Black Hole....errr The Political Roundtable

[Zonkerbl]

Krugman's Insanity and the Hard Mathematical Truth

Yes this hardly article truth antichrist forwards looking aardvark!

[dobrojim]

One other thing about unemploy bene's

they're probably near or at the top of the list
of types of govt spending that are stimulative.
I'm betting Kyl LOVES a lot of other more extravagent
types of spending that are far less stimulative.

[nate33]

Spence, Krugman's solution to every economic problem is more deficit spending. It's a solution that works until we can't deficit spend anymore, at which point we have the mother of all Great Depressions.

Also, the Great Depression was not caused by excessive government spending. The Great Depression occurred during a time of extremely low federal and state government spending. Massive government stimulus, in the form of infrastructure and defense spending, is what pulled the United States out of the Great Depression.

First, I'd like to amend my first statement to say that Krugman's solutions are always more deficit spending and looser monetary policy. It's important not to leave that part out, because that's an even bigger problem.

Second, I disagree vehemently with your conclusion that Keynesian spending is what pulled us out of the Great Depression. Keynesian spending is what turned what would have otherwise been a 1-2 year recession into the Great Depression. We didn't get out of the Depression until the manufacturing base of Europe was obliterated in World War II, leaving the U.S. without competition.

[Zonkerbl]

WWII was the mother of all Keynesian spending programs.

[Spence]

Krugman's Insanity and the Hard Mathematical Truth

Ah, you're a Ken Denninger fan. Things make a bit more sense now. Yeah, I can see why you think Paul Krugman is insane. Well, I'm more inclined to listen to mainstream economists, who agree with Krugman on the vast majority of what he writes. Mr Denninger is not an economist, he's a stock trader and one of the founders of the Tea Party movement, as well as a friend and associate of Glenn Beck. To each his own.

[Spence]

Second, I disagree vehemently with your conclusion that Keynesian spending is what pulled us out of the Great Depression. Keynesian spending is what turned what would have otherwise been a 1-2 year recession into the Great Depression. We didn't get out of the Depression until the manufacturing base of Europe was obliterated in World War II, leaving the U.S. without competition.

Interesting. I have to admit I had you figured wrong, Nate. I thought you were sort of a standard monetarist, a Friedman-esque, Chicago-style conservative, but I'm much closer to that than you are. In fact, you're far more radical than that, espousing views held by virtually no real economists. You must regard almost every U.S. policy-maker, left, right or middle, as a communist or something close to it.

I think you and I can safely skip each other's posts on economics. I don't think someone attached to "lamestream" economics and the economic equivalent of a John Bircher are going to learn much from each other.

[Zonkerbl]

Ah, Spence, don't take other folks' opinions all personal. At least Nate is talking with us about it and giving us a chance to respond. You know?

[Spence]

SEVERN HOOS:

I'm prefer to err on the side of generosity so I'll assume you're not a liar, you're just foolishly relying on Mr Taranto, who is a well-known charlatan. The summation of Mr Krugman's views on unemployment benefits you provided earlier in this thread is so completely out of context as to be completely deceptive. Here is Mr Krugman's view of unemployment insurance, which comes directly from his own NY Times column:

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

Emphasis mine.

You and anyone else are free, of course, to disagree with Dr Krugman's views on economics. Fully-trained economists are naturally accustomed to attacks from people who have little or no training in the science. But let's at least try to accurately reflect his views, okay?

[Spence]

Ah, Spence, don't take other folks' opinions all personal. At least Nate is talking with us about it and giving us a chance to respond. You know?

I apologize. I never meant to give the impression that I am personally offended by Nate's views. I don't agree with his economic views, but they don't offend me at all. His views on economics are so far out of the mainstream that I'm quite certain they will never be taken seriously by anyone who will ever hold an important policymaking role in this country.

I bear no ill will toward Nate, at all, who I will continue to read regularly on other topics. I don't know him, but he seems like a decent person to me. But it is rare to come across someone of his views and I was naturally curious when I finally realized where he was coming from. When I said I won't read his economic stuff anymore I did not intend to insult, merely to point out that two people with such completely opposed views are not likely to have many productive discussions. I doubt the chairman of IBM has spent a lot of time shooting the breeze with Bolsheviks.

[Zonkerbl]

Wait, who's the Bolshevik in this scenario?????

[nate33]

Don't worry Spence. I take no offense by your demeaning insults that try to marginalize my viewpoint because it's not in the "mainstream" - a mainstream that failed to predict the 2008 collapse and has failed to fix it, I might add. I find my views are much more in line with Austrian school of economics, you know, the ones that actually did predict the collapse. I'll patiently await for the Keynesian school to continue to fail in it's predictive efforts. Eventually, you'll come around.

[Spence]

Wait, who's the Bolshevik in this scenario?????

Nobody. I'm a boring center-left-type. Nate's views are much more interesting, as I suspect he's an adherent of the Austrian school.

[Spence]

Don't worry Spence. I take no offense by your demeaning insults that try to marginalize my viewpoint because it's not in the "mainstream" - a mainstream that failed to predict the 2008 collapse and has failed to fix it, I might add. I find my views are much more in line with Austrian school of economics, you know, the ones that actually did predict the collapse. I'll patiently await for the Keynesian school to continue to fail in it's predictive efforts. Eventually, you'll come around.

Nate, as I wrote above, it was never my intention to demean you or your views. They are well outside the mainstream, as you acknowledge, which was all I meant to convey. Going back over what I read, I can't really find anything I wrote that could properly be considered demeaning, apart from my original assertion that you don't have a clue what you're talking about in re Paul Krugman. I stand by that assertion and would add that someone who refers to another person as "insane" really isn't in a position to be lecturing others on their manners. I'm sure you would agree with that.

As far as your adherence to the Austrian school, that's pretty much what I figured. To set your views in opposition to Keynsian economics is not quite telling the whole story, though, is it? It isn't just Keynesians who regard the Austrian school as pseudo-economics. This is also a view held by New Keynesians and the Chicago School. This covers economists from the left [like Paul Samuelson], the center-left [like Paul Krugman], the center [like Jeffrey Sachs] and the right [Milton Friedman, Bryan Caplan].

Finally, some from the Austrian school saw the Global Financial Crisis coming, but others did not and still others got the timing badly wrong. The Crisis was also foretold by classical economists like Nouriel Roubini [aka Dr Doom]. One of the most famous from the Austrian school, Peter Schiff, badly screwed up on what would happen due to the Crisis. From The Wall Street Journal:

Peter Schiff predicted a collapse of the U.S. financial system. The bust-up he didn't foresee was the one that made mincemeat of investors who took his advice in 2008.

Mr. Schiff's Darien, Conn., broker-dealer firm, Euro Pacific Capital Inc., advised its clients to bet that the dollar would weaken significantly and that foreign stocks would outpace their U.S. peers. Instead, the dollar advanced against most currencies, magnifying the losses from foreign stocks Mr. Schiff steered his investors into.

I'm not convinced by a school of thought that favors deduction over induction derived from empirical mathematical and statistical studies. You are. Fine with me, but don't confuse disagreement with hostility. I've worked on The Hill and in politics and long ago got over the idea that people who disagree with me are wicked. There is nobody on this board less hostile to you than I am.

[Severn Hoos]

Spence - thanks for your generosity. Good to see there's no namecalling or guilt-by-association going on here, it's the model of civility.

I'm not arguing the "context" of his columns or what he says in them. The context is provided in his economic textbook. On page 206, he begins the discussion of unemployment, covering structural, frictional, and cyclical unemployment. On page 208, he writes:

"Structural unemployment occurs when the wage rate is, for some reason, persistently above WE. Several factors can lead to a wage rate in excess of WE, the most important being minimum wages, labor unions, efficiency wages, and the side effects of government policies."

Then, on page 210, he has a section on the side effects of government policies, quoted in full above and here again:

"Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries."

Please feel free to follow the link and explain how it is out of context to say that Krugman states that unemployment benefits (and unions,for that matter) will have the effect of increasing unemployment. Is it worth it? Is the stimulative benefit greater than the unemployment impact? Is the impact marginal? (he doesn't say so in his book, but does in his column.) All separate questions.

Do unemployment benefits increase unemployment? Krugman the economist says yes. Krugman the political columnist not only won't concede the point but essentially calls you insane for holding it.

But then, consistency is the hobgoblin of little minds and ours are far too little for one such as Mr. Krugman....

[nate33]

Spence, your posts tend to be filled with snide derision whenever you disagree with someone. I'm used to it, but you really need to reconsider your writing style if you truly bear no hostility to anyone that disagrees with you.

[Severn Hoos]

Spence, your posts tend to be filled with snide derision whenever you disagree with someone. I'm used to it, but you really need to reconsider your writing style if you truly bear no hostility to anyone that disagrees with you.

Well, he did study under Paul Krugman...

D'oh! There I go again!

[Spence]

SEVERN HOOS: I addressed what Krugman wrote earlier and I thought it was pretty clear. And please don't lecture me about manners, Mr Smart Stats Guy. [No, you're not going to live that silliness down.]

NATE: Point taken and I'll watch my writing style in the future. Just out of curiosity, if I referred to someone who holds economic views different from my own as "insane," would that be snide derision or would that be something else?

[Severn Hoos]

Fair enough, Spence. I get what he wrote in the column, but it essentially contradicts what he wrote in his own textbook. And then he mocks a Senator for making a factual statement that is exactly in line with what he wrote in said textbook. Do you disagree with what he wrote in the textbook?

I guess we'll just have to go back to what we agree on. LeBron sucks.

[montestewart]

SEVERN HOOS: I addressed what Krugman wrote earlier and I thought it was pretty clear. And please don't lecture me about manners, Mr Smart Stats Guy. [No, you're not going to live that silliness down.]

NATE: Point taken and I'll watch my writing style in the future. Just out of curiosity, if I referred to someone who holds economic views different from my own as "insane," would that be snide derision or would that be something else?

I don't comment all that much in here, but it does make for good reading. I think the "insane" comment prodded me a little bit, but never forget that web writing doesn't include intonation, body language, smiling face, etc. I have family and friends that range from leftists and liberals, through evangelicals, to neocons and Tea Partiers (and truly, that range can be represented just by close relatives; family gatherings are a hoot). It's helpful in maintaining relations to depersonalize intellectual arguments. Debating with an opposing view helps clarify positions, and everyone can be enlightened by that.

[Spence]

Fair enough, Spence. I get what he wrote in the column, but it essentially contradicts what he wrote in his own textbook. And then he mocks a Senator for making a factual statement that is exactly in line with what he wrote in said textbook. Do you disagree with what he wrote in the textbook?

I guess we'll just have to go back to what we agree on. LeBron sucks.

SEVERN, what Krugman wrote in his textbook is classic economics. This is what he wrote in his column:

workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

Note three things:

-- use of the word "slightly," indicating Krugman believes unemployment benefits reduce the willingness of the unemployed to take the first job offered to them;

-- Krugman writes that recent economic research suggests the link between unemployment benefits and worker behavior is much weaker than previously believed. In other words, Krugman is indicating his views may have changed somewhat with the introduction of new information, which is more or less what one would expect from a scientist;

-- Emphasis on the fact that reducing incentive to take work is a real effect when the economy is doing well. Krugman was writing [column published on July 4, 2010] when the economy was weak, weaker than it is right now. Krugman, like virtually all mainstream economists, believes unemployment benefits have little or no impact on worker behavior in a weak economy and that, whatever the impact on behavior, it is outweighed by the positive effect of putting money in the hands of people who will definitely spend it, thus helping to stimulate the economy.

Now, you and everyone else are free to disagree with those views all you like. But I don't see any contradiction with what he's written previously in other forums.

Finally, Lebron definitely sucks. Never thought I'd be so happy to see the Cavaliers win a game.