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Daniel Kuehn
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Smith, Hayek, Friedman, Keynes, Samuelson, and Stiglitz have logic and evidence on their side. Say and Marx make decent points now and a gain but have both done considerable harm. I am still abysmally unfamiliar with Mises (with no remedy in the near future, unfortunately), but I'd guess he'd be tagging along with Hayek in this assessment. Not following the premise of the question, I know, but then I think there are problems with the premise.
They make good points although I wouldn't accept a strong version of Friedman's claim. Take Keynes. Sure we can see roots in Malthus, but he takes quite a different turn from Malthus too and criticizes him on many points. There is novelty to Keynes, although he is also reintroducing older ideas. So I suppose old/novel need not be a dichotomous choice. I don't understand why you think that Keynes or any of the others denies the fecundity of the market. That seems wrong as a matter of history of thought on its face.
"I did see a lot of what I would consider bad papers presented by the struggling up and coming -- focused as they are on 'data' and not the theoretical mechanism unlocking the empirical puzzle." I find this intriguingly cryptic (and obviously I've got a vested interest in good practice on this front). I could imagine it meaning many different things, some of which I think I'd agree with you on and some of which I wouldn't. Care to elaborate or even give examples?
I agree with some of the other commenters on how he addresses the questions you raise. I think it's also good (1.) not to always treat Kotlikoff like the gold standard on this question, although he's certainly a smart guy (wouldn't a "serious public conversation" cite more than him on the state of the debt?), and (2.) to separate the intergenerational entitlement concerns he spends a lot of time on from some of the other transfers inherent in a social democracy. Lots of people are worrying and thinking about the sustainability of entitlement programs but that does not mean it's right to copy-and-paste those concerns to other parts of the budget. Finally - it's a little misleading to use the economic freedom index to assess social democracies, don't you think? I'm not deeply familiar with the data so correct my if I'm wrong but they sort of by definition assume social democracies aren't free based on how they score freedom. You may want to assert that, but you can't really prove the point by citing data defined that way.
Brian you've just furnished a quote where he is explicitly saying that monetary policy should be conducted differently, and implicitly references how we've been doing fiscal policy that he thinks should change. Doesn't this very quote prove my case? Monetary policy is obviously in better shape than fiscal policy - the difference of opinion there is on future guidance sorts of concerns.
Brian Gladish - What?!? I think the last thing Krugman wants is continuing the same policies! On stagnation - I take Keynes's position on this. More optimistic, like Barkley, and less radical or deterministic than say Hansen. That is, I think economies can sit in a stagnated state for an extended period of time (the negative equilibrium interest rate is a CONSEQUENCE of this state, not a cause), but not that it is doomed to be in that condition. Barring underlying demographic factors like Japan's, I don't expect stagnation to be an extended affair. Market economies have incredible capacity for growth - it's just what they do. But that doesn't mean there couldn't be a "secular" stagnation for a painful length of time. Hell, five years is a painful length of time as it is.
I agree completely with the Hayek quote. I sympathize with the Friedman quote but don't entirely agree with the application. Obviously I have the same concerns about the Fed's action in specific circumstances (notably the Depression and to a certain extent even now), but the question is not whether it's perfect - of course it's not - it's whether the alternative would be better. I want rules-based Fed policy but I don't know that central banking itself is the principal problem. I agree with the Smith quotes you've posted here. Smith is a little naive about public finance and we've learned a lot since his time. Malthus even began addressing a lot of that in his Principles. But I think it's a mistake to copy and paste an 18th century quote to the 21st century in a progressive science for precisely that reason. In other words, I'm not convinced that given the ensuing 300 odd years of economics since Smith, that he would be on your side of things Pete. On the broader points of classical political economy - fiscal responsibility, sound money, skepticism of government - I'm very much in agreement with him. On the specific points I'd have differences. re: "Do you believe that if we had a system where arrogance and opportunism were held constantly in check, that we would have a CEA?" I think we have a CEA precisely to hold arrogance and opportunism in check. It's good we have economists talking to politicians making economic policy.
But Pete, you're conflating more optimistic than Pete Boettke with abandonment of the classical tradition of skepticism of government. That, I think, is a mistake. I'm fully willing to agree that I'm willing to do more with government than you are. I'm not going to concede that you're holding up a Smithian legacy I've abandoned. re: "Markets fail, but governments fail as well." Of course.
I think you are cherry-picking some of the points here. As one example, on optimism or pessimism about the market, Malthus, Keynes and Keynesians are leaps and bounds more optimistic about the market than Ricardo was in the long run. They are of course more pessimistic than Ricardo on short run stability. It's hard for me to not make the same assessment. Does that make me pessimistic about the market? I don't think of myself that way at all. I'm incredibly optimistic about the market, more so even than some classical political economists like Ricardo or Mill. And I support fiscal responsibility, suspicion of the state, and sound money too... UNLESS those turn into euphemisms for libertarianism. And if it's a political view we're disagreeing about, let's say that. Let's not pretend that it's the orientation of classical liberalism we disagree on. We don't. We have different political views of the details. Obviously there was a big change with Keynes, but I don't think it's quite the change you've tried to establish here.
Oh yes I know the review. And it should go without saying I don't mean anything bad by suggesting I feel along the same lines about you. I would assume being classed in the ranks of Stiglitz, Knight, and Boulding wouldn't bother you all that much...
I'm not sure if you'll like this or not, but Stiglitz actually. He is in the top three most brilliant economists I've come across. But he also makes some very odd claims - his whole the invisible hand doesn't exist thing. And what's puzzling for me is just like with your description of Knight I know he is not that naive (he's no Naomi Klein or someone like that), because he's demonstrated it elsewhere. I'm even less sure if you'll like this, but it also reminds me of you. Simultaneous brilliant insights and deep command of the science with claims that want to make me bang my head against he wall.
And there is a difference, I think, between this and saying life is fuzzy and complex and can't be reduced to a logical formulation. To a large extent this IS true and we can't do everything with math or verbal logic.
I would think the opposite would be the case, though, Daniil. Verbal reasoning if anything adds complications to the exposition, right? Given that a problem is amenable to logic in the first place I would think Occam's razor would militate in favor of math. I'm not sure I'd propose that as a hard rule or anything, but I have no idea why Rothbard seems to be claiming the exact opposite.
Could someone in the know on Rothbard explain what verbal logic has to do with Occam's razor? Is there some kind of implicit assumption here that verbal logic offers the most parsimonious answer? I don't get it.
I don't think it's correct to say that the majority position is the majority for one thing - I think both the positions you describe are minority positions and the majority position is much murkier, ill-defined, and not based on much economics at all. But I also think it's a mistake to say that what you term the majority position isn't in agreement on the power of the pricing system to guide the recalculation process. So far as I know, none of us have denied that point. The analytic difference, it seems to me, is whether the market guarantees full employment and whether collective action through other institutions can achieve full employment or something like it with minimal costs. But if you approach the difference as if people are rejecting the power of the price system to coordinate economic activity I think you're going to leave a lot of people scratching their heads.
btw, Alex, the biggest public choice concern with libertarianism for me is not that it could never happen. I could see how it could potentially happen (you're seeing the beginning of that now). The problem for me is that it seems extremely vulnerable being co-opted by special interests - much more so than a constitutionally limited, liberal, but active state that consciously takes the public interest as its object. When we've hints of this co-optation in the Reagan revolution gone wrong, the Tea Party gone wrong, Rothbardians paling around with segregationists, etc. - all we get is a true Scotsman response. It wasn't REAL libertarianism in the first place. That, it seems to me, is a sign of a system that is very fragile and liable to co-optation. Contrast that with the constitutional liberalism of the United States which isn't perfect but seems to be stable and functional for over 200 years now. Since I care a lot about politics without romance, the success and robustness of that model matters a lot to me. I'll take that over libertarianism, myself.
Alex - I would suggest, though, that it's largely a matter of how it is practiced, and it's a matter of not finding a usable result. I don't think anyone wants to toss out the market economy, and as Mark pointed out above very few people want to toss out the state. I think if you look at the work of, for example, Allan Drazen and more of the political economy literature you have stuff that is less contested. I don't know why that is, but for some reason public choice seems to be a lot more highly politicized. Maybe that's my perception but if it's not perhaps it's something for someone else to answer. And maybe I am barking up the wrong tree here, but I've seen too many people get "politics without romance" hurled at them that are wholly aware of the lack of romance in politics.
I haven't made the claim that I can be certain of anything Mark.
Mark - I was 100% with you through the example so I'm not exactly sure what has been lost in translation. I don't think I've missed Pete's point (or if I have just little snippets and corners of his point). We agree that nothing is going to be perfect - that was sort of the whole point of that passage! - I think it's a lot harder to defend the claim that we can never know what better is outside of decisions to trade. In fact given the common incongruence of willingness and ability to pay it's certainly wrong that that is going to be the best of an imperfect set, and it's almost certainly wrong that we can't fairly certainly come up with better ideas (again, imperfect better ideas). This can't be true - "To say that markets aren't perfect and neither is government, but using government can better an existing status quo misses the point that politicians and bureaucrats aren't perfect - in fact, many are malevolent." Because lots of people think the first half and don't miss any more than you or Pete do that politicians and bureaucrats aren't perfect. [As an aside I think the malevolence is rare, at least in countries with liberal institutions like ours - but of course they are around]. re: "government has a very limited role in bettering social welfare." Absolutely! Limited, but important, though.
Gene - That passage isn't the ace in the hole people treat it as. It's a funny little passage if people take the time to read it. Kennedy's done a good job pointing that out. But on the broader point he seems far too strenuous to me. If Smith had only written his first three chapters we'd pretty much have what people attribute to the invisible hand passage. So practically speaking I don't think there's much harm in the misreading of the invisible hand passage itself.
Take the recent Lind question. It was a little ham-fisted in execution but the question was a perfect opportunity for some really robust soul searching by libertarians of the public choice problems with their often romantic politics. Did we get that? Nope. Mostly just denunciations (Russ had a nice long talk with him... I've heard good things about it but haven't listened yet). It's situations like this that concern me about public choice and endogenous politics in practice. Its not analysis that has proceeded as objectively or dispassionately as other areas of economics.
It's a very good post. The trouble is, a good public choice account seems to be very much in the eye of the beholder. I've all but given up getting a real answer to the public choice problems I see in libertarian policy discussions, and I've also all but given up on getting much admission on the holes I see in some of the favorite arguments used. It is easily the most politicized sub-field (for understandable reasons, of course). It's also often used the way an intro student will use market failure theory. If there is even a whiff that there's a government failure involved (as there will ALWAYS be - it's government after all - hardly the tool of choice for an efficient outcome), people act like that's the end of the discussion. That's not a legitimate answer - the question is, will the imperfect mixed solution, the imperfect state solution, or the imperfect market solution be comparatively better. It gets very old for people who see politics without romance to get repeatedly told they need to see politics without romance, and one starts to suspect it's because we're not coming up with the answers that people want to see. Clearly none of this is a disagreement with what you're interested in. I obviously agree. It's a statement of how this always seems to work out in practice.
What Barkley said times ten. It's also important to keep in mind what some of the major debt run-ups have been and really ask whether Keynesianism even speaks to them. A big one has been national security concerns (real or perceived). Of relevance to this graph is entitlement spending. Neither has much to do with Keynesianism. In practice Keynesians have been on all sides of each question. Both would pose fiscal concerns in the complete absence of Keynesianism. Neither in words/inentions or in actions/consequences has Keynesianism exacerbated the political economy concerns around national security spending and entitlements as far as I can tell. I prefer just to not use "Keynesian" to talk about this stuff - but if you insist on it I think we need to recognize that now the word has very little import for Keynesianism as most people understand it.
Rob Atkinson is a pain. Just a couple weeks ago he wrote a real sloppy response to a paper I had out of EPI that accused me and my co-authors of just trying to "advance an agenda of redistribution". I've got very similar analysis that's going to be published by the Cato Institute soon, so something tells me a desire for redistribution has little to do with it. You're exactly right - their principle concern here is their policy goals. The list of myths is interesting... some of them are just plain wrong, but then the ones that make sense from the perspective of economic science are presented as if economists oppose them! Why the contrast? They need a whipping boy and they've picked one.
The other obvious point to make, of course, is differential MPCs when we compare cutting checks to just going out and spending it.
Toggle Commented Jun 18, 2013 on Neoclassical Synthesis Redux at Coordination Problem