Scott Sumner and Bob Murphy: Profiles in Nitpicking

     If there were no Paul Krugman, Murphy would have to invent him-otherwise what would he talk about; his favorite subject by far is Krugman bashing. 

     Bob is back to one of his favorite parlor games-allegedly proving that Krugman in hindsight said something years ago that was wrong. It must be nice to be as perfect as Mr. Murphy who doesn't has never been wrong about anything. 

     Usually what he uncovers in his 'Krugman was wrong!!!' meme is so trivial as to strike one as rather pitiful that he would even pursue such hairspliting. 

     Not surprisingly, Scott, who is a pretty fair nitpicker in his own right, had to get in this parlor game. 

     "For a guy who has been right about everything, Paul Krugman sure is wrong about an awful lot of things.  Bob Murphy has an excellent new post which digs up lots of Krugman claims that turned out to be somewhat less then correct."

Krugman, armed with his Keynesian model, came into the Great Recession thinking that (a) nominal interest rates can’t go below 0 percent, (b) total government spending reductions in the United States amid a weak recovery would lead to a double dip, and (c) persistently high unemployment would go hand in hand with accelerating price deflation. Because of these macroeconomic views, Krugman recommended aggressive federal deficit spending.

As things turned out, Krugman was wrong on each of the above points: we learned (and this surprised me, too) that nominal rates could go persistently negative, that the US budget “austerity” from 2011 onward coincided with a strengthening recovery, and that consumer prices rose modestly even as unemployment remained high. Krugman was wrong on all of these points, and yet his policy recommendations didn’t budge an iota over the years.

Far from changing his policy conclusions in light of his model’s botched predictions, Krugman kept running victory laps, claiming his model had been “right about everything.” He further speculated that the only explanation for his opponents’ unwillingness to concede defeat was that they were evil or stupid.

     http://www.themoneyillusion.com/?p=29447

     Which policy conclusion does he need to change according to Bob? He admits that he too thought nominal rates couldn't go negative-does he claim that Krugman still believes they can't?

    As for austerity, as usual he and Sumner go for the lowest hanging fruit. I mean they lower the bar so low as to be absurd: according to them-and we know that Sumner has been crowing about winning an imaginary bet from Krugman for 2 years-I guess that's how real economists comport themselves; now that's maturity-if you do austerity and the economy doesn't simply explode, then it is in no way a harmful policy. 

   I mean if the minimum wage were raised and the economy didn't explode they'd complain that they never claimed it would-that they were talking 'about the margins' and 'deadweight loss' and all that but with austerity unless the economy shrinks by 10% then it's been shown harmless and maybe beneficial. 

   Keynesians don't need there to be a double dip to show that it has ill effects just that the economy would have grown faster than it did if there were no foot on the fiscal break. 

    "First, taking the totality of empirical macro and macro theory on the impact of fiscal shocks, the weight of evidence is greatly in favour of what Ferguson and others are calling ‘Keynesian’.  Which is that an experimental yank of the fiscal tiller to tighten it will contract the economy, temporarily.  How much is uncertain.  That this obtains for all levels of initial debt is dubious.  But I’m pretty sure that the UK is/was in the region where fiscal tightness could not have been expansionary."

     "Observing that the UK eventually started growing again after a few years of shrinking deficits doesn’t tilt this weight of evidence.  Indeed, as others have pointed out, what we saw is entirely consistent with the consensus view that fiscal shocks are temporarily contractionary.  (If I were lecturing my MSc macro lot, I would also tick them off for making no proper attempt to identify fiscal shocks – what was alluded to by the ‘experimental yank at the fiscal tiller’ phrase above.  But that is for another post.)"

     "Some were undoubtedly predicting that the economy would enter a death-spiral of ever greater deficits following austerity.  We haven’t seen such a death-spiral.  But that this hasn’t happened doesn’t disprove that that was a consideration worth weighing in the menu of policy options.  [In fact, I’m sure it did weigh on policymakers minds, else the medicine would have been doled out in harsher doses]."

     https://longandvariable.wordpress.com/2015/05/19/austerian-empirical-macro-wars/

     What Scott and Bob need to show is not that there was no double dip but that they can prove that it wouldn't have grown faster if there hadn't been austerity; I mean no one considers this recovery to have been impressive-it took 6 years and the economy still has some acute problems in terms of wages. 

    Traditionally after a shock as deep as 2008 you would expect to see GDP at twice or three times it's rather pedestrian 3% during the recovery. 

     This attempt to make Krugman look silly has as usual made Murphy and his buddy Sumner look silly. 

     Maybe Scott can run out and win some more bets to redeem himself.