The Problem? Or the Solution?

I’m not calling him a saint by any means, and he could learn some lessons in how to express ideas better, but where others see a problem, I see the solution. Well, most of the solution. Change doesn’t generally happen because people in power are super nice, it happens because it gives someone an advantage. Branch Rickey hired Jackie Robinson partly because he was less racist than others, but largely because he was looking for a way to get ahead. After a while it became obvious to everyone that their racist “thinking” was hurting them, and baseball as a whole changed.

When companies hire programmers in India for less than they’d make here, but more than they’d make otherwise, is that immoral? I’m sure Thornley saw people (women) at other companies he wanted to hire, figured out what he had to offer to bring them over, and offered that. In a sexist industry that means they’ll still make less than they should, but more than they would have. I wish we could snap our fingers and make prejudice disappear, but it doesn’t happen like that.

Tabarrok is good on this also.

With Friends Like These...

Ugh. In the course of a pretty good column on taxes and the economy, Boskin proceeds to destroy his credibility with a stupid claim. "The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history." I mean, is he trying to convince people that tax-cut enthusiasts are just charlatans? We can support lowering tax rates without resorting to this sort of thing, people.

Grasping Reality?

Ha!
"Megan McArdle's major problem is that she is looking at one table--Table 1.1 in OMB's Historical Tables. She is not reading Hoover's Budget Messages" (it goes on like this).
Translation: McArdle's problem is she is looking at the data instead of the rhetoric.
Really? This is the best you can do, Professor? If you want to claim that spending should have increased a lot more than it did, or that Congress tried to increase spending by more than actually happened, or that Hoover tried to cut spending, or that his tax increases were contractionary, that's all fine and defendable, and probably true. Lines of criticism of McArdle along those lines I have no problem with. However, the evidence is crystal clear, government spending under Hoover went up, and claims that cuts in spending exacerbated the Great Depression are false. Grasp reality, not ideology.

The Right Tool, at the Wrong Time

(Background to let you know what this is about here, here, and here).
I can prove that Greg Mankiw is a better economist than is Paul Krugman. How? Well, Paul is something like 5'6", and Mankiw is 6'2". Therefore, anyone claiming otherwise is selling voodoo.
What's that you say? You think that that's not a good way to show what I want to show? Well, you must be pretending to be stupid. I mean, NBA scouts use height to judge prospects. And height has a lot to do with a man's attractiveness.
True, height doesn't have much correlation to economic knowledge or wisdom. So? Krugman's economic brilliance must be puny if he's not even close to Mankiw in height.

(Implicitly) Making Stuff (Up)

This is a pet peeve of mine, but I think it's important (so maybe pet peeve isn't the right term). Paul Krugman wrote a column on the state of US manufacturing, and can't find two sentences to note that the idea of long term decline is a myth. Not only that, but he very carefully constructs his sentences to leave the impression on people that it's true, without actually lying that I can see. Check out the data, while US manufacturing does dip a little during recessions, it is clearly rising over time. It's one thing when some random pundit without much economics knowledge doesn't know this stuff, but Krugman either does, or absolutely should. Chances of DeLong noting this? Approximately 0.1%.

More dishonesty from BDL

The NY Times had a Room for Debate forum about Bernanke, the Fed, etc. In Megan McArdle's portion she wrote a fairly blah piece, talking about how some see it this way, some another. DeLong's response? To go after her because "she talks about how Ben Bernanke has been 'recklessly ignoring inflation'." Go read what she wrote. I support criticizing her for her Shape of the Earth type writing, and I agree with DeLong that Bernanke and The Fed are doing too little (I'd put it a slightly different way, but that's splitting hairs at this point), but why lie about what she wrote? Delong has shot whatever remained of his credibility.

Alright then

Well, Obama has joined the debate. A bit demagogue-y, but still. My preliminary read on it is that his plan is about 85% serious, so a step up from Ryan's in that respect. Of course Krugman's reaction is to gloss over all of his unserious maneuvers that mirror Ryan's. $3T in unspecified deduction eliminations? Completely ridiculous. $1T? Well done.
On the Medicare part of it, I find the plan terrible. Serious, I suppose, but terrible. Have we not learned that central planning is unworkable? However, here is a compromise plan I think would actually work, giving people pining for socialized medicine what they're looking for, and people looking for more individual choice what we're looking for. Well done, Tyler.

Paul Ryan

I partially agree with Krugman's assessment of Paul Ryan's budget plan. The growth assumptions look aggressive, and many key parts of it are...unspecified. However, I do have some disagreements as well.
Krugman says that anyone who didn't regard his original blueprint for the proposal as unserious has no credibility. What were the reasons to regard it as unserious? That the CBO hadn't evaluated the tax part of it. Which it hadn't done because it was swamped with Obamacare. And...that seems to be all of it. Now, that he still hasn't had CBO score it is bad, but complaining about it at that time would be like complaining that I hadn't proven my senior thesis at the time that I was proposing it, or calling a batter out for not touching home plate after a home run, when he was still making his way to first base.
On Medicare, again, the assumptions look aggressive. However, Krugman's key complaint is that the spending cuts won't actually be allowed to go through once they would start to take effect in many years. And he may be right; I too am pessimistic about the likelihood of large spending cuts. But then, Medicare as it is currently plotted will definitely not be allowed happen, it's much too generous. You punch through your target (especially when your growth assumptions are too rosy).
Lastly, many people are complaining that he doesn't touch military spending. This is simply untrue. As you can see here, the part of the budget that includes defense spending in his plan is currently at 12% of GDP, and his plan cuts that to 3.5%. Defense spending right now is about 6%. No way to do that without cuts to the military, or very high growth in the economy.
All in all, I'd call his plan about 75% serious. Which makes it about 75% more serious than anything I see coming from the other side of the aisle.
UPDATE: I've looked more closely at the economic growth projections, and they actually look a lot more reasonable than I thought. The unemployment rate is ridiculous, but the GDP growth numbers are not outrageous at all. Not saying I trust Heritage, but how these numbers feed into deficit projections aren't a big strike against it or the plan.

Oy

Greg Mankiw wrote a post Saturday on why he is agnostic on the question of how long people should be eligible for unemployment insurance. While he does a good job of raising the questions that we should ask to figure out what the optimal length of eligibility should be, the post is somewhat disingenuous, as he could pretty easily get good answers to all of his questions by walking down the hall to talk to his colleague Chetty who's studied this stuff, as pointed out by DeLong.

However, DeLong, in the course of pointing this out, is even more disingenuous, and more blatantly so. He points that out Chetty "conclude[s] that an unemployment benefit-market wage of about 50% is about right", and that he also concludes that more is called for at certain times (such as now). Well, that's all fine and good and interesting, but it really doesn't tell us how long people should be eligible for benefits, neither in normal times nor in times of high unemployment. I pointed this out to DeWrong in his comments section. His response? To delete my comment and ban me.

Why oh why can't we have a better economics professor section of the blogosphere?

Update: Well, BDL let me know why I'm banned. It's because I spread misinformation in the past. How did I do so? By questioning how someone used a model of global climate (NB: no claims about climate change made by me), and by trying to fill in the blank spots in the story of the Krugman-Okrent tiff. I don't know if I was right or wrong in either case, but I certainly never spread misinformation; both times I speculated a little (clearly labeled so marked as such, not as fact) and asked questions. Regardless, I think we can take this as an admission that I'm right in this case; why else go to the extra effort to bring up things that happened years ago instead of engaging on the points I made about his UI evidence this time? Also, he's clearly lying about why I'm banned, as I've left a few comments in between then and this most recent time; I embarrassed him with truth, and it pissed him off so that he had to find an excuse to get rid of me. In any case, I'd still like to know if there's good research on the ideal length of benefit eligibility.

Read it

I should just repost everything that Scott Sumner writes. Please read this.

Finally

Krugman admits that fiscal stimulus (the guv spending money) is an ineffectual way to increase GDP. I'm sure that he doesn't realize that he did this, but it's the clear implication.

Debt vs an Equity Like Substance

Boone and Johnson have a very good post on the problems in Europe, and I recommend that people read it. It's not too long, and you'll get a lot better understanding of the challenges facing the EU, the Euro, Greece, and so forth. I do want to add my two cents though, and offer a partial solution. I initially thought it was more novel on my part than it turns out to be, but hopefully that will mean that it will actually be implemented (ok, ok, probably delusional on my part to expect anything other than the stupid bailout to go thru, but bear with me).

Without the bailout, Greece would need to either renegotiate or default on its debts. The problem with outright default is it makes it way way harder to get financing going forward, as Greece will need to do. Renegotiation/restructuring, if done in a straight forward manner, and to the extent needed, would be nearly as bad from the standpoint of future borrowing. So, offer to take back the already issued bonds, at a discount of course (maybe a price of 70% of par?), in exchange for Greek GDP bonds. Maybe make it a timed offer, where the discount grows over time, or some such. I'm not sure how good an idea GDP bonds are for the US at this time (I don't 100% agree with Merkel as to why, but he raises some important points), but they are way cheaper in the short-run, which, combined with the discounts, should reduce the interest payment requirements on the Greek government, and so enable it to make its spending cuts of a politically acceptable size. Apparently, something very similar was done in Argentina, with good results.

Of course, independent of this idea, I still think that the European Central Bank is keeping monetary policy excessively tight. Moreso from the Greek perspective than the rest, but probably for every EU country. Loosening by the ECB would smooth the process of recovery for all of Europe, but especially for the most at risk economies (Greece, Spain, Italy, Ireland). It would probably help us over here in the US as well. They need to be careful how they do it to avoid the opposite problem and thus ignite destructive inflation (NGDP futures markets would help immensely), but they don't even seem to be aware that they're a big cause of the current difficulties.

If Confucius was an Harvard Econ Professor Blogger

Mankiw, ah snap.

What's Holding Us Back

I know it's not the most exciting topic, but it's vitally important. The Federal Reserve's policy of paying interest on banks' reserves has been killing the economy. Yglesias hits the nail right on the head. Fortunately we are probably at the point now in the cycle where it's not going to be a major problem, merely holding us back from the strong growth snapback we should be experiencing. This would be easier to see if we had a good objective indicator of the stance of monetary policy (perhaps Sumner's NGDP futures market?)

If B, then B

This takes question begging to a whole new level. Usually people just implicitly assume their conclusions. Here Krugman does it explicitly. He starts with the assumption that P is fixed. Then examines what would happen under a given policy and finds that P doesn't change. Wow. Very impressive.
Update: See this Sumner post on this as well. Really hoists Krugman by his own petard. You might say that Krugman is petarded.

Taking a step back

I probably overdid it with that last post. That's how you know he's probably lying or misleading. It's not 100%.
Also, a dolphin learns to save, invest, and speculate. Woh.

Shorter Mankiw

How do you tell when Krugman is lying? Either his lips are moving or he's typing.
BTW, did anyone else catch Geithner saying on Meet the Press that the number of jobs saved by the stimulus is a fact? Really Timmy? A fact? I accept that it's your best guess at the effect, that the estimate was made in good faith, etc. But it is by no means a fact. It's an estimate based on some models. No more, no less.

Using force to control without ownership is...

Please read Bainbridge on what's going on with the Obama administration and pay cuts at (admittedly sleazy/corrupt) financial firms. Seems to fit a certain term, can't remember what it is, who's definition includes "private property that is controlled but not nationalized".

Paging Dr. Hayek

Humana sends out a letter to its policyholders on possible effects of reform. And is threatened by the federal government from ever doing so again, under threat of fines and jail time.
Congress is considering putting explicit limits on health care executives pay, as a result of other "reforms" under consideration.
Hmm, there's definitely not a chance that health care reform as it's being debated will lead to the complete takeover of the system. It's just a lie to say something like that. Clearly the people who say and think that are simply racists, or idiots. Or both.

I Don't Think that Word Means what you Think it Means

DeLong tells us what economics calls for, to chew out Allen Meltzer. Unfortunately for DeWrong, economics does not call for anything. Certain moral theories combined with economics may call for certain things, but economics calls for property rights and subsidies and such as much as astronomy calls for dividing the year into 12 months. Not the only mistake that DeLong makes in the post, but the most egregious in my mind.