Saturday, June 6, 2015

Paul Krugman Wins the Macroeconomic Debate with Evidence. So What?

Paul Krugman wants honest debate, gets derp in return. What a surprise!

Honest academicians want real debate based on ideas, evidence, experimentation, and facts where available, which basically means they want a fair fight.

Politicians -- and the ideologues who support them -- want to win, even if their ideology is flawed. Since I believe that reality has a liberal bias, I tend to find right-wing argumentation supported more by derp than reasoned and well-researched positions.

Paul Krugman, on his blog and in many of his columns, has stressed how his Keynesian view of macroeconomics is supported by the evidence and the success of the models that demonstrates it. For some observers, myself included, he spends a little too much time repeating the back-and-forth of the debate. But I respect that he feels obligated to fight the good fight until it's actually won.

Why? Because he feels it's that important. I agree. And Krugman can't stress enough that most economists of any importance agree with him. He thinks the debate should be over. But it can never be over if the other side plays unfair, absorbed by confirmation bias and echo-chamber-based epistemological closure.

Here's an example. Krugman attempts to make the case for temporary fiscal stimulus:
So, am I a Keynesian because I want bigger government? If I were, shouldn’t I be advocating permanent expansion rather than temporary measures? Shouldn’t I be for stimulus all the time, not only when we’re at the zero lower bound? When I do call for bigger government — universal health care, higher Social Security benefits — shouldn’t I be pushing these things as job-creation measures? (I don’t think I ever have). I think if you look at the record, I’ve always argued for temporary fiscal expansion, and only when monetary policy is constrained. Meanwhile, my advocacy of an expanded welfare state has always been made on its own grounds, not in terms of alleged business cycle benefits.
In other words, I’ve been making policy arguments the way one would if one sincerely believed that fiscal policy helps fight unemployment under certain conditions, and not at all in the way one would if trying to use the slump as an excuse for permanently bigger government.
Seems clear enough. Krugman is in favor of temporary fiscal stimulus to fight an economic downturn, not because he wants bigger government with permanent, ever-larger deficits.

So, what does he get in return for his exposition? His commenters -- those that disagree with him -- offer stark examples of the emptiness of their counter-argument.
Paul, you are bright enough to know expansion of government programs are almost never "temporary", so your assertion that you advocate temporary increase during recessions is specious.
These expanded programs have stakeholders that furiously resist termination once the economy rebounds. This includes both the recipients of the program and the public employee union member, determined to hang onto his new job.
For Pete's sake. That is not an argument. First, it's led by an insult -- "Paul, you are bright enough to know..." -- followed by a misdirection -- "expansion of government programs are almost never 'temporary'" -- that says, essentially, that Krugman is lying or at least insincere.

I remember arguing years ago with my brother, who couldn't have a more opposite political viewpoint from mine, and making the point that simply because I was liberal didn't mean that I couldn't be fiscally responsible. I stated that I could accept "tax and don't spend" and that I felt the GOP's formulation was " don't tax and spend anyway." The Dubya years proved that.

My brother mulled this over quietly amid small talk and then blurted out, "You're just a tax-and-spender no matter what you say!"

Whether he's right or not is meaningless: His ideology did not permit me to be different from what he thought of my ideology. There is no policy difference there. There is only an angry denial that I mean what I say.

That, in a nutshell, is what Paul Krugman has to put up with. Here's another commenter:
Surely, the "failure of aggregate demand" is THE cause of the Great Recession; and government stimulus, whether through fiscal or monetary policy, is the right antidote for the acute stages of the disease. But is government stimulus the ONLY solution to the problem; or even the BEST solution to the problem?

There seems to be some magical thinking involved with this prescription; that after some unspecified period of unrestrained borrowing, deleveraging will inevitably produce consumer liquidity at levels sufficient, not only to power economic growth, but also to pay down debt accumulated during the period of stimulus. Given the deterioration in wages for a very large proportion of consumers, and the reality of global labor markets, that just seems far from a given.
Saying this in response to Krugman's position is actually specious, and it's a waste of time countering it, but let's do it as an exercise in countering derp.
  • The commenter starts by agreeing with Krugman. Well, fine.
  • Then, he goes off the rails with his "But is government stimulus the ONLY solution..." Who said it was? Krugman didn't.
  • Then, we get pure derp: "There seems to be some magical thinking involved with this prescription..." Calling it "magical thinking" implies that Krugman is wrong to believe that fiscal stimulus has a multiplier and can help to restore full employment and raise aggregate demand in a downturn, and that the stimulus can end after it's no longer required. The commenter puts the lie to his earlier agreement with Krugman, and he fails to offer any counter-theory. Is it because he doesn't have one?
  • The dead giveaway that derp is involved with the argument is the line "after some unspecified period of unrestrained borrowing..." First, the time period is specified by the concept of short-term fiscal stimulus sufficient to halt the downturn and get back to full production, and second, who's talking about "unrestrained borrowing?" Nobody but the commenter and certainly not Krugman.
It may seem petty to be attacking the arguments offered by a couple of random commenters, but it's a valid exercise because it illustrates the problem. Krugman offers a policy prescription that has a track record written right into American history, that of the Great Depression. Also, most economists believe the ARRA stimulus did some good but was too small to do enough good. There is evidence that stimulus works to repair downturns and avoid the pain of slow, jobless recoveries. Dismissing it as magical thinking is actually admitting you have no actual counter-argument at hand.

What's really going on here is that those who oppose stimulus spending oppose it because it's a government solution, and we must not have that because it might work and government might appear effective and voters might say "government good! Me want more!" That's what worried the GOP about Obamacare, that it would work and get written into the fabric of the country. The evidence so far is that it's working, except possibly in the states that refuse Medicaid expansion. Those states are freaking out now that they see themselves deprived of the billions in aid the states who embraced Obamacare are receiving. It would be funny if it weren't so tragic. States that deny healthcare to its neediest citizens are dooming some of them to die unnecessarily. That's a horrifying political outcome, one chosen because of ideology.

I understand those who say, "Let the markets decide these things." Presumably, they sincerely believe in free markets, or at least that market failures are preferable to government regulatory failures. The only problem is that when certain markets decide who shall live and who shall die, or who shall be jobless and broke in a recession and who shall get by because of dumb luck, it should be understood as a market failure, one that is just not acceptable, and not proof some people are just unworthy.

And, yes, dumb luck is involved in many of life's decisions. My experience bears that out. If you don't believe that just think about this: Some of Mark Zuckerberg's college roommates are multimillionaires. Is that dumb luck or were they just smart enough to be Zuckerberg's roommates? You decide.

In the end, I agree with Paul Krugman not because his blog is called "The Conscience of a Liberal." I agree with Paul Krugman because he persuaded me with evidence.

Now job one remains getting politicians elected who'll press for these policies.

I'll close by quoting a Krugman commenter who gets it right:
This highlights one of the biggest differences between liberals and conservatives. Because conservatives want smaller government as an end in itself, they simply assume that liberals want bigger government for its own sake. I've never met a liberal who felt that way. Even democratic socialists don't want state control simply because they like the sound of it. They want the state to intervene in areas where they believe it can provide the greatest good for the largest number of people; otherwise it's hands-off.
On the money.

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