 5:04 pm

“And because anyone who has spent a lot of time on the ‘net knows, computer programmers the clearest writers and most sensitive readers of other people’s writing there are”

Computer programmers not the clearest writers. But maybe learned one important thing. Should also learn English rules, and practice, practice, practice. And check work before running program/posting. That important too.

124

Lee A. Arnold 04.27.16 at 5:14 pm

Lupita #120: “Actually, investors started speculating in the West and indebting Western consumers and students only when it became clear that it was the only place left where they were still permitted to do so.”

Evidence for this, please. Direct foreign investment has risen steadily for at least a decade or two in China, India, Russia, Malaysia, Indonesia, most of the Asian countries (with the notable exception of Japan), etc. Many other countries would like to convince the international financial community to invest. It looks like a surfeit of financial capital, the global “savings glut”.

125

Brett Dunbar 04.27.16 at 5:31 pm

engles @ 128

I’m not sure what that has to do with Chomsky.

There’s quite a big difference between police attempting to cover up a monumental screw up and the kind of elaborate conspiracy theories espoused by Chomsky.

He was an apologist for the Khmer Rouge after the exposure of the killing fields; that is truly evil. That alone exposes his utter moral bankruptcy.

He is clever and articulate enough to obfuscate the essential moral and intellectual bankruptcy of his position. But as he is reasoning from false assumptions rendering his entire argument worthless.

126

T 04.27.16 at 5:45 pm

@124 RNB

My post @117 was not completely clear and I can understand why JW took offense. I think I cleared that up.

With respect to the fiscal actions post-crisis, the scuttlebutt was that Romer wanted a larger stimulus with a higher proportion of spending vs. tax cuts than the final agreement. The story was that, in part, Summers thought the size of Romer’s recommendation was politically unfeasible and it was cut back. (Why the hell an economist was opining on what can get through Congress was always a mystery to me.) The split between spending and tax cuts seemed to be hashed out politically.

All this was being done at a time when the extent of the recession was being way underestimated. That was because the profession didn’t understand the magnitude of recessions caused by systemic financial failures. Their models didn’t incorporate a financial sector. A few heterodox economists (students of Minsky, etc), open-economy macro types who lived through the Asian crisis (e.g. Krugman and Rogoff), and some behavioral econ types seemed to realize the severity of the recession. But the profession as a whole dropped the ball.

I just wish the Keynesians that are hippie punching and kicking down to the Left would remember that there was no difference between themselves and Lucas in 2007 — it was all about monetary policy, financial deregulation, and the Great Moderation ad infinitum. They screwed the pooch. They controlled the levers under Clinton and pulled some of the wrong ones. And these were the guys always looking for market failures. Guess what. You missed one.

127

Simon St.Laurent 04.27.16 at 5:46 pm

I’m guessing DeLong didn’t read this post before posting this latest rant.

“The day will come when it will be time to gleefully and comprehensively trash people to be named later for Guevarista fantasies about what their policies are likely to do. The day will come when it will be time to gleefully and comprehensively trash people to be named later for advocating Comintern-scale lying to voters about what our policies are like to do. And it will be important to do so then–because overpromising leads to bad policy decisions, and overpromising is bad long-run politics as well.”

Sigh….

128

engels 04.27.16 at 5:58 pm

Should also learn English rules, and practice, practice, practice. And check work before running program/posting

You’re obvious right

129

engels 04.27.16 at 6:07 pm

Ancient CT Chomskython, for anyone who has the energy for this (not me!)
crookedtimber.org/2006/07/03/chomsky-wars

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roger gathmann 04.27.16 at 6:08 pm

133 – You know who was a supporter of the Khmer Rouge? Jimmy Carter, Ronald Reagan, Brzenzski and George Schultz.
http://www.historyplace.com/pointsofview/kiernan.htm

“When the Vietnamese army ousted the Khmer Rouge in 1979, most of the world lined up in confrontationalist Cold War positions. By intervening, Hanoi was seen as having created ‘the Cambodian problem’ rather than having ended the genocide. With the support of Australia as well as the United States and China, the Khmer Rouge held on to Cambodia’s U.N. seat. The only major Western country that abstained, but did not vote against the Khmer Rouge on the issue, was France. “

“For more than a decade, official Western support for Deng Xiaoping’s China spilled over into support for his protégé Pol Pot. Former U.S. National Security Advisor Zbigniew Brzezinski recalls that in 1979, “I encouraged the Chinese to support Pol Pot. Pol Pot was an abomination. We could never support him, but China could.” According to Brzezinski, the United States “winked, semi-publicly” at Chinese and Thai aid to the Khmer Rouge. At the same time, international aid to the Khmer Rouge on the Thai border was pushed through by United States officials.

In the 1980s, U.S. Secretary of State George Shultz opposed efforts to investigate or indict the Khmer Rouge for genocide or other crimes against humanity. Shultz described as “stupid,” Australian Foreign Minister Bill Hayden’s 1983 efforts to encourage dialogue over Cambodia, and in 1986 he declined to support Hayden’s proposal for an international tribunal. In 1985, Shultz visited Thailand and warned against peace talks with Vietnam, allegedly telling ASEAN “to be extremely cautious in formulating peace proposals for Kampuchea because Vietnam might one day accept them.”

So, I hope 133 extends the name “evil” to the governments of the countries that supported the Khmer Rouge. Funny, when Reagan died, I don’t remember any encomia that mentioned his support for Pol Pot. And I imagine the same will be true when Carter dies.

131

engels 04.27.16 at 6:09 pm

Also starring… Brad Delong!

132

Lupita 04.27.16 at 6:13 pm

Evidence for this, please. Direct foreign investment has risen steadily

I didn’t state that foreign investment had not risen, but that the strategy to avoid the vicious circle of speculative attacks -> capital flight -> financial crash in the 3rd world was to accumulate foreign reserves.

Evidence: Foreign reserves in Argentina, Brazil, Chile, Colombia, and Mexico, increased 21% from 1995 to 2002. Mexico alone increased its foreign reserves by 265% from 1995 to 2004.

Between 2000 and 2005, the following countries have increased their foreign reserves by the following percentages: China 388%, Japan 135%, South Korea 119%, Malaysia 138%, and Taiwan 137%.

133

Bloix 04.27.16 at 6:23 pm

Dean Baker has been making the same point as Lupita for some time now, most recently here: http://cepr.net/blogs/beat-the-press/the-question-is-not-free-trade-and-globalization-it-is-free-trade-and-globalization-designed-to-screw-workers#disqus_thread

“Since some folks asked about the botched bailout from the East Asian financial crisis, the point is actually quite simple. Prior to 1997 developing countries were largely following the textbook model, borrowing capital from the West to finance development. This meant running large trade deficits. This reversed following the crisis as the conventional view in the developing world was that you needed massive amounts of reserves to avoid being in the situation of the East Asian countries and being forced to beg for help from the I.M.F. This led to the situation where developing countries, especially those in the region, began running very large trade surpluses, exporting capital to the United States. (I am quite sure China noticed how its fellow East Asian countries were being treated in 1997.)”

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Lupita 04.27.16 at 6:26 pm

Meanwhile, in the West, reserves have gone down by the following percentages between 1995 and 2005: Euro zone 38%, US 20%, UK 2%.

135

Lee A. Arnold 04.27.16 at 7:06 pm

Lupita #139: “I didn’t state that foreign investment had not risen, but that the strategy to avoid the vicious circle of speculative attacks -> capital flight -> financial crash in the 3rd world was to accumulate foreign reserves.”

We all know (or should know) that many foreign central banks are accumulating foreign reserves especially including US Treasuries, after the Asian financial crisis showed them that the Washington Consensus was willing to allow capital flight to destroy their economies.

But that is not what you wrote.

You wrote, “Actually, investors started speculating in the West and indebting Western consumers and students only when it became clear that it was the only place left where they were still permitted to do so.”

But investors are still permitted to invest in these non-Western countries, as the rising foreign investment figures clearly show.

You also wrote, “The West is in trouble. It is crashing.”

This is also false, or relatively so. The West appears to be in as good a shape as any of the other disasters, and better than many of them.

This is part of the problem, really. Most Westerners don’t understand that their lives are still relatively easy, and don’t understand the true provenance of any perceived ease or are willing to credit their own efforts all too easily — and this could create problems in another 20-40 years.

136

Lupita 04.27.16 at 8:00 pm

@Lee A. Arnold

OK, I was very imprecise when I wrote “investment” when I meant speculation. What I meant by the West not being permitted to “invest” in the periphery, was that it was no longer possible to blow speculative bubbles there, to the point where whole economies collapsed, thanks to the now huge foreign reserves. This is when speculative bubbles in the core started appearing: dot.com, real estate, stocks, credit cards, and student loans. Some of these have already burst.

As to the “West crashing” being false, I meant by this the 2008 crisis, Iceland, Ireland, and Greece. Italy also, since Berlusconi was unceremoniously replaced with the financial elite’s choice. For you, these same events mean the West is relatively not crashing for perhaps another 20-40 years. It may well be wishful thinking on my part, but I don’t see Western hegemony lasting another 20 years.

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Lee A. Arnold 04.27.16 at 11:42 pm

Lupita #134, I still don’t understand what you mean. The accumulation of foreign reserves helps a central bank protect agains runs against its currency. But isn’t the total amount of money involved in shorting currencies rather small, in comparison to the growth in investment (and speculation) in private debt and equities?

It seems to me that the main attraction of mortgage derivatives was their slightly higher yield under the worldwide conditions of very low interest rates.

On the other point, the question I was asking at #112 is: WHY don’t people see Western hegemony lasting another 2o-40 years? In other words, I am looking for some sort of reasonable scenario that might defeat it.

The usual suspects, known from history, are military weakness; loss of economic potential in relation to some other hegemon; and/or losing the reserve status of one’s currency.

How is this going to happen? The only thing I can think of, in this time frame, is if China makes military moves to control resources in other parts of the world (in which case most of the world will be against them), and/or many countries move to accept the renmimbi as a reserve currency (despite the fact that almost everyone thinks that China is cooking the books).

So what other scenarios are possible?

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Lupita 04.28.16 at 12:48 am

@Lee A. Arnold

But isn’t the total amount of money involved in shorting currencies rather small, in comparison to the growth in investment (and speculation) in private debt and equities?

When periphery countries were crashing all over the place, sudden outflows of speculative capital were enough to cause devaluations, capital flight, and crash their financial systems. Countries were targeted one at a time. This happened during the 90s and 00s; it’s not happening anymore. Now the bubbles and crashes are occurring in the highly indebted West.

So what other scenarios are possible?

Political: US hegemony was buttressed by an international consensus that has been disappearing. Westeners should not underestimate how much political capital the US has lost since its intelligence elite’s WMD fiasco, its military elite’s invasion of Iraq, its financial elite’s uncomprehending panic during the 2008 crisis, and now, its political elite thinking, just some months ago, that Trump was a joke. Katrina, Ferguson, Flint. Really, the US has lost lots of its shine.

The Asian Infrastructure Investment Bank, CELAC in Latin America, the G-20 standing up to the rich countries and rendering the WTO a zombie, all chip away at American political hegemony and start filling the power vacuum that has begun to form. As to the event that will bring the entire edifice crumbling down? It could be anything: a big event such as Brexit, Trump winning the presidency, a major epidemic, a natural disaster, the Middle East exploding. Or it could be several minor events in succession. Barring major and minor disastrous events, it is clear that each successive financial crisis gets closer and closer to the core of the core.

139

Aubray Flounders 04.28.16 at 1:47 am

There’ve been some laughs in this thread, but for a guy like me it’s been pretty hard to follow.

Brad DeLong is at his best when he’s embarrassing us all by talking about his Prius, expressing astonishment at finding coyote turds on a rock in his back yard, or proclaiming that a San Francisco canapé tray should have good old-fashioned San Francisco fresh-frozen shrimps on it rather than avocado. When you really get down to his understanding of the real world, this guy is just Ezra Klein without the excuse of youthfulness.

140

RNB 04.28.16 at 2:06 am

Same point DeLong has been making for years.
http://www.bloombergview.com/articles/2016-04-27/the-world-needs-more-u-s-government-debt-narayana-kocherlakota
“From a purely economic point of view, the [US] government’s policy seems entirely artificial. No private entity would behave like this. Imagine a corporation with such a safe cash flow and such low borrowing costs. It would issue debt to fund expansions or payouts to its shareholders.

Analogously, the U.S. government should issue more debt, using the proceeds to invest in infrastructure, cut taxes or both. Instead, political forces have imposed artificial constraints on debt — constraints that punish savers, choke off economic growth and could sow the seeds of the next financial crisis.”
Rhetorical masterpiece in the way Kocherlakota is trying to undermine conservative business opposition to Keynesianism by painting such opposition as political interference with the supply-and-demand mechanism usually operative in the marketplace!

141

RNB 04.28.16 at 2:17 am

In other words if neo-liberalism has meant in part thinking of and running the state as if it were a private company, Kocherlakota is saying that if the government were actually run like a private business. it would actually pursue expansionary Keynesian policy. Pretty impressed with the rhetorical maneuver

142

Cranky Observer 04.28.16 at 2:35 am

Thoughtful coalition politics from Dr. Delong:

= = = Mind you: The day will come when it will be time to gleefully and comprehensively trash people to be named later for Guevarista fantasies about what their policies are likely to do. The day will come when it will be time to gleefully and comprehensively trash people to be named later for advocating Comintern-scale lying to voters about what our policies are like to do. And it will be important to do so then–because overpromising leads to bad policy decisions, and overpromising is bad long-run politics as well.

But that day is not now. That day will be mid-November.
http://www.bradford-delong.com/2016/04/live-from-la-farine-duncan-black-is-anxious-duncan-black-hard-to-kick-the-habithttpwwweschatonblogcom2016.html
= = =

143

RNB 04.28.16 at 3:56 am

In the 1930s one would have been reasonable to have worried that FDR and Leon Blum were overpromising that they could ease the global economy out of depression without war. It could be that in certain conjunctures that any form of Keynesianism results in over-promising.

144

Lee A. Arnold 04.28.16 at 11:12 am

Lupita #147,

Still not following you. The speculator’s aim in blowing speculative bubbles is NOT to make a whole economy collapse, because then your own investments, in their debt and equities, might be among the collateral damage. Only currency speculators might be certain to win: those who shorted that currency. (And win big time, as George Soros has shown.) Speculative bubbles in debt & equities are NOT prevented by a central bank’s accumulation of foreign reserves.

And what if now, the “final” speculative bubble (“final”, in this long sequence) is in US Treasuries themselves? Well then, that leads to 1. low interest rates worldwide, 2. no immediate pressure on US gov’t debt, and 3. the US retaining its hegemony, for another 20-40 years.

I agree that President Trump could start a trade war, possibly a shooting war, with China. (If he isn’t lying to his supporters about his policies.) I also agree that the AIIB presents a threat to the US as reserve currency — but if, and only if, the Chinese gov’t can convince anyone that it is not a corrupt oligarchy rife with familial favoritisms. This is not likely to happen in less that 20-40 years.

It is also quite possible that a bit of protectionism on the part of the US will reinvigorate its labor and consumers with a bit more income, and thus help to prop it up, for the next 20-40 years.

Indeed, higher US gov’t debt, spent especially on education and infrastructure, would help that economic invigoration. US conservatives must have cranially abdicated, to not understand this.

There also remains the fact that, to many individual entrepreneurs with new marketable ideas, the assurances of individual freedom and property protection are primary considerations, and the lack of political stability in many of their own countries deters them, which is why a lot of them are try to get to the US and the West. Again, this is a situation that isn’t going to turn around, for another 20-40 years.

Epidemics and disasters will not disfavor the US or the West unless they happen only in the West. Otherwise, it currently has lots of resilience. It is using less oil, so a Middle East explosion is less danger than ever.

Also — I am NOT someone who needs to be told that the US is losing its shine.

I am way ahead of you on that account. I think the US lost its shine with the Vietnam War, with Dr. King’s assassination, with the election of Nixon, and with the findings of the Church Committee. To me, Reagan arrived as a fiberboard chest of drawers with a cheap veneer.

But again, “losing its shine” is NOT a reason. My question at #112 remains. Put in these terms, it is: Who will look shinier in the next 20-40 years?

I am not trying to “defend” the US, nor anything else. I am trying to find out: 1. why nobody will think clearly about this; 2. why people refuse to examine their own fears and prejudices; and 3. why the technocrats, despite their intellectual pride, are as foolish and boring as anyone.

145

Ronan(rf) 04.28.16 at 12:46 pm

That quote by bdl at 151 is pretty vulgar. Entertaining, but vulgar. I guess if people want to read an economists perspective on the problems with the research/policy nexus they should read charles manski. You wouldn’t get this sort of barstool vulgarity from him.

146

RNB 04.28.16 at 3:47 pm

Did the responsible technocrats who gave Japan Abeconomics over-promise? Do technocrats whatever their political leanings and however empirically grounded their analyses just tend to overpromise?

147

engels 04.28.16 at 5:56 pm

read charles manski. You wouldn’t get this sort of barstool vulgarity from him

It’s not barstool vulgarity, it’s a delegitimusing move by a relatively privileged and, well-spoken academic / ex-govt official aimed at people he can convincingly treat as marginal

148

Lupita 04.28.16 at 8:12 pm

@ Lee A. Arnold

Still not following you.

The Asian Crisis is a good example of how speculators make a kill. Up until 1997, South East Asian countries were considered miracle economies, with high growth rates and interest rates, which made them very attractive to foreign speculators. Then, suddenly, on May 14 and 15, 1997, there was a massive speculative attack Thailand’s baht. Thailand did not have enough foreign reserves to defend itself against the attack and the baht lost half its value, stocks fell 75%, and their biggest financial company went bankrupt. In August, Indonesia’s rupiah suffered a similar attack and its national rating was downgraded to junk. Attacks were repeated in Malaysia and the Philippines.

At this point, when countries are in the midst of a crisis, vulture funds descend on the victim, buying debt at a fraction of its value, about 25%, in order to redeem it at 100% with the help of Western judges. For example, an American federal judge issued an embargo against Argentina, including impounding one of its navy ships by a Cayman Islands’ hedge fund, until it pays vulture funds what would be a 1608% profit on their Argentinean bonds.

Speculative bubbles in debt & equities are NOT prevented by a central bank’s accumulation of foreign reserves.

They are. Speculators’ money does not flow into countries with high reserves because it would be impossible to cause a devaluation by suddenly withdrawing capital. The country in question would be able to defend the exchange rate. There would be no debt to buy at distressed prices for vulture funds to profit on. Furthermore, since the Latin American and Asian crises, monetary funds have emerged in these regions to defend themselves from similar attacks happening again, the IMF taking over, and American judges impounding your navy. It has worked. Now the crises are in the West where profits can still be made by speculators.

149

Lupita 04.28.16 at 8:22 pm

@ Lee A. Arnold (Part 2)

“losing its shine” is NOT a reason.

What I mean is that Pax Americana is kept in place by global consensus and that consensus, and the legitimacy of Western hegemony, has been steadily eroding. I do think that the legitimacy of the global system is very important when determining if it is sustainable and for how long, it is not just about internal stuff. That said, I think it is clear that the non-West does not support a unipolar world and is working towards the creation of a multipolar one. I already mentioned the demise of the WTO and the creation of AIIB and CELAC as concrete steps in this direction, but there are also symbolic steps, such as Hugo Chávez’ funeral that was better attended than a pope’s.

In general, I think the actions of the non-West in the creation of alternative regional organizations are what will weaken Western hegemony the most. Perhaps a Russia-China alliance like the Reagan-John Paul one. Maybe China has a sinister plan to pull the rug from under the US at the worst possible moment. A scandal due to a leak that a Western head of state was complicit in assassination or torture and is actually brought to justice. And once legitimacy is lost, perhaps we will still be left to endure a couple of decades more with a sticky zombie empire that refuses to die. It happens.

150

Lee A. Arnold 04.28.16 at 8:33 pm

Lupita #157: “Speculators’ money does not flow into countries with high reserves because it would be impossible to cause a devaluation by suddenly withdrawing capital.”

Again, not all speculation is currency speculation. Speculator’s money certainly flows into countries with high reserves, if there is some other gain to be made, in real estate, equities, debt.

151

Lee A. Arnold 04.28.16 at 8:39 pm

Lupita #158: “left to endure a couple of decades more”

In other words you now agree with me?

152

Lupita 04.28.16 at 9:17 pm

@Lee A. Arnold

Speculator’s money certainly flows into countries with high reserves, if there is some other gain to be made, in real estate, equities, debt.

Of course, but it is no longer destabilizing, which was the problem.

In other words you now agree with me?

I guess so. I must admit that for two years before the 2008 crisis, I did not understand why the system had not already collapsed. I apparently tend to dismiss the law of Will E. Coyote where not realizing you have run off the edge of the cliff grants you the ability to run on air. I will endeavor to remember it in the future.

153

Lee A. Arnold 04.28.16 at 9:52 pm

Lupita, If it’s any consolation, I know the person who gave Chuck Jones a room to live in for the last few years of his life, and Chuck Jones pretty much agreed with you.

154

phenomenal cat 04.29.16 at 3:24 am

I have to admit I have a much finer, much more filigreed appreciation and understanding of Chuck Jones physics than real world political economy. Even so, I still don’t get the reference Lee.

What puzzles me about your line of questioning though is that it seems to presume hegemonic “collapse” or whatever must in the main come from exogenous forces–China!, and so on. This strikes me as an obvious weak-point in your analytical structure as it were–and make it sound somewhat like an echo of the songs the TINA sirens lull everybody to sleep with.

The forces which have the most relevant spatio-temporal potential to disrupt American, North Atlantic, Western (whatever descriptive curlicue we want to put on it) hegemony are endogenous. The West, and the U.S in particular, may be shielded to some measurable degree from ME dissolution and oil shocks, capital flight, and speculator whimsy, but it is not shielded from its own increasingly fraught internal political economic dynamics.

If visible, concrete change at a range of scales is not in the offing within the next 10-15 years then the architects and bureaucrats of TINA are likely to be educated on any number of interesting alternatives, along with the rest of us.

155

Robert Waldmann 04.29.16 at 5:19 am

My this thread is long. I see that JW Mason proposes that he and I attempt to communicate via productive exchanges and refrain from insults. OK. Sounds good.

I also note that he has praised C Romer for her effort to obtain a larger fiscal stimulus. I do not consider his credibility to be staked on the claim that C Romer and R Lucas are similar. I think that means another comment of his up thread has to be “read in context” that is ignored.

For the future, and for the sake of civil discussion, I plan to never discuss the question of whether, to what possible extent, or in what conceivable way, anything JW Mason typed might be construed as having conflated R Lucas and any Romer.

156

Lee A. Arnold 04.29.16 at 12:31 pm

Phenomenal cat #164: “make it sound somewhat like an echo of the songs the TINA sirens lull everybody to sleep with.”

Via my comments #53, 54, & 112, I am arguing in favor of Sandersnomics. The US should have free healthcare and free public college. I think the US can do much more government spending via increased deficits and/or increased taxes on the wealthiest.

It will not harm the US dollar’s international position for the next 20-40 years. (In fact it will greatly extend that time period, and help pull the rest of the world up, too. And the US would be well advised to do this, before the Chinese — with a far less transparent gov’t — step into the vaccuum via the AIIB.)

I rather doubt that the standard US multiplier, at this moment, is as little as the “sober” economists say that it is. In fact I rather doubt that current economic methodology presents a coherent or very useful view of things.

I expect that Hillary will move a little to the left if she is elected — and this was true, even before Bernie pushed the whole country in that direction. Why? Because, There Is No Alternative.

157

Rich Puchalsky 04.29.16 at 1:18 pm

phenomenal cat: “but it is not shielded from its own increasingly fraught internal political economic dynamics.”

I think it’s a bad mistake to characterize the basic problems as internal and political rather than, say, environmental. Unless the internal political economic problems are supposed to do us in by making it impossible to do anything about the environmental ones.

158

A H 04.29.16 at 2:26 pm

Here is noted non-ideological technocrat Brad Delong today making a neoliberal ideological argument about “breaking the budget”:

https://twitter.com/delong/status/726052931728859136

Das Reinhart-Rogoff still count as a “reality based” paper?

159

T 04.29.16 at 2:57 pm

RW @165 and JW
I, for one, hope this becomes a productive discussion. And I hope it has at least two parts. First, why did neoclassical economics fail to understand the conditions that led to the Great Recession? Why were Romer, Blanchard and Lucas all on the same page and all wrong prior to the crisis? (i.e. monetary policy was sufficient to stabilize GDP.) I’d be interested in hearing both your opinions from an economic and sociological perspective. What was missing from the macro models? Why was it missing?

Second, moving port-crisis, what is the size of the gap between actual and potential GDP? Estimates vary form 18% to get back to the old trend, to O% from the CBO — i.e. the trend has permanently shifted down. This is somewhat uncharted territory and where the profession once again seems split even among neoclassical economists much less the more heterodox economists. JW is talking about getting back to trend. How? Does a one-time giant fiscal stimulus (Freidman) have a nascent productivity effect that will get us back to former trend despite the current low unemployment rate? Is potential GDP permanently reduced by hysteresis and there is only a 5% gap a la DeLong such that there is no policy mechanism that can get us back to the old trend — it is lost forever? What economic mechanisms and permanently shift and/or tilt the trend?

I think the mainstream Keynesians have never fully addressed the former questions and have not at all reached a consensus on the later. I’m also quite interested in JWs further analysis. The Romer critique of Friedman — confusing levels and rates — is pretty devastating.

160

bruce wilder 04.29.16 at 3:13 pm

I was a bit surprised by the tone Waldmann took in this thread. His comment @ 45 destroyed more knowledge than he introduced in the whole rest of the thread. I know he’s capable of subtle and insightful expositions. I’ve learned from his comments over the years at various sites. What I learned in this thread is to trust him much, much less.

161

bruce wilder 04.29.16 at 4:52 pm

T @ 169: “Why were Romer, Blanchard and Lucas all on the same page and all wrong prior to the crisis?”

What does it mean to be “wrong prior to the crisis”? I am not sure neoclassical economics is structured to recognize that any thing it comes up with is definitely “wrong” in a scientific sense. Lots of models in the quiver, and the clever and wise draw them out to fit the occasion, like Green Arrow. (cf accusations of Green Lantern politics) People on the Lucas end of the spectrum combine an obsession with hard math to bolster their credentials as masters of the esoteric, with a political theory that features a Kaleckian business confidence beyond parody — poor performance is usually attributable to businessmen frightened by socialist or progressive reform proposals. A real devotee of efficient markets would point out that occasional market crashes are well-within the range of a random walk — “nothing to see, here” to disprove the theory, they might say. New Keynesians are all about ad hoc explanations — the economy is subject to random, inexplicable “shocks” that that nobody could have predicted, and almost nobody — at least nobody within the blessed circle — predicted, so nothing to be embarrassed about. Besides, “we” understand IS / LM or bank runs or Bagehot and our predictions of the course of events since the shock nobody coodehavnode was coming, we have been spot on with our ad hoc analyses.

Brad DeLong certainly hasn’t changed. In November 2007, when Bob Herbert of the New York Times was earnestly drawing attention to the economic plight of the poor and what we used to call the working classes, Brad DeLong attacked him as an economic illiterate. Bob Herbert, as quoted by Brad, wrote in 2007:

Bankruptcies and homelessness are on the rise. The job market has been weak for years. The auto industry is in trouble. The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards. The country has been in denial for years about the economic reality facing American families. That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiate like addiction to credit cards at rates that used to get people locked up for loan-sharking…

Brad’s take was that “This is at most one-quarter true” and to call for Herbert to retire. Oh, yeah, and in November 2007, Brad’s prescience allowed only 50/50 odds on a recession (– if you want a reality check on conditions in November 2007, check out the archives of the Calculated Risk blog; for Brad to put the odds of a recession at 50/50 in November 2007 required the deployment of some major stupid).

Five years later, Brad was in a self-congratulatory mood. All the best people among economists were doing a great job and he was proudly using “we” to include his own lovely self in the golden circle.

We economists who are steeped in economic and financial history – and aware of the history of economic thought concerning financial crises and their effects – have reason to be proud of our analyses over the past five years. We understood where we were heading, because we knew where we had been.

In particular, we understood that the rapid run-up of house prices, coupled with the extension of leverage, posed macroeconomic dangers. We recognized that large bubble-driven losses in assets held by leveraged financial institutions would cause a panicked flight to safety, and that preventing a deep depression required active official intervention as a lender of last resort.

This is who Brad is. Robert Waldmann may put vaseline and gauze on the lens of his camera all he likes, but the real DeLong is what he himself will own up to, a neoliberal reincarnating an Eisenhower Republican, which is to say, a reactionary conservative congratulating himself that his reluctant acquiescence to a regulatory and welfare state makes him a practical liberal technocrat.

DeLong doesn’t care about Friedman’s arithmetic. He hates the concern shown for the economic welfare of the neglected hoi polloi. He is at pains to use technical mumbo jumbo to de-legitimate any suggestion that policy of the state ought to or even can take responsibility for the economic welfare of the dispossessed (who really should shut up and stop whining).

T @ 169: “what is the size of the gap between actual and potential GDP? . . . What economic mechanisms and permanently shift and/or tilt the trend? . . . I think the mainstream Keynesians have never fully addressed the former questions and have not at all reached a consensus on the latter.”

I think mainstream Keynesians have spent 70 years trying to ignore or deny the very existence of economic mechanisms. The core of the theory is imagining how a system of markets reach a self-regulating, self-stabilizing equilibrium with money as nothing more than a transparent numéraire, and the New Keynesians turn around to gaze at the actual economy, where prices are mostly administered by bureaucracies, and invent a panoply of ad hoc explanations for whatever is happening at the moment, all the while trying to avoid any but the most minimal “interference” with the “market mechanism”. And, you’re asking them to get real, now?

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T 04.29.16 at 7:27 pm

BW@171

DeLong is a bit of an odd bird. He is pretty vicious to anyone on his left. At the same time, he did issue a pretty harsh mea culpa for missing the GR, failing to understand finance and failing to understand the effects of trade agreements. But like most of the Keynsians, he has a short memory and has moved on to how to fight the recession rather than his own complicity in its cause. My comments to RW, sometimes expressed with a bit of snark, was to let him know that some of us haven’t forgotten. In a more constructive vane, I’m asking him to reassess why they were wrong and how it’s being fixed in the profession. I’m also asking if the error was one of ideology as much as one of an insufficiently developed science. These are uncomfortable questions. I hope RW goes there. He is one very smart guy.

The second question was more directed to JW (but is obviously central to the Keynsians as well.) He needs an explicit account of how fiscal expansion and other policies endorsed by the heterodox left will fix the loss to trend within the context of the current mix-economy. (btw — now that Sanders is kaput, I expect the Keynsians to refrain from the hippy punching and pretty much ignore them. The guys at MIT, Harvard, Berkeley, et al never paid too much mind to the folks at UM-Amherst before and likely won’t in the future. But you gotta dream.)

As to your general comment on the last 70 years of Keynsianism, well hey. It wasn’t long ago that natural scientists were talking about phlogiston and the ether. And to the extent that Ptolomic navigation worked pretty well despite being earth-centric, we would have been way better off using paleo–Keynsianism as a response to the recession despite its theoretical weaknesses. If economics is a science, it is a baby science.

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T 04.29.16 at 7:32 pm

auto-correct, fat thumbs, and failed editing have made many of my posts a bit of a language nightmare. i should remind myself to not look back once I hit submit…

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Rich Puchalsky 04.29.16 at 8:05 pm

T: “He is pretty vicious to anyone on his left.”

One more time (and I’m sorry to repeat myself, but I suppose that I’ll keep trying until someone shows some sign of understanding): DeLong was also pretty vicious to e.g. Lysander Spooner and Frederick Douglass, people who were not “on his left” in any meaningful way because their conflict occurred so long ago. So this doesn’t necessarily have anything to do with leftness as such. It has to do with (in my opinion) the discrediting of entire styles of thought or politics as inferior to the kind of thought that BDL understands or the style of politics that he feels comfortable with.

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JW Mason 05.01.16 at 3:14 am

Cranky @151 – Wow. I would not have expected him to spell it out that explicitly.

T @ 169 –

why did neoclassical economics fail to understand the conditions that led to the Great Recession? Why were Romer, Blanchard and Lucas all on the same page and all wrong prior to the crisis?

I make an attempt to address that here.

what is the size of the gap between actual and potential GDP?

The first challenge here is formulating the question. I am not convinced there is a well defined “potential GDP.” And whether there is or isn’t, you have to ask what are the consequences of missing your preferred target for aggregate expenditure on either side. One thing that bugged me about the DeLong post I mentioned is the implication that demand shortfalls permanently reduce potential, but periods of excess demand do not increase potential at all. If you read Laurence Ball on hysteresis (and I think DeLong would agree me that you should) you’ll see he finds that low unemployment increases the effective labor force just as much as high unemployment reduces it.

The Romer critique of Friedman — confusing levels and rates — is pretty devastating.

I don’t disagree. I have never defended Jerry Friedman’s paper. (Not that it matters one way or the other what I have said — just saying.) But the truth, boringly, is presumably somewhere in between. Increasing demand by 1 percent of GDP for one year doesn’t boost output by 1 percent forever, but it also doesn’t necessarily boost GDP by 1 percent for one year and leave it unchanged forever after either. Multiple equilibria are possible — the analogies of “scape velocity,” “stall speed”, the icy slope, etc. are expressing something real. For me, a good starting pint for thinking about these questions more systematically is the work of Axel Leijonhufvud.

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Stephen Frug 05.02.16 at 3:22 am

Since no one has done so, let me appreciate the Gene Wolfe reference in the OP.

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Henry 05.02.16 at 3:42 am

BdL is a fan of Wolfe – hence the reference. He isn’t, apparently, inclined to respond directly, which I can’t say I’m especially surprised about given past form (he does sometimes admit that he was wrong on the facts of something; I’m not sure that I’ve ever seen him apologize, even when he has been dreadfully badly behaved). He has however reposted Robert Waldmann’s comment from up above on his blog, including one bit that he certainly knows is quite wrong (Robert suggested that the redbaiting wasn’t aimed at me; but Robert is likely unaware that this isn’t the first time he’s come out with bizarre claims that I believe in the existence of a ‘universal class’). I suppose it’s one way to conduct argument, but I can’t imagine that it’s a particularly satisfying one for him – when poor old Jonah Goldberg makes a hames of someone else’s argument, it’s presumably because he’s not really bright enough to realize what he’s doing, but BdL surely knows enough to know that he should be doing better.

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