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Not keen on Keynes?
Nov. 2nd, 2011 09:52 amIn economics and politics, there's a school of thought that (simplified) says that if the government spends a big pile of money, it can help lessen the effects of a recession, and may in fact have a larger impact than some other options (like just cutting taxes). This theory has been around a long time, but I don't know it well, and I also don't know how true it is. See, some people think it's true, and others don't. Learn more here: http://en.wikipedia.org/wiki/Keynesian_revolution
Needless to say, since it's in politics it makes everyone stupid and insane when discussing the topic. Fair warning for your future inquiries and research.
Former Ontario Premier Bob Rae tried to spend his way out of a recession in 1990, with what I understand to be poor results. (I was only 15 and didn't pay attention at the time). Prime Minister Stephen Harper spent a bundle after the 2008 recession hit -- the "Economic Action Plan" had signs up in every neighbourhood for two years -- and US President Barack Obama spent 3/4 of a trillion dollars (I think) in the US at the same time.
Currently, Canada (which started from a better place) has pretty good economic indicators and unemployment rates, and the US (which weathered most of the financial collapse that was a bit part of the recession) is in the doldrums. I've heard clear, cogent arguments that say it's all Obama's fault -- why didn't he just leave it alone, or cut taxes further, or use a magic wand or whatever -- and I've heard clear, cogent arguments that this would be worse if the spending hadn't happened, and that in fact the spending was too low. (Obama wanted higher spending originally, but apparently to appease the right wing in the US he included far more tax cuts and reduced spending than the left wing suggested was appropriate)
Anyway. All of that as background to say this: WTF? Is Keynesian economics a fraud (as I've heard) or useful (as I've heard and to be honest seems to make more sense to my non-economist brain so far) ? Since anti-Keynesians often also claim tax cuts solve all problems (which I know to be false*), I've tended to put less stock in their opinions on this topic**.
Last night (after I went to bed, so this is my morning rant on it) Andrew Coyne of Maclean's Magazine linked to an article in the (known-to-be) right-wing op-ed page of the Wall Street Journal. It irked me because it made claims (and had a few "Obama is evil"-style claims with no supporting evidence. I thought I'd write up my concerns since Twitter isn't really built for complex concepts and debates. I tweeted:
Frustrating and confusing. If I find (or I am sent) any useful and non-partisan articles on this, I'll add them here.
Late addition thanks to @iglikalvanova:
* I say "know to be false" so I really should have evidence to support this. Here you go! http://www.time.com/time/magazine/article/0,9171,1692027,00.html
** People whose opinions I discount in this area include Andrew Coyne, guest star of this post. He often takes potshots at Krugman but this was the first time I managed to find content in his complaints. On other topics I still find him very insightful and helpful to read.
Needless to say, since it's in politics it makes everyone stupid and insane when discussing the topic. Fair warning for your future inquiries and research.
Former Ontario Premier Bob Rae tried to spend his way out of a recession in 1990, with what I understand to be poor results. (I was only 15 and didn't pay attention at the time). Prime Minister Stephen Harper spent a bundle after the 2008 recession hit -- the "Economic Action Plan" had signs up in every neighbourhood for two years -- and US President Barack Obama spent 3/4 of a trillion dollars (I think) in the US at the same time.
Currently, Canada (which started from a better place) has pretty good economic indicators and unemployment rates, and the US (which weathered most of the financial collapse that was a bit part of the recession) is in the doldrums. I've heard clear, cogent arguments that say it's all Obama's fault -- why didn't he just leave it alone, or cut taxes further, or use a magic wand or whatever -- and I've heard clear, cogent arguments that this would be worse if the spending hadn't happened, and that in fact the spending was too low. (Obama wanted higher spending originally, but apparently to appease the right wing in the US he included far more tax cuts and reduced spending than the left wing suggested was appropriate)
Anyway. All of that as background to say this: WTF? Is Keynesian economics a fraud (as I've heard) or useful (as I've heard and to be honest seems to make more sense to my non-economist brain so far) ? Since anti-Keynesians often also claim tax cuts solve all problems (which I know to be false*), I've tended to put less stock in their opinions on this topic**.
Last night (after I went to bed, so this is my morning rant on it) Andrew Coyne of Maclean's Magazine linked to an article in the (known-to-be) right-wing op-ed page of the Wall Street Journal. It irked me because it made claims (and had a few "Obama is evil"-style claims with no supporting evidence. I thought I'd write up my concerns since Twitter isn't really built for complex concepts and debates. I tweeted:
- @c_9: Frustrating piece: overly partisan, makes claims without evidence. 4 Reasons Keynesians Keep Getting It Wrong bit.ly/vP43eB
- @c_9: @acoyne can you recommend any less-partisan reading that shows evidence instead of just claiming things to be true? Both sides of Keynesian debate claim they are right in every paragraph - how does one learn the truth? Would love to learn some facts on this.
- @acoyne: He's Allan Meltzer! He don't need no steenkin' evidence!
- @acoyne: It is a frustrating debate. I'll see if I I've saved any particularly compelling articles, but it's generally bits & pieces here &there
- @acoyne: Problem is the debate went dormant for about 20 years. Keynes was pretty thoroughly out of odour when I was in grad school...Then fin'l crisis hits, and suddenly everyone's a Keynesian, without a lot of thought, in my view.
- @acoyne: Rather, a mix of a) Keynesians seizing the moment, b) others shrugging "we have to try something, c) opponents grown rusty.
- @c_9: Thanks for anything you find. I find your writing & Krugman's both compelling, hard to reconcile. Meltzer I found a partisan crank.
- @c_9: I don't claim expertise at ALL in this, but isn't this something Krugman has spent career thinking about?
- @acoyne: Not exactly: his Nobel was for trade theory. And lots of others, who've spent their lives thinking about it on opposite side... Including Nobel prize winners. Bob Barro, Tom Sargent, Bob Lucas, Tyler Cowen, Gary Becker, John Cochraine, John Taylor, etc etc
- @jm_mcgrath: One note: Krugman came to his neo-Keynesianism *by way of* his work on trade, thanks to 97 Asian Crisis. Not mutually exclusive
- @c_9: Thx for other names to watch for. Are they also tax-cuts-only? Using "Obamacare" & misleading about tax cuts disqualified AHM for me.
- @acoyne: They'd be skeptical that deficits had any effect, more inclined to rely on monetary policy for stabiilzation. Actually Lucas is famously skeptical that even monetary stimulus has any effect: see "rational expectations," "Lucas critique" etc. Barro is probably the most cited economist alive. I mean in academic journals.
- @phillipblancher: Unfortunately!
- @MikePMoffatt: 2nd, after Andrei Shleifer. http://ideas.repec.org/top/top.person.nbcites.html
- @c_9: My (again, limited) understanding is that monetary policy not good enough with rates already at 0 in US. What would they do now?
- @acoyne: Monetary policy has many more tools than just interest rates: see "quantitative easing." Another thing forgotten in recent years.
Frustrating and confusing. If I find (or I am sent) any useful and non-partisan articles on this, I'll add them here.
Late addition thanks to @iglikalvanova:
* I say "know to be false" so I really should have evidence to support this. Here you go! http://www.time.com/time/magazine/article/0,9171,1692027,00.html
** People whose opinions I discount in this area include Andrew Coyne, guest star of this post. He often takes potshots at Krugman but this was the first time I managed to find content in his complaints. On other topics I still find him very insightful and helpful to read.
