"Krugman says he's surprised to strongly disagree here with Delong on a few points:
But here’s where I think Brad is getting something wrong now: when he says that
I've been arguing Krugman should engage Sumner and push back for a while. This was a case where he really nailed it. In Zizek's terms, the 'purloined letter reached it's intended destination' this time.
What really is driving Sumner and friends crazy this time is that Congressmen actually picked this up and got it right.
P.S. The trouble with Furth's number is that it lumps in 2007-09 when there was EU stimulus and the last 4 years where they got out too soon:
But here’s where I think Brad is getting something wrong now: when he says that
It is unfair for Keynesians to be making fun of the people who call for austerity by saying “confidence fairy” when they are making similar expectational-shift arguments themselves.
It's surprising that Delong would waste time defending the confidence theory. The big trouble of course is that the confidence fairy has been demonstrably a false worry, with record low interest rates for all countries who can print their own currency. I don't get why that isn't worth laughing at.
Krugman also differs with Delong's taking the concerns about raising interest rates to damp down on booms seriously:
"One other thing: Brad takes fairly seriously the calls for higher interest rates to avoid bubbles, or something, essentially because low rates create moral hazard for the financial sector. Can we say that those moral hazard problems would have to be incredibly severe to justify contractionary monetary policy in a depressed economy?"
"And I can’t help noticing that the people now demanding that we raise rates to curb hypothetical bubbles are the same people who, a while back, were demanding that we raise rates to head off inflation. (I often make fun of Allan Meltzer for his inflation warnings, but had forgotten that Feldstein was doing the same thing at the same time). In other words, I don’t think we should ignore the evidence that some people always want higher rates, and just keep changing the justification."
Here I think Delong may mean that we should have higher interests during booms which is at least a plausible theory-a lot of people share it-as long as he doesn't think we're in anything like a 'boom' now.
Some of the Post Keynesians like Randall Wray argue for keeping rates low always-and basically devolving the Fed's duties into the Treasury.
Interestingly, Wray thinks that Krugman is 'inching inexorably towards MMT.' Sumner says he's going to 'help' Krugman by arguing that he has done no such thing.
Interesting as both mean to praise Krugman. On the other had, Sumner claims that Steve Landsburg has a 'serious' criticism of Krugman that he needs to respond to.
Speaking of Krugman, he really needs to address this criticism by Steven Landsburg, linked to by Greg Mankiw. If he doesn’t, look for people like Rogoff to say “I told you so.”
Reading Landsburg, I'm not as impressed as Sumner is. Landsburg clearly has a bee up his bonnet due to the surgical way that Rhode Island Democratic Senator Sheldon Whitehouse took apart the Heritage Foundation's Salim Furth's claim that the EU had done less austerity than the U.S. This is what Landsburg's criticism amounts to:
"There are a couple of legitimate reasons why Furth’s and Whitehouse’s numbers don’t agree. The first is that they’re for different time periods. Furth’s are for the years 2007-2012, while Senator Whitehouse’s are for the years 2009-2016. That’s right, 2016. Which brings us to the other reason these numbers differ: Furth’s come from the historical record, while Senator Whitehouse’s come from somebody’s ass."
Whoa! Comes from somebody's ass?!! I thought Sumner said this validates R-R who had called Krugman 'remarkably uncivil.' I guess Landsburg is showing us that only the Right wing guys are civil.
Actually what this outburst shows is that this testimony in Congress really hit a nerve-the strong way that Whitehouse questioned Furth. The Democrats are getting it. Krugman always worries that economic knowledge never makes it to the policymakers. Clearly Whitehouse has done his homework and that explains the outburst of both Landsburg and Sumner. Of course, Sumner can claim he had no outburst he was just linking to Landsburg who had the outburst.
But clearly he's not happy as Krugman and Whinehouse have clearly hit him where he lives as well. He's been talking up this angle lately: the U.S. has done the austerity. The EU has been profligate.
What really is driving Sumner and friends crazy this time is that Congressmen actually picked this up and got it right.
P.S. The trouble with Furth's number is that it lumps in 2007-09 when there was EU stimulus and the last 4 years where they got out too soon:
Roche on post-K vs MMT:
ReplyDeletehttp://pragcap.com/post-keynesian-is-not-necessarily-modern-monetary-theory-mmt
I see the issue with the confidence fairies this way; Keynes certainly talked about animal spirits, mostly in regards to equity markets and the such as I understand, but I dont think he ever argued that animal spirits or confidence was THE driver. The issue is causality, especially what can cause a depressed economy to restart. Confidence and animal spirits certainly play a large role in keeping a boom going but many on the conservative side seemed to be arguing that plain and simple confidence, on the part of the "job creators" was all that was needed to restart our economy. Thats two different questions I think. What keeps a boom going and what turns a bust into a boom, especially a big bust.
ReplyDeleteTo me its obvious we cant just wish or "confidence" ourselves out of a depression. Something besides that must get people wanting to spend again, normally its having access to enough money. Once the process starts and reaches a certain level then people will try and get out in front of things and try and reap profits from where people are spending. This will breed the confidence necessary to keep the run going.
Confidence can be a fuel but its not the ignition. We need an ignition
I really don't think that 'confidence' as in the confidence fairies is at all commesurate with what Keynes meant by animal spirits.
ReplyDeleteCheck this out;
ReplyDeletehttp://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
I'm fairly confident that the confidence fairies are for the most part, "con-fidence" men. Greg's right: We need ignition. The problem is that the proponents of austerity in the Congress would like to use the ignition to blow up the social safety nets currently holding the system back from total failure.
ReplyDeleteFrom the horse´s mouth:
ReplyDeletehttp://www.nationalreview.com/corner/350528/senator-whitehouses-austerity-mistakes-salim-furth