He writes another piece that claimed Krugman is biased. It's an improvement over the last post doing the same that claimed he is a spoiled brat but what strikes me is he really doesn't prove any bias on Krugman's part whatsoever.
He certainly gives us some interesting charts and data to chew over. The main thrust of the post is to compare monetary to fiscal policy in various postwar recessions. The data he believes shows that monetary policy is what's key in each downturn. Whether or not this is so, I don't see how the data makes the strong claim of Nunes' title: that Krugman is biased.
Part of this is that he really doesn't discuss Krugman in the post except at the very beginning and then at the very end. Here is the first paragraph:
"In his NYT column Krugman also says:
Here is a novel argument. Fiscal policy doesn't work because it's been used very seldom and policymakers must have had good reason not to. By this premise how do we ever have progress in science? After all, if there is a new idea, theory, or invention, well, anyway it must not work as if it did it would have been used in the past.
Marcus takes issue with a post that argues that fiscal austerity is slowing down the recovery.
"Anyway, the logic of the ‘austerity – anti austerity’ debate eludes me. This research from The Brookings Institution has an ‘arithmetic’ or accounting take:
What strikes me about Friedman's argument here is it's nothing but a counterfactual. Monetarists never burden themselves with an answer, they just demand that Keynesians burden themselves with one.
He then finishes the argument of Krugman's bias with this finishing paragraph:
"Krugman says the fiscal contraction is the result of ‘austerian hysteria’. That may be so, but the important thing to note is that the economy remains depressed or, more congenially, the recovery remains weak, because monetary policy so ‘desires’ and not because fiscal policy is contracting."
He hasn't actually shown this in the data. At best it's not always easy to draw causation from correlation. However, the whole line of argument he uses here is what Monetarists have always used. They claim to see correlations and demand that Keynesians prove there isn't causation on this real or imagined correlation.
Rather than saying Keynesians need to prove that the economy would not have grown at this same rate without monetary policy Keynesians should argue that the MMers need to show that monetary policy doesn't work better with fiscal stimulus than without.
Yet this whole piece is not about fiscal stimulus. It's one thing to not argue for stimulus-increasing government spending. Yet what Marcus and other MMers are doing is arguing for austerity-cutting back.
There are some interesting charts in the piece, Yet even here its' an assumption that the state of monetary policy can be measured simply by NGDP. This assumes that it's able to wholly drive NGDP when this hasn't been shown.
Anyway, thought provoking piece but doesn't substantiate the big claim that Krugman is biased at all. If he has a different view, fine. Where's the proof of bias, though?
He certainly gives us some interesting charts and data to chew over. The main thrust of the post is to compare monetary to fiscal policy in various postwar recessions. The data he believes shows that monetary policy is what's key in each downturn. Whether or not this is so, I don't see how the data makes the strong claim of Nunes' title: that Krugman is biased.
Part of this is that he really doesn't discuss Krugman in the post except at the very beginning and then at the very end. Here is the first paragraph:
"In his NYT column Krugman also says:
In the United States, government spending programs designed to boost the economy are in fact rare — F.D.R.’s New Deal and President Obama’s much smaller Recovery Act are the only big examples. And neither program became permanent — in fact, both were scaled back much too soon.
"What this may be indicating is that it´s not a good idea to design government spending programs to boost the economy. Maybe the powers that be get ‘cold feet’ and become frightened of the possible consequences."
http://thefaintofheart.wordpress.com/2013/05/09/krugmans-bias-part-ii/Here is a novel argument. Fiscal policy doesn't work because it's been used very seldom and policymakers must have had good reason not to. By this premise how do we ever have progress in science? After all, if there is a new idea, theory, or invention, well, anyway it must not work as if it did it would have been used in the past.
Marcus takes issue with a post that argues that fiscal austerity is slowing down the recovery.
"Anyway, the logic of the ‘austerity – anti austerity’ debate eludes me. This research from The Brookings Institution has an ‘arithmetic’ or accounting take:
There are more than 2 million unemployed Americans who might have jobs today if not for austerity.That’s the conclusion of a new study by Michael Greenstone and Adam Looney at the Brookings Institution. In the 46 months since the Great Recession ended, state, local and federal governments have cut about 500,000 jobs. In contrast, in every other U.S. recession since 1970, the government hired approximately 1.7 million people, on average. That means the U.S. is an estimated 2.2 million jobs in the hole.
"I don´t think you can talk about the power, or lack thereof, of fiscal stimulus without taking into account what´s going on with monetary policy. Unfortunately this is how the issue is stated, proceeding along the lines of “since we are at the ZLB, monetary policy has lost power so we can only rely on fiscal policy”.
It's not clear why it eludes him and his fellow MMers. Do budget cuts make sense in a recession or not? You may or may not think so but why is it hard for him to understand?
However, before we do anything we have to assume monetary offset according to the MMers.
"This reminds me of a 1969 debate between Milton Friedman and Walter Heller (Chairman of President Kennedy CEA in 1961-64) on Monetary vs. Fiscal Policy, having as backdrop the 1964 tax cut. According to Friedman:
…So far as I know, there has been no empirical demonstration that the tax cut had any effect on the total flow of income in the US. There has been no demonstration that if monetary policy had been maintained unchanged…the tax cut would have been really expansionary on nominal income…
What strikes me about Friedman's argument here is it's nothing but a counterfactual. Monetarists never burden themselves with an answer, they just demand that Keynesians burden themselves with one.
He then finishes the argument of Krugman's bias with this finishing paragraph:
"Krugman says the fiscal contraction is the result of ‘austerian hysteria’. That may be so, but the important thing to note is that the economy remains depressed or, more congenially, the recovery remains weak, because monetary policy so ‘desires’ and not because fiscal policy is contracting."
He hasn't actually shown this in the data. At best it's not always easy to draw causation from correlation. However, the whole line of argument he uses here is what Monetarists have always used. They claim to see correlations and demand that Keynesians prove there isn't causation on this real or imagined correlation.
Rather than saying Keynesians need to prove that the economy would not have grown at this same rate without monetary policy Keynesians should argue that the MMers need to show that monetary policy doesn't work better with fiscal stimulus than without.
Yet this whole piece is not about fiscal stimulus. It's one thing to not argue for stimulus-increasing government spending. Yet what Marcus and other MMers are doing is arguing for austerity-cutting back.
There are some interesting charts in the piece, Yet even here its' an assumption that the state of monetary policy can be measured simply by NGDP. This assumes that it's able to wholly drive NGDP when this hasn't been shown.
Anyway, thought provoking piece but doesn't substantiate the big claim that Krugman is biased at all. If he has a different view, fine. Where's the proof of bias, though?
No comments:
Post a Comment