Krugman Redistribution or Ponzi Scheme

by Chidem Kurdas

A nice thing about Paul Krugman, he does not mince his words. Thus his new book, End This Depression Now!, repeats as boldly as possible the central point he’s repeatedly made in his New York Times columns and blogs for years. Namely, governments have to spend a lot more. They have to run gigantic deficits, much more than they’re doing now. His penchant for going straight for the jugular means that the full implications of the scheme he advocates are crystal clear.

DeLong, Friedman and Maximal Government

by Chidem Kurdas

The case made for minimal government by Milton and Rose Friedman in their 1979 book, Free to Choose, has been debunked,  according to Berkeley professor Brad DeLong.  Basically, he avers that the Friedman program has been tried and failed. As a commentary on Friedman, this is outrageously misleading. But Mr. DeLong  provides a revealing glimpse of the left-liberal mindset.

Yes, Paul: It is Hayek versus Keynes

by Mario Rizzo

Although by the standards of contemporary economics, I am a historian of economic thought, I am not a historian of economic thought, properly considered. Thus my major interest in F.A. Hayek’s business cycle theory is not from the point of view of a historian. My interest is only incidentally in how Hayek’s contributions were perceived in the 1930s and 1940s, especially in light of John Maynard Keynes’s Treatise on Money and General Theory.

I am interested in Hayek’s business cycle theory because I believe it has much to teach us today – both in the style of reasoning it embodies and for its substantive points. Of course this is not to say that Hayek’s approach cannot be improved upon and revised in light of more recent theoretical and empirical developments.

But now comes Paul Krugman with his sometimes-echo Brad Delong (or is it vice versa?). Krugman thinks that Hayek was not an important “macro” economist; certainly not the rival or alternative to Keynes, either in the 1930s or today. 

Quick, More Stimulus!

by Mario Rizzo  

More than thirty-five years have passed since Friedrich Hayek said in his Nobel speech, “The Pretence of Knowledge” (1974):  

“The theory which has been guiding monetary and financial policy during the last thirty years… consists in the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level.”

Paul Krugman, Brad DeLong and others are now calling for bigger and better stimulus in the hopes of decreasing unemployment more rapidly. Most of this is wishful thinking or, should I say, value-signaling.  If you care about the poor and middle class, if you realize the irreparable harm that long periods (months, years?) of unemployment may cause, if you recognize the many unmet public sector needs we have, you would doubtless advocate more fiscal stimulus. In an equation: Good Person = Advocate of More Fiscal Stimulus. 

Further Diagnosis

by Mario Rizzo

Brad DeLong continues his long-distance diagnosis of my mental and moral character.

UPDATE: Steven Landsburg has a different take.

Crowding Out DeLong: A Clarification

by Mario Rizzo  

“What it [the total of stimulus-created or saved jobs — MR] doesn’t consider are the jobs lost due to the very policies that are “saving” jobs. Government can only spend what it takes from the private sector one way or another, either through taxation, borrowing, or the redistribution effects of inflation. For every dollar that government spends, there is one less dollar being spent somewhere else in the economy. The jobs that weren’t created because the private sector lacked access to capital due to increases in government borrowing should be offset against whatever jobs the stimulus supposedly is creating.”  Steve Horwitz.   

Brad DeLong says (in the comments below my previous post) that I got Steve Horwitz’s point about crowding out wrong and therefore my defense of Horwitz is inappropriate. Furthermore, then, I miss the importance of DeLong’s evaluation that Horwitz is incompetent.  

First, and most important, I did not intend my post to be primarily a defense of Horwitz and therefore an implicit criticism of DeLong in his criticism of Horwitz. (Got that, readers?)

I intended to say simply that (1) DeLong is wrong for not worrying about crowding out in its various dimensions; and (2) that someone who worries about crowding out, like Steve Horwitz, is therefore not clueless or worse.

Crowding Out Brad DeLong

by Mario Rizzo  

Brad DeLong thinks that, under present circumstances, the crowding out of private expenditure by fiscal stimulus is not a live issue. The basic argument is that since neither average wages nor interest rates have risen in response to stimulus, no resources are being diverted from private to public uses. 

I am unsure what the standards of good analysis are among Keynesian macroeconomists, so I proceed with some trepidation. However, as readers of this blog will know, I am unhappy with the level of macro-aggregation usually practiced by both Keynesian and new-classical macroeconomists. So I want to disaggregate the analysis a bit.  

Mankiw And Meltzer Are Right! More Or Less

by Mario Rizzo  

As we have been saying here, the claims that the fiscal stimulus has saved or created X number of jobs is not a simple empirical question. It must be an inference from a model that tells us what would have happened in the absence of that stimulus. Collecting reports from various firms or local governments about their job situations will not do. At best these individual reports are based on pop-theories on the part of the reporters about what would have happened.

Is All Spending Created Equal?

by Mario Rizzo

“And government spending is as good as anybody else’s.”  Brad DeLong seems to think so. But the idea is only plausible because it has been repeated many times and because it is a politically convenient “truth.”

Keynes Against DeLong: A Comment on the Cowen-DeLong Debate

by Mario Rizzo

 

I am reading with some exasperation Brad DeLong’s comments in his exchange with Tyler Cowen on the efficacy of the stimulus package.

 

Clearly, DeLong is a rigid aggregate demand theorist. He talks about output and employment as if it were some homogeneous thing. In his mind, macroeconomics is just about spending to increase the production of stuff. Yes, there is lip service to the idea that the stuff should have economic value. But that is easy when you assume that the only alternative is value-less idleness.