
Prof. Krugman received the New York Association for Business Economists’ Annual William R. Butler Award at a luncheon on October 4. There were about 100 in attendance.
Prof. Krugman spoke from notes and did not have a formal title for his speech. But as the orientation of the association is forecasting, that was the general direction that his remarks took. He is pessimistic about the outlook, not only for the U.S. economy, but more generally for developed countries’ economies. In the process, he made a central point about the inadequacy of the policy responses. According to him, both U.S. monetary and fiscal policy responses have been less robust than Japan’s response after its real estate bubble burst. So a long period of very little growth is the outlook Prof. Krugman expects. The in-joke is apparently renaming the Chairman of the Federal Reserve Benanke-san.
A key phrase he used in his evaluation of the policy response to the economic crisis was “failure to rise to the occasion.” My question, the first in the Q&A, was in keeping with the theme of his remarks.
In December 2008, you were at a book salon on firedoglake. In the thread, three of us pressed you strenuously on why you thought that President Obama’s economic team: Summers, Geithner and Bernanke, architects of the economic disaster, would be the right people to salvage the U.S. economy. You’ve clearly changed your opinion. Can you go back over what you missed back then and what has now led you to evaluate them as failures to rise to the occasion?
He gave much the same answer that he gave in 2008, namely that he knew those men and he thought they were smart, understood the problem, and flexible enough to advance the right policy measures. Scanning the record, he did not use the word flexible in 2008. The implication of using it in his evaluation of what he missed, is that he has, upon reflection, decided that the economics team is NOT flexible. That was exactly our point in 2008. All three had a long record before Obama chose them, and nothing in it suggested they would do anything but continue to support corporations at the expense of citizens, voters, consumers. . . .
Krugman added detail to his answer, with the caveat that he had no inside information. With respect to Bernanke, he just sighed and wondered why he wasn’t the same person in 2010 he had been in 2000. On Summers, Krugman has surmised that Summers’s advice to Obama was that the Republicans would obstruct and that the Obama Administration couldn’t get more than $800 billion, which became $700 billion on compromise. Krugman’s rejoinder was that if Summers thought it would take $1 trillion (or whatever the larger amount was), then they should just have asked Congress for $1.1 trillion and compromised on $1 trillion. On Geithner, he mentioned that U.S. Treasury Secretary is always obsessed with what the [financial] markets will think, which Krugman characterized as a “mug’s game.”
Then Krugman paused, and said, “It’s fundamentally about the president.” Geithner and Obama are “soul mates, both cautious guys.”
Of course, that was our point back in 2008. Namely, that you could forecast the quantity and quality of Obama’s economics policies by the people he appointed to fill the jobs.
What to make of Krugman’s failure to see that the ‘guys’ he knew as smart and up-to-the-job, turned out “failures to rise to the occasion?” The most charitable interpretation, and the only one for which I currently have any evidence, is that Krugman is a poor judge of character, especially of the character of people he had previously worked with from time to time without conflict. Unlike reporters, Krugman has no access, and is thus not worried about losing it. Like every human, and perhaps with greater consequences for more prominent people, there is a reluctance to make public criticism of important people unless there is a lot of evidence. Thus, there was no downside for Hugh, selise, and me to utter harsh opinions of Obama and his economics team in December 2008. Not so for Krugman, who had much more downside risk on being wrong on an unfavorable opinion than being wrong on a positive one.
The problem is that Krugman is a public intellectual, one of the few on the progressive side of economics matters in the U.S. these days. That he helped hide Obama’s agenda by incorrectly evaluating the economics team, gives Krugman some small share in the responsibility for real suffering caused by the grave U.S. economics problems. His error also reduced his credibility, as he will be remembered first as an Obama supporter.
There were many other interesting points in Krugman’s remarks and his responses to other questions. But rather than making this post longer, I’ll check the comments frequently, and pass along any information Krugman gave that bear on your issues.
Two other issues to mention, to whet your appetites.
Krugman does think that a banking crisis in Greece could well cause/force it to leave the euro.
Krugman is very disappointed with the economics profession more generally. His words: there were things that I thought were settled matters 50 or more years ago, that came up again with some economists seeming to go back to Hooverite rhetoric. He gave three examples: influence of adequate Keynesian stimulation, liquidity trap, paradox of thrift. That economists didn’t come out in great numbers and defend those simple points at precisely the time that they are critical is amazing. This has been a source of wonder to me too.
[Photo: Paul Krugman, by Prolineserver via Wikimedia Commons]



123 Comments

I suspect that even though PK won an Nobel Prize, is a tenured prof at Princeton and a NYT columnist and comes at this all from the left side he is still a believer in capitalism and how it works – markets and so forth. S left he may be, but he is not radical enough (even if he understands it) to present the emperor’s new clothes – The US economic system is one vast pyramid or ponzi scheme which will work as long as you keep feeding it from the bottom. And all the bubble creation of the recent past was all about percolating wealth up to the top of the pyramid driven by those at the top who benefit.
He’s not about to declare a support of a bottom up model where those at the top are not making out big time and in proportion to their status on the pyramid. That’s just too radical. The rich must remain rich and powerful and drive the economy and everything else in society.
The left and people like Jane, and Zinn believe in people power and if enough people toss in something it adds up and they can engage and overcome the few at the top of the pyramid. It sounds good and usually means installing a new set of leaders who then become corrupt, but little guys can’t even organize enough to change almost any aspect of the game and like Sisyphus they just keep at the only thing they know – trying to get the little guys to work together a one. It’s not happening.
What we get is the incrementalists such a PK who simply want a kindler and gentler “fascism” for all intents and purposes. How bout a little more gas to kick start the only klunker. All we need a bigger middle class cos dat’s America to me!
I take Krugman’s near silence to be evidence of “professional courtesy” which you might remember is the punch-line of that old joke;
“Why won’t sharks ever attack a lawyer?”
But, back in 2008, he did agree with us/me that being wrong about our economic outlook, and thus economic policy, were part of the job description for Obama’s economic team and so, reading between the lines I assumed he was saying clearly, if a bit too softly, for my taste, that we could expect more of the same Wall St-centric policies from Obama.
IMHO, we should be glad to have Krugman’s analysis, and accept as our own, the responsibility to convince our leaders that we understand the nature of our economic problems, and that we do not believe the myths we are being sold by the FCM, (fawning corporate media)and expect different, and more effective solutions.
In short, I don’t believe we’d be in much better shape if only Krugman was more aggressive in his criticism.
eCAHN, thanks for your detailed report.
As Watt4Bob say, there is a great deal of professional courtesy in academia which probably led Krugman to be soft on Summers and Bernanke. You can see it in Brad Delong’s posting of the same period. But I think you need to give Krugman (and Delong) credit for being as vocal as they could in early 2009 that we needed a stimulus
north of $1 trillion. They were unfortunately naive to think that Christine Romer would be able to prevail.
Your point about professional courtesy is well taken, but he is now criticizing them, so it is not the end of the story. If you don’t don’t analyze the policy makers, you are several steps behind the game, and then there isn’t much point in being a public intellectual. There’s no real separation between the policy makers, the policy & the outcome, except for the usual large gap between forecasting & reality, and between intended & unintended outcome. But those difficulties don’t absolve you from the effort, they just point out how difficult it is to do it well.
And Krugman took on the role voluntarily. He could always stop if he thought professional courtesy precluded being honest about his erstwhile colleagues.
You are also right that it’s our job to be hard on the public officials, but not only on them, but on all their defenders.
Of course Krugman goes along with the discipline that is his life’s word.
He didn’t mention anything about the income distribution nor the vital role of the U.S. consumer in bringing the developed economies out of the slump. When I mentioned the income distribution omission to him after the formal part of the meeting broke up, his not-too-thoughtful rejoinder was: Yes, but that’s political economy. I wasn’t sure of what to make of that, since there’s no really separating that out from the mix either. More likely he meant it in the context of giving a speech before a group whose primary job is forecasting.
Thanks, eCHAN, for this post and your analysis; I’m glad you’re reporting on your questions to PK and his answers.
I agree with prior comments that, while it might have been good or nice if PK had been more forthcoming in his analysis of the O Economic team from the beginning, I doubt it would have made much difference. I don’t agree with everything that PK says/writes, but at least he has provided an more insightful perspective, and I feel that, most of the time, PK strives for his own version of truth, integrity and solid analysis of the situation.
In other words, I don’t see PK as total corporatist shill sell-out. There’s always room for improvement, of course, but at least PK is willing to say what he’s saying now.
Will check back to see if you leave any more info from this meeting. Very interesting.
Watt4Bob & allan,
On further reflection, I’m guessing that a lot of what you refer to as professional courtesy goes on at a less-than-conscious level. Which is another reason why it would take more evidence to get Krugman to change his mind than it would take an outsider. I was mulling that issue over in the bus on the way back to the country, as there are multiple ways to look at how humans are motivated & act.
After meeting him (I also joined the small group conversing with him before we sat down to lunch), I wanted to like him. He is personable, reasonable, answered the Qs, both in the small conversation & the general meeting with intelligence, insight, and is articulate. IOW, has none of the demeanor of the usual jerks we see in his kind of position.
It’s a top down world and people in power who make these policy decisions are at the top and they will always think as they do because of their environment up there. There’s no other outcome. And you don’t get upstairs if you bitch to much about the system and you won’t even get much of a platform except perhaps in academia or on the interwebs where you can be called another nutcase in pajamas whinning.
PK has a platform but he’s all about saving this ship as opposed to mutiny and a complete new course.
What got the three of us so exercised is that the stakes were/are soooo high. It’s real people’s lives we are dealing with, not some intellectual exercise.
Agree that PK’s being more accurate would not have made a difference in the short run, but (1) gotta try, and he’s in a better position than most and (2) drip, drip, drip, drip might make a diff over a longer period, in which case starting the dripping the sooner the better.
Also, he is partly guilty of his own criticism & disappointment with his profession, as expressed in my last paragraph.
Yes, I quite agree with your points on that. It is disappointing that PK didn’t stand up and be counted from the very beginning. Thanks again for reporting on this. Keep it up.
Quite. Well, PK is at least somewhat part of the “establishment,” so he has a vested interest in it remaining in tact.
Part of what I’m trying to do here is assess how much credibility PK has. It is not a matter of none vs complete, but rather where along the spectrum to place him.
Everyone with any public forum is part of the establishment. So they are the only people who can influence the public in a more general sense. I think it’s worth the exercise to try to fine tune their creds.
Yes!
And Yay! for “our” eCAHN for asking the questions and telling us here about the responses.
I like Krugman – will not join in on “PK ultimately supports the fascists.”
How many other prominent economists are expressing their disappointment with their own profession, as he does regularly?
And boy, do I agree with his comments about the amazing rejection of what seemed to have been settled matters. It’s as if the Great Depression and the New Deal programs never happened, or as if Hoover’s terrible decisions were what rescued the economy.
Thank you, eCAHN.
thank you eCAHN, good on ya !
You’re welcome.
There are many folks whose cred wouldn’t be worth the effort to fine tune and who are not worth the benefit of the doubt, like many pols. And in our disappointments, we tend to lump too many into that category.
Yet another reason for trying harder to figure out those who shouldn’t be lumped in.
You’re welcome.
Glad you got to ask your question and thanks for the information. PK needs to be in this administration.
Better on the outside pissing in, methinks. If he went in, he’d probably be secunded, or, like Romer, quickly leave.
It is incorrect IMHO to see the solution solely in terms of another or larger stimulus package. We need to stop our wars and divert military expenditures to infrastructure rebuilding. We need to end the Bush tax cuts and the income tax benefit hedge fund managers receive. Krugman has a bully pulpit of sorts which he should use because no one can touch him. The worst that may happen is he won’t get a job in the administration which he won’t get anyhow. Perhaps he has dreams. Once he awakens he can lose his inhibitions. For reasons known only to him he hasn’t screamed though he gets more shrill with the passing days.
PK did talk about the composition of the stim, infrastructure in particular. He did not mention stopping the wars, as that would have opened up a whole new subject that he did not want to divert the meeting toward. There was one whiney Q about eliminating the W tax cut for incomes above $250,000, which Krugman handled with kid gloves because he knew many attendees were in that category. He just pointed out that the higher tax rates would be only on the income in excess of $250,000, and that, anyhow, the huge majority of the tax benefit, and therefore the cost of eliminating it, didn’t kick in until you got to the top 0.2% of income, or $2 million/year. And he also pointed out that households with those kinds of income did not have the same propensity to spend as lower income folks did, so chances are it would provide extra revenue to the USG without diminished aggregate demand by a comparable amount.
couldn’t agree more eCAHN… i like Krugman, he appears genuine in his criticism and analysis unlike anything written by shills like Robert Samuelson, but on some issues he appeared to have been compromised. Take his lack of criticism of Bernanke (and yes, there will always be a certain loyalty to your first boss in academia) and his cave on Public Option as examples. This is understandable to the extent that the opinion page of the New York Times is the establishment for punditry, and they will only let you go so far in rocking the boat. Applying that filter when reading Krugman has been very helpful.
i don’t see how PK could ever work for Obama unless President 70% does a complete 180 on every economic initiative for the last two years. And I see that scenario occurring when pigs spontaneously take to the air in flight while belting out showtunes.
Is completely avoiding this central topic now the bedrock norm in ‘economics’?
It’s very clear he still has a soft spot in his heart for Bernanke. B isn’t his first boss in academia
(from his wiki) But I’m guessing PK really likes being at Princeton.
I have read the first essay in Bernanke’s book about the Depression, and it’s a real piece of garbage. And just the kind of garbage (regression analysis) that I have the experience to debunk. I was going to write a diary on it, but feel obliged to read several more of the essays to make sure I have missed something before I do, and that has so far exceeded my garbage tolerance.
So IMO, I can’t imagine why anyone would either like (given his plodding and supercilious public demeanor) or respect Bernanke (given what I know of his allegedly seminal work), but there you are. I don’t know the man and undoubtedly he has SOME redeeming feature which is not apparent to the great unwashed.
BTW, I blogwhored f you early this morning. Linked to your diary on Taibbi, which I was sorry to read. Another idol with feet of clay.
Thanks for your report, eCAHNomics, but I expected Krugman to parrot those false “solutions” for the US.
I believe we’re experiencing class warfare, which I’m calling the Second Civil War. I certainly wasn’t the first person to recognize what’s happening and I think all who finally realize it will come to that realization in their own way at different times for different reasons. Class warfare is a foreign concept. We’re used to thinking that it can happen elsewhere but never here. We’re used to thinking that we’re Americans first. That idea is one of the foundation principles of what it means to be an American. The Moon plunges into the Sun and the solid ground beneath our feet turns to liquid when we question it. To reject that centering idea is to set forth on a journey into the unknown with no hope of ever returning to the secure hallucination we comfortably inhabited, a place called home.
Generally, it takes a severe shock to the system like losing your job through no fault of your own and maybe your home because you can’t find another job, despite excellent qualifications and experience. Paul Krugman sees that happening to others and it troubles him, but it hasn’t happened to him and likely won’t because he is a big name tenured professor and former Nobel Prize winner.
I do not begrudge what he has. I believe his heart is in the right place and I like and respect him, although I don’t know him personally. I just think it’s going to take him longer to see the reality that I see, assuming her ever sees it all.
BTW, Lloyd Blankfein, he who proclaimed that he does God’s Work, warned the Basel conferees to back off on regulating the banks with differing sets of rules in different countries because in the end the banks will relocate to the country with the least prohibitive regulations.
Globalization means that there is no allegiance to any nation. It’s all about maximizing profits now and absolutely nothing else matters, including respect for the Rule of Law.
Hi eCahn. Thank you for keeping us informed.
Early in this administration I was hopeful with some of O’s choices:
Rahm would run “interference” and keep O safe from The Opposition;
O’s economic team knew where “the bodies are buried” and would come clean.
I was naive to a fault that O meant to honor his campaign promises.
Try as I do, I still can’t figure out Obama – irrespective of chess moves.
Trojan Horse seems appropriate.
I’m confused. Is your point that the U.S. will split into a civil war, or that the world will unify under the banksters?
And as the U.S. has already had one civil war, I surely don’t understand your point about how it is unAmerican.
Hiya Pat9. Read Paul Street’s first book about O. (I haven’t read the second one yet, but that might be good too.) Unlike you, I saw a lot of what was coming. I didn’t read Street’s book until over a year into O’s presidency, and by then both my general understanding and the details I had observed, allowed me to retain a lot more of the details Street provided.
One of the things that I seemed to have picked up from reading O’s book Dreams, that no one else I know did, was how narcissistic he is. One niece, an English teacher, loved how it was written, for example. What I noticed was how it was all about him. It was published years after he did his community organizing, yet there was no afterward to tell us what happened to those other people & his projects. Clearly, they were of no further consequence once he had milked them for what they were worth.
What was your final verdict?
It is a near certainty that the Bush Tax Cuts including the upper bracket cuts will be extended.
Neither PK nor anyone can break through the bubble of Trickledown “Truth”. Milton Freidman, Reaganomics is de rigueur in most Media outlets 24/7.
Just the other day, the mayor of New York, Bloomberg opined on the importance of reinstating the Bush Tax Cuts in total. He also said he supports Meg Whitman.
Tax Cuts create jobs. Everyone knows that! /S
It was disappointing that PK did not tell the truth earlier about Geithner, Summers, Bernanke.
To wingers he’s a pinko Commie, anyway. Might as well tell the truth.
I guess he didn’t want to sh*t where he eats.
Whoring appreciated, thanks.
I think that krugman is very overrated by the liberal blogosphere. He is very pro free trade and his nobel prize IMO probably had more to do with endorsing that establishment approved view than the work that he was actually awarded for, which was essentially for explaining things that already happened. He also turncoated away from the public’s interests and towards the democratic establishment’s when he supported the health care bill w/o a public option.
He wrote an essay critiquing his professional field (http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html and somehow overlooked the influence of the fed on the economics academia in corrupting it by funding findings that support the fed’s agenda. Instead, he provided innocent reasons as to why the vast majority of his profession was so wrong … romantic reasons tied to numbers and beauty and all kinds of other really nice things that caused them to oh so innocently miss bubble after bubble after bubble … as wall street got richer and richer and richer. God, he makes you feel so sorry for them, you almost just want to hold one in your arms and protect them and tell them that everything is gonna be all right … just like the vast majority of them have been telling us the whole time as things have gone to hell.
Basically, the truth that krugman dare not utter is that his profession in this country is CORRUPTED! They have been for a long time. Who hires them? wall street, the fed, the federal government … excuse the redundancies … and academia, the factory for these ideologues that also has its own incentives to play nice with dc coz they’ll play nice back. That’s generally how you become “successful” as an economist in this country: by serving the interests of wall street, the fed and the u.s. government.
krugman plays favorites. He loves the clintons. He was up for a position in clinton’s cabinet but … as he tells his favorite story … he was too blunt to get it. Whatever … he still worships bill clinton … anything clinton. He loves benny bernanke too … he backed another term for him … and raved about the great job he did in printing up money until wall street stopped making him cry uncle. Big accomplishment … it takes about as much talent as it does to fill up a pitcher of beer. But no wonder he loves bernanke so much: bernanke got him his job at princeton.
krugman continually blames ronald reagan for everything … and I’m getting so tired of this bullshit from the liberals. This is similar to the idiot republicans blaming Jimmy Carter for the housing crash due to some bill he signed for low income housing. (Hell, why not just blame it on James Polk. He’s the one that acquired california, nevada and arizona and the housing crash never would have gotten this bad if those states weren’t around.) But the liberals are often just as illogical as the republicans and just as blind to it. Anyway, reagan has been gone for a long time, any of the presidents that followed him could have changed course but they did not. reagan did not put them under some hypnotic spell, they made their own decisions and you can’t lay their decisions … and sell-outs … on a man that hasn’t been president in over 20 years.
krugman is a sell-out albeit a quirky one. He won’t go against the people that helped him get into the system. He’s been corrupted by the process that it takes to become “successful” and wealthy in his field. He is far from intellectually honest IMO though he is much more so when the republicans are in power.
Z
I like him.
But to evaluate my opinion of people you should have some evidence on my record. When I take an instant dislike, I have an uncanny record of being right. OTOH, my idols (not that PK is an idol, just someone I appreciate for what he does) often turn out to have feet of clay. So caveat emptor. *g*
Yes, he does know more than he says. When I spoke to him briefly after the meeting, besides mentioning income distribution, I also mentioned that the reason why they are going to extend the W tax cuts ‘temporarily’ is so they can tide over until congress gets taken over by the Rs and they can be extended permanently. He said, “Of course.” But that isn’t something he mentioned in A to the Q during the big meeting.
Thanks for the clarification. I give credence to my intuition because I think I am usually using analysis that is reality-based, I’m just not aware of it at the time. At this point in my life, I think I’d be more surprised if someone I admired didn’t have feet of clay or a skeleton-stuffed closet.
I missed that one. Thanks for the link.
Actually Yves Smith has a version of this in her book Econned. I can understand why the tone of Krugman’s essay would grate on you. You’d probably like Smith’s read better.
I was thinking of including this in a series of diaries under the general rubric, “What Is a Market.” I have the whole series pretty much sketched out in my mind. The first one would cover that kind of material that Smith & Krugman covered, but would argue that the neoclassical economists who hove to that absolutely nutzoid way of thinking about the economy wouldn’t recognize an Adam Smith market if they came face to face with one, and that their hidden agenda is supported by the usual suspects (Coors, Koch, etc.) because it benefits the rich. That’s where my project stalled. I don’t know enough about the history of economic thought, and I certainly don’t know enough about what the rich wingnuts support, to tighten up that case. I know just enough to be dangerous. I’ll bet if you read the same story written that way, you’d find it more appealing.
There was a survey of economists that Smith mentioned in her book, that I now have a copy of, that showed that only 3% of economists self-identify as neoclassical (the ones that want all that beautiful & pure math to back up their assertions). Trouble is, they’re all in the policy making positions, of all administrations, these days.
BTW, zeabow, I’ve always thought poorly about most economists. My undergraduate major was science (got into economics in a roundabout way), and economists don’t know how to analyze anything in an hypothesis testing way. The neoclassicals are the worst, since they develop these completely unrealistic data- & evidence-free models from pure math using ridiculous simplifying assumptions that make their conclusions laughable. When I took Ec 1 as an undergrad, I immediately wondered wtf they were talking about and learned barely enough to pass the course because I knew it was garbage.
Thanks for the post and update eCAHN, but on the subjec to professional courtesy, that apparently hasn’t stopped people like Roubini, Stiglitz, Bill Black, Simon Johnson, etc. Maybe they just have more principles and guts than PK?
I must not have expressed myself clearly and for that I apologize.
I believe we are involved in a class war that will likely turn violent before much longer. I believe it will be called the Second Civil War. I do not know how long it will last or how widespread it will be, but I do expect it to spill beyond our borders and I believe many people will die.
I predict the government will not survive if millions are jobless and left to fend for themselves without unemployment compensation, housing, and food. I do not see any evidence to believe that anything will change enough politically and economically to avert catastrophic human disaster. People will not go willingly into a dark night without a fight.
I hope I’m wrong, but I cannot identify a reason to be hopeful at this point.
Good points. Some of the diffs you point out, though are differences of style. PK is lower key, more collegial in general than Roubini, who also made a presentation before the same group about a year ago. Roubini is much more defensive, with an agitated demeanor, because he’s been attacked so much. Krugman showed just as much equilibrium in answering my criticisms from the left as he did those from the right.
As for Stiglitz, he had a great awakening. I’m not sure exactly when in his career, but I think it was when he was at the World Bank. I first ran into him when he was on Clinton’s CEA and came before the same group to argue, among other matters, that their work on inflation & unemployment showed different results that the work that had preceded it. But their method was exactly the same; they just fitted a slightly different regression analysis curve to the data. So in the Q&A I asked him why he was so certain his work was right when economists had been doing the same thing for decades. His A, as near as I came remember, is “Because we know more than they do.” You would not have liked Stiglitz in those days. He is one of the few examples where my original negative opinion had to be revised upward, but it was because he changed.
Don’t know Black & Johnson enough to comment.
That comment was much clearer.
So far I would disagree. You say
But I see no evidence to support your case. The only fight that’s being put up so far is financed & organized by the usual suspects. People are angry, but it looks like things will have to get a lot worse before any actual armed conflict would occur, and even then, the USG has so much power that they can nip it easily. A domestic insurgency would be much easier to be put down than one in a country the U.S. has invaded & knows nothing about.
But we stray far from the subject of the post. *g*
Thanks for sharing this post and for the interplay in the comments here. I love to read your stuff – doesn’t leave me with a lot to comment about, but I love to read it.
I, in turn, love readers like you. Praise, but no challenges. *g*
Yes, we do. Another time, perhaps?
I do enjoy reading Paul Krugman’s OpEds and I share his and your alarm that so many influential people have forgotten or discarded certain bedrock economic principles as if the Great Depression never happened.
Wise man say, “Better to have feet of clay and extra bones in closet to make new feet than skull full of shit.”
If your scenario comes into play, we’ll have plenty of time to discuss it later. A specific example of one of my general views of life: Why get anticipatory anxiety? There will be plenty of time to worry about it later.
Good one.
Perhaps the progressive left which still is willing to accept capitalism as an economic organizational force, should turn their eyes toward Stiglitz’s favorite young economist Ha-Joon Chang, who by the way has also been endorsed by, – drumrolll….Chomsky.
Why the World isn’t Flat:
http://www.youtube.com/watch?v=T5-ojv5-b3U
http://www.youtube.com/watch?v=T5-ojv5-b3U
And an Interview with Amy Goodman:
http://www.youtube.com/watch?v=7aMgmKiR48E
http://www.youtube.com/watch?v=Cfc-GQinwlQ&feature=related
I saw you mentioned him the other day. I read his book Bad Samaritans & liked it very much. I also saw him on book-tv on same book when it came out. Will check out your links later, as I’d like to get updated on what he’s doing now.
What I particularly liked about his book about development is that he actually looked at the evidence of what countries did that were successful at development. And it’s a pretty uniform record: mercantilist export driven model. And that goes a long way back in history, including UK & US. Which is why his title. After the rich countries did it, they tried to impose econ policies to prevent other poor countries from doing it, so that the rich countries could maintain their advantages. It was one of the first cases where the ‘hidden agenda’ was so clearly exposed to me. (Better late than never.)
On edit: He also makes a great presentation. I loved his performance that cspan showed. For example, he talks about the principle of comparative advantage wrt his 5 year old son, who would have a comparative advantage in shining shoes, and so there is absolutely no economics reason for not sending him out to do that to be a contributing member of the economy right now, rather than invest all that time & money in him to delay his entry into the productive economy as a brain surgeon in his late 20s.
OMG, I had a long reply to you, I edited it, and now it seems to have disappeared. I’m going to wait to see if it magically reappears before reconstructing it. I have something else to do right now, but check back later.
Aha, the edited version reappeared as #51 on my computer.
Hi eC,
I’m trying to help get progressives to realize that our ‘progressive’ economists, are little more than ‘compassionate’ neoliberals. I found Ha-Joon Chang’s economics to be fully anchored in a just model of capitalism, and very accessible to laypersons such as myself. As he intimated: Economics is 95% common sense, and the rest is abstract and socially detached modeling, econometrics, etc.
I pre ordered his latest book at Amazon, due out in January.
Bad Samaritans is also available @ Scribb:
http://www.scribd.com/doc/20987474/Ha-Joon-Chang-Bad-Samaritans
My whole approach to economics, as I indicated in 39, is empirical. Other than Ec 1, I had taken no courses in economics when I switched to working for Prof. Otto Eckstein at Harvard (courtesy of my first husband who was a grad student there at the time). I was a RA who helped him put together his econometric model of the U.S. economy. Although that technique has limited usefulness, which I eventually realized I had overused & outgrown, it IS empirical. After moving to NYC, I eventually went to NYU for graduate work, ending up with an ABD. All my graduate courses were useless except for one in Industrial Organization with Larry White.
The fact that I had so little respect for anything taught about economics in school is both a strength & a weakness. Its strength is that I never got caught up enough in it to be seduced or subverted by it. Its weakness is that I never learned how ‘real’ economists think, so I have been at a loss to unnerstan how all the stupidity actually came about.
So as I said, what I liked about Chang is that he looked at how countries actually developed rather than ‘theorizing’ about how they should develop.
Only an idiot and/or an ideologue would see the econ development story differently. All power to Mr. Chang, but it’s absurd that stating the obvious that everyone not coopted has long known gets you celebrated. But, that is where we are at in ‘economics’ (or mebbe econ development is ‘political economy’ now and not part of ‘economics’ anymore).
The answer appears to be that ideologues who get paid handsomely by the usual suspects think about economics that way. I’m just learning about how that stuff really works. It does bear some relationship to religion insofar as it is a belief derived from (in the case of religion) ‘revelation,’ in the case of economics from a kind of religion called math. (No offense to mathematicians who have contributed to the advancement of many fields, but if economics is one of them, I would like some evidence.)
Nothing to add but just HAD to compliment eCAHN on the diary, her comments and for sharing so MUCH with us readers . . . especially on a subject which I have very little knowledge of.
The comments in general are also stellar.
What a fine read start to finish about stuff I know so little about.
I sure know more now than I did.
Big H/T to all.
Ive heard of and studied sacred geometry, numbers, and astronomy.
Economics? Not so much.
I believe the Gentle One had the right idea when he went off on the money changers and booted them out of the temple at Passover.
That was way cool.
(((Larue))) Thanks soo much for your complements. What you appreciate is very much what I hope to accomplish. I agree that the comments are really great. And I thank each & every one.
As an economist, even an iconoclastic one, I’d have to say I don’t share your sentiments. Where our values might intersect is that what you are interested in and what I am interested in should both be for the benefits of humans, widely, not narrowly, construed.
Published Friday, Oct. 01, 2010
President Obama has asked Congress for an additional $50 billion in “stimulus” money to finance infrastructure projects. The theory is that the additional spending will cause businesses to boost production to meet this demand. Producers will add jobs, triggering increases in consumer spending that will ripple through the economy and fuel a stronger overall recovery.
Unfortunately, however, such government pump-priming hasn’t worked in the past, and there’s no reason to believe it will work now.
Sure, consumer spending accounts for approximately 70 percent of America’s gross domestic product, and increases in consumer spending would provide the economy with an immediate boost. But a drop in consumer spending is not what ails the economy. In fact, as a percentage of GDP, consumer spending actually increased during the downturn, the Commerce Department’s Bureau of Economic Analysis reports – from approximately 69.2 percent of GDP in the fourth quarter (October-December) of 2007 to approximately 71 percent of GDP in the April-June quarter of 2009.
Link
ABOUT THE WRITER
Robert Higgs is senior fellow in political economy with the Independent Institute
[Mod Note: In order for FDL to stay within Fair Use guidelines, copy and paste only 2 or 3 paragraphs and provide a link.]
Guessing you need to read about a lot of subjects. You might start with the investment accelerator & multiplier effects. Wiki offers a start, but Paul Samuelson’s Principles would probably be a better source.
Strikes me you are also unfamiliar with the paradox of thrift. Anyhow, good studying up to you.
My 63 was a reply to 62. Thought I had that covered.
Um, mod, that would be copy & paste, not copy & past. /pest
Sorry, the devil made me do it. Had to have some comic relief on an otherwise VERY serious thread.
~~~My bad. Thanks, L.~~~
No apologies needed. *g*
“The fact that I had so little respect for anything taught about economics in school is both a strength & a weakness. Its strength is that I never got caught up enough in it to be seduced or subverted by it. Its weakness is that I never learned how ‘real’ economists think, so I have been at a loss to unnerstan how all the stupidity actually came about.”
_________________
It came about from students uncritically believing the things that Paul Samuelson says in his ubiquitous textbooks.
Well, this certainly turned into an interesting thread eC, thank you, thank you, thank you.
Reminds me of Nassim Taleb, author of The Black Swan, I’m sure you’ve read it.
Taleb is another skeptical empiricist, and has stated that he holds most economists to be un-ethical.
I say Krugman is the exception that proves the rule.
You might say I value Krugman as an interpreter, his education, professional experience, and yes, that Nobel Prize provide enough credibility to prevent the Wall St. gang’s efforts to dismiss him from being absolutely effective.
He’s our man on the inside, timid or not, it’s good to have someone to plainly explain the exact nature of the fallacies being sold as universal laws of physics.
I don’t expect him to tell me what to do about it.
I should have exempted the parts of Samuelson that dealt with macro. It’s micro that’s nuts. Not all parts of micro, mind you. Supply & demand is a fine concept as long as you forget all the utility BS that it is built on.
I tried to spotlight this to Paul Krugman, and got to “submit” and was prompted to enter a code that I didn’t see anywhere on the page. I tried a couple of times with no success, including refreshing the page.
Everyone who reads this should send Paul a copy. I have left the link on his blog.
~~~ModNote: The Spotlight function is currently disabled.~~~
Thanks msmolly. We’d love him to come back & comment. I’m sure he’d have some interesting things to add.
I’m turning in the trowel for tonight. I’ll dig back in tomorrow morning. Looking forward to more good stuff and have a wonderful evening everyone.
Thanks for the note, Mods. I’ve never had a problem in the past so I was puzzled.
eCAHN, Paul does much of his own moderating so I’m hopeful he will follow the link even if he doesn’t post it in his comments.
In other words, Samuelson is correct when he promotes what you believe and incorrect when he doesn’t. Why aren’t you writing the textbooks?
The utility BS was the only part of 101 I grasped, our professor (a former and failed haberdasher) employing a white dress shirt for his example, increasing it to two white dress shirts, and so on. In the day, a white dress shirt was more important than today.
Someone in the comments mentioned Chomsky. (You get and deserve smart readers.) He’s our treasured documentarian of sour grapes, probably the best at explaining the near-present (i.e., yesterday) by extrapolation of the past. Chomsky stops short of prediction, I figure bc he disdains the social sciences.
Professor Krugman might also have a bad hangover from sour grapes, but his profession looks forward while recalling the past only whenever appropriate. In December 2008, he must have tried to avoid appearing shocked (he does that well since he always looks shocked) at the humorous kind of fate that had given Hillary Clinton more votes from voters but not enough delegates to the convention. It’s also worth remembering from the recent past (but earlier than December 2008), that Professor Krugman said he prefers a single-payer HC system for our society, but that our kind of politics wouldn’t adopt it in the near future.
He’s a good guy, and your respectful journalism here is highly admirable. Thank you, and encore. Often.
I should note that it is not only the fed that funds intellectual corruption in our country’s economic academia; it’s also wall street and the federal government. An example of the federal government doing it is with jonathan gruber, who touted obama’s health care plan with a study with some very questionable assumptions such as companies would raise employee’s pay due to their decreased cost of employee’s health care plans hence justifying the cadillac tax. Remember even though gruber and the administration did not divulge the financial arrangement … and the obama crew touted his work as support for their plan … krugman wrote a column defending gruber and the whole arrangement.
IMO, there’s no way that krugman is unaware of its effects on the economic field of study and on why so many of them “got it so wrong”.
Z
The best economics textbook can’t be published because no one could edit it. It’s like what Bobby Fischer once said about the impossibility of a chess computer’s ever defeating him since he also has all the games ever played in his head plus those no one else knows.
An example of wall street doing it is when larry summers was cashing on speeches to goldman sachs … and other wall street outfits … while he was a faculty member at harvard to the tune of $135K for one speech.
And krugman can’t find anywhere to include this dynamic in an 8-page explanation of why so many economists got it so wrong in supposedly never seeing the huge housing bubble? IMO, that’s a purposefully incomplete analysis that was much more concerned with defending his field of study and his colleagues than illuminating to the public what the true causes were.
Z
i started corresponding with PK ,through candy grams i sent to him ,because at the time ,he was the only one in the NYT to stand up to Chimpy & Co. in print…what balls he had…so when i subsequently met him at a conference,i was surprised at his humble demeanor,this was 4 years pre NP. i really respect him
agreed
United States of Goldman……..
I agree with your sentiments. I realize that I sound awfully harsh at times, and there is no doubt that I have a sharp edge and a willingness to lash out. What can I say? I too am an iconoclast, a Cancer Sun with Moon in Virgo and Scorpio Rising. I’ve spent a lifetime being of service to others and will continue to do that until I’ve taken my last breath. I am a storm. I believe in the Golden Rule and struggle like hell trying to live up to it. I hate injustice and I’m really upset about what’s happening to my country.
Fortunately, I can still laugh at myself and my pretentiousness and I’m still willing to learn.
Nevertheless, I still don’t see anything sacred in economics and never really gave a damn about money, although I will readily concede that it has a certain usefulness. As Lord Peter Wimsey said, “It’s so damned inconvenient to be without it.”
Yes, let us all work together to benefit the many and let us pray that we can make a difference by the example we set rejecting selfishness and acting non-violently in the spirit of peace and love.
Good night and
Namaste.
Thank you for writing this. It was very interesting.
I recently read Krugman’s book -The Accidental Theorist: and Other Dispatches from the Dismal Science. It is a collection of essays on a variety of economic matters. He writes with clarity and wit.
His intellect and humanity shine through the essays. This is a good example.
I know that last sentence will enrage some.
Thanks eCAHN. This is one of the best posts I have ever read.
I like the joke:)
Assuming facts without evidence even logical people want to believe sometimes.
I am thinking that might be an Authoritarian trait Bush was famous for picking men of failure same as Obama. Krugman as an Authoritarian hmmm not enough evidence for me to make that call but I agree bad judge of character.
This why the blogs are better than the media we can say mean things about important people.
Diary :)
That sounds like something we could research.
I was tired last night when I responded, so let me add some details.
Samuelson & other academics are correct when the evidence supports what they say. Otherwise, they are incorrect.
WRT whether it’s consumer spending or investment that leads the way into and out of business cycles, here’s the historic record. Housing is often the first sector to turn, which has nothing to do with business. Then consumer spending on durables, which are postponable. Business investment spending lags, with some parts, like factory construction, lagging by a lot, sometimes more than a year.
The multiplier effect is important because it is what amplifies the cycle. So demand for housing or postponable consumer durable goods turns up or down, which effects jobs, up or down, which effects the purchases of those consumers, and so on in a multiplied effect.
The accelerator effect refers to the fact that business investment spending is more volatile than consumer spending, even the more cyclical components of consumer spending. That volatility relates to the fact that as consumer demand drops or rises, capacity utilization rates drop or rise, which dampens or spurs investment demand not only for replacement (capital goods wear out less rapidly or more rapidly), but more greatly influences the need for capacity. That is, biz investment is derived from consumer demand in an accelerated manner.
The inventory cycle, a more short-run aspect of what economists call biz investment, amplifies the business cycle even more.
Put more simply, why would business be interested in investing now, at 74% capacity utilization? No matter how certain USG tax or other policy is, business simply does not need any additional capacity, and the capital goods they already own are wearing out less rapidly. Here’s the capacity utilization data. Scroll down to the second table for utilization rates. The high for the 1990s expansion was 85% (lots of reasons why the peak is much lower than 100%), down to a low of 68% in the Great Recession, now back up to 75%. That figure suggests that, with a lag, declines in biz capital spending should be diminishing, but it not high enough to spur rises in capital spending.
So not only do the leads & lags definitively show that it is consumer demand that is the key to business cycles, but logic reinforces the case.
It is the greater volatility of investment, for the reasons I’ve detailed, that holds up consumer spending as a % of GDP. IOW, that figure is meaningless in light of the behavioral model I’ve detailed.
And of course, Keynes comes in & recommends that shortfalls in consumer spending be temporarily filled by government demand as one way to get the economy out of recession.
I think I covered why I haven’t written a diary on that yet. I feel obliged to read more of his work first, and there’s only so much pain I’m willing to subject myself to in any period of time.
Thanks for the additional comments after I retired last night. I’ll check back from time-to-time today (Wednesday) and try to answer additional ones.
x2
You funny.
Just you wait until someone dredges up something you typed on a blog in a situation that is really important to you. Online stuff never disappears, ya know. *g*
Thanks, Ecahn.
Tried to ‘Spotlight’and send further, but final step of ‘enter code and send’ not working. Sent note to them about it. When fixed will send around.
I noticed Louis Ruykeyser is still on Spotlight’s CNBC email list.
So, added him to it, too.
Thought he would enjoy reading it -
From Heaven.
;)
Take Care.
Just saw in comments that ‘Spotlight’ is disabled. Anyone know ‘Why’?
That would have been nice to know before I took the time to do it and the time to contact them. Wouldn’t have commented otherwise.
Will do it the old-fashioned way, E…I still have a few email addys from old letter-writing days.
Take care & ‘see ya in the movies’.
:)
Glad you posted it, thank you.
Yes, if spotlight is disabled, the button should be removed.
Thanks dmac & nice to ‘see’ you.
DMAC, haven’t seen you around here lately (maybe you’re on different threads than I am). Hope all is well with you.
I just noticed that some nice editor added Krugman’s photo. Thanks to whoever it is!
Heh. I have a ‘little list,’ and sometimes it brings people out of the woodwork.
mWAH.
: )
Hey msmolly. Haven’t been in here much. Come in and read here and there. Hope all is well with you all…
And yeahah, there are a few that can bring me out of the woodwork….ecahn being one of them…
I was so happy she posted it, had to comment and support her doing it in the hopes she will do it Again…
: )
I remember the flowers!
awwww, wow, that made me tear up. you deserve armsfull….hope to make it North and bring more in person.
: )
OK. Got dinner guests tonight, so off to get house in order, start food prep. Will check in periodically during the day.
I doubt I will ever be important enough for that to matter but I hope I’m wrong thats the kind of problem I want right now:)
Did Paul talk about China restricting the export of Rare Earth Metals?
No. The only thing he said about China is that its economy is not big enough to be the engine of growth for the world economy. The small group talking to him before lunch when I walked up was asking Qs about China, more along the lines of exchange rates, but the conversation just switched to Greece as I joined them.
“Housing is often the first sector to turn, which has nothing to do with business.”
___________________
Housing has nothing to do with business? Don’t you suppose that when home sales and construction are at a peak that there might be significant activity in building materials manufacturing, warehousing, trucking, etc., etc., as well as employment in these areas? And that when home sales plummet and new construction grinds to a halt businesses in this sector will shrink or fail with consequent layoffs? The housing construction sector currently has the highest unemployment rate of all labor categories. Only a revival of the unsustainable housing bubble would alleviate that. These workers aren’t returning to the job anytime soon, if ever, and deficit spending on dubious highway projects isn’t going to change that.
If he did then is China in violation of free trade agreements what does he think America should do about that?
What does he think America will do about that hybrid cars, wind mill turbines, solar cells all need Rare Earth Metals.
Thanks that was quick. Any other countries besides Greece likely to default to their debt?
Maybe the housing market goes up for whatever reason before an economic upturn begins, before business improves, consumer demand goes up, businesses hire new people, wages go up compared to inflation etc.
Thank you, eCAHN, for this diary. I don’t know why it wasn’t front paged yesterday, but, nevertheless I’m glad that so many pups took the time to read and comment.
(Another “Hi” to dmac, from me.)
It wasn’t front paged and it has this many comments? Whats the record for a diary for most comments without being frontpaged?
I don’t know. Mayby one of SD’s Caturday diaries?
Good point:)
By nothing to do with business I meant that the beginning of the cycle (downturn or upturn) is not initiated by business or business sentiment, but rather by monetary policy and consumer sentiment as prime movers. Of course, once the change in direction has started, all the consequences you point to occur.
PK had nothing to say about that & that is also not my area either.
Employment lags & wages lag even more. Cyclical turning points had been mainly initiated by changes in monetary policy, and in a different sense, still are, in that monetary policy is a main cause of bubbles (Greenspan & Bernanke demurs nothwithstanding), and bubble bursting now is a main cause of downturns. Easing monetary policy has brought economy out of the burst bubble downturns, until this time, when the FRB used up all its ammunition & the economy is now in a liquidity trap.
OK folks. I got called away to watch my first home grown honey spun, so now I’m really behind on dinner prep. I’ll check back if I have the time, but don’t count on it.
And thanks again for all your great comments & questions.
Welcome to my world where I could never understand why those with less talent became the bosses of those with great talent – forcing folks to change jobs. Then close to retirement it hit me. In my third professional job my CEO took me aside and said “No one likes someone that is always correct”. In the US we have a system that kills anyone with more talent than his boss unless the fellow had the luck to get noticed by those above his boss – and later I found even that did not work to do much more than delay the problem because the boss would work day and night to kill you off – and that will wear down your support – and indeed those above that protected you will retire.
Only a very average “go for coffee for the boss” clerk type can survive the politics, and if that person can sell “self-assurance” he will get ahead. Warton made acting a requirement in their MBA program 25 years ago and I did not understand why at the time. Oh well, nerds do survive, they just end up depending on Social Security rather than having large Bank CD’s put away to draw on.
(((papau)))
Being in the forecasting business, I never had to worry about being disliked for being someone who is always correct. *g*
e – a few thoughts, most stem from impressions from the initial days of this mess that still resonate when I read your post –
Someone in Krugman’s position also risks it becoming about ‘Him’ instead of the policies and actions he is analyzing…as I recall, there were many trying to do just that. Spent more time on his bio and why it would influence his illustrating others’ conjectures than the analysis he was Trying to convey. I sat there and watched it, waited for him to throw up his hands and say, well, have fun, here’s my number if you want to hear what I think.
Something so multi-faceted as the ‘recession’ is hard to articulate to the general public due to its terminology/processes being so compartmentalized, then add-in the to-date unprecedented factors at play. Then add-in the fighting about what to do that deliberately, and pointedly by name, detracted from what he was illuminating. He couldn’t even get out what was happening, let alone what to do about it for Months. That’s what I remember. His frustration.
Bow and arrow vs. platoon of M16s. Even if the best bow hunter in the World, a half-aimed rifle shot from an army of Gomers will win.
That of course does not address what the administration was doing while PK was trying to be heard and add valid circumstance to the pile. For that, I have no idea what they thought they were doing. Or whom it was supposed to benefit. All I know is, they put Krugman out there and then did their best to make sure it wasn’t about anything but Him and why his opinion was merely ‘intellectual’ and not valued as a tangible voice in a solution. He was easily dismissed. In the media, Noone asked him the right questions and reigned him in when he attempted to illustrate points the interviewers couldn’t comprehend enough to raise.
I am interested in the other points you mentioned if you post another. : )
OT – And a jar of honey would be nice…rofl….how much was harvested? That machine is fun to watch. YUM.
OT – ((((demi demi demi)))) every time I see Issa I think of you and your meeting…rofl…he’s still there, isn’t he? : ) UGoGirl. Hope you are still playing your flute.Friend’s daughter just started with hers…thought of you.
Stopped in to support ecahn, and am glad to see some familiar names.
: )