Category: Equitablog

Must-Read: Paul Krugman notes how the “laziness dogma” that American is now dominated by the moocher class–that America is now “a nation of takers” has become yet another dogma impervious to evidence on the right, even the center-right, of America’s political spectrum:

Paul Krugman: The Laziness Dogma: “Americans work longer hours than their counterparts in just about every other wealthy country…

…we are known, among those who study such things, as the ‘no-vacation nation’… full-time U.S. workers… 30 percent more hours… than their German counterparts…. But Jeb Bush… says that Americans ‘need to work longer hours and through their productivity gain more income for their families.’… The real source of his remark was the ‘nation of takers’ dogma that has taken over conservative circles in recent years–the insistence that a large number of Americans, white as well as black, are choosing not to work, because they can live lives of leisure thanks to government programs….

This laziness dogma [is] everywhere on the right… tMitt Romney’s… 47 percent… furious attacks on unemployment benefits… claims that many, if not most, workers receiving disability… are malingerers… a vision of the world in which the biggest problem facing America is that we’re too nice to fellow citizens facing hardship….

Over the past few decades working-class white families have been changing in much the same way that African-American families changed in the 1950s and 1960s, with declining rates of marriage and labor force participation. Some of us… see them as consequences of an economy… no longer offer[ing] good jobs to ordinary workers. This happened to African-Americans first… but has now become a much wider phenomenon…. Bush’s clumsy call for longer work hours was… an indication that he stands firmly… believ[ing] that American workers just aren’t trying hard enough… and that the way to change that is to strip away the safety net… in line with the party consensus. If he makes it to the White House, the laziness dogma will rule public policy…

Back in 2007 I used to have an applause line: that because the North Atlantic had lived through the Great Depression, we would not make the same mistakes in dealing with our current crisis that the policymakers of the 1930s had made. Instead, I said, we would make our own, different mistakes.

Boy, was I wrong with respect to Europe!

Barry Eichengreen: Saving Greece, Saving Europe: “The Eurosystem has been rendered more fragile and subject to destabilization…

…Other European finance ministers will have to answer for agreeing to forward to their leaders a provisional draft containing Schäuble’s destructive language…. The new program is perverse… will plunge Greece deeper into depression… provides no basis for recovery or growth. The Greek economy is already in free-fall, and structural reforms alone will not reverse the downward spiral…. As the depression deepens, the deficit targets will be missed, triggering further spending cuts and accelerating the economy’s contraction. Eventually, the agreement will trigger Grexit, either because the creditors withdraw their support after fiscal targets are missed, or because the Greek people rebel. Triggering that exit is transparently Germany’s intent.

Finally… privatization at fire-sale prices, with most of the proceeds used to pay down debt, will not put Greek parliamentarians or the public in a mood to press ahead enthusiastically with structural reform. Greece deserves better…. Other European countries should not in good conscience accede to this politically destructive, economically perverse program… should not allow the European project to be sacrificed on the altar of German public opinion or German leaders’ insistence on “rules.”… Franco-German solidarity would be irreparably damaged, but Franco-German solidarity is worth nothing if the best it can produce is this agreement. Last but not least, the German public deserve better…. They deserve their fellow Europeans’ admiration and respect, not renewed resentment and suspicion.

Eight years after 1929, even France had exited from the hold-strong-to-fixed-currency-parities-and-“structural-reform”-and-pray-for-the-confidence-fairy-to-rescue-us policies. Now, all of the eurozone is still in the trap. The fact that the depression came on more slowly than 1929-1933 has played a role.

But the principal cause is I think, Germany’s role as effective European hegemon plus the fact that distress in southern Europe is good for the German economy: every time a policy car is torched on the streets of Athens, the value of the euro drops and another container full of washing machines departs from Hamburg. Couple that with the agreement of the eurozone’s great and good that “structural reform” is both necessary and also impossible in periods of full employment, and they reassure themselves that everything is going to plan. The fact that the eurozone has broken the promise of economic prosperity and convergence that used to underpin it is not a major concern.

And, on the other side, we have the strange and mysterious attachment of southern Europeans to the euro. It is part–maybe all–of being a “prima liga” country. It is part–maybe all–of being a real part of Europe.

Economic reality is that a prosperous business sets the price of what it sells neither too high to attract demand nor too low to attract revenue, and sticking to a high price when demand ebbs is disastrous. Economic reality is, similarly, a prosperous country needs to behave like a business and set the value of its currency–the price of what it sells–neither too high to attract demand for its exports nor too low to create unattractive terms-of-trade, and sticking to an overvalued currency when demand ebbs is disastrous.

Economic reality is nowhere here.

If Europe’s political masters were intelligent right now, I think they would abandon the euro and their freedom of action in monetary and macroeconomic policy, and bind themselves to obey a joint U.S.-IMF hegemon in international finance, monetary, and macroeconomic policy affairs.

But there is little in their reaction to this crisis–to what we need to now start calling: “Europe’s Greater Depression”–would lead anyone to think that they are intelligent.

Must-Read: Paul Romer: Stigler Conviction vs. Feynman Integrity: “I’ll start with the smallest quote…

New economic theories are introduced by the technique of the huckster… [but not] mere hucksters…. The successful inventor is a one-sided man… utterly persuaded of the significance and correctness of his ideas and he subordinates all other truths…. He is more a warrior against ignorance than a scholar among ideas http://www.jstor.org/stable/2551184…

I would restate Krugman’s account… [as:] “the path that led Lucas and his followers to increasingly implausible positions… starts with Stigler conviction and a commitment to an initial conjecture that turned out to be false… [that] the aggregate economy can be… model[ed]… [with] imperfect information and… signal extraction… [with] market clearing as a maintained auxiliary hypothesis.’ To me, this gives a plausible description… but it leaves the fundamental cause unexplained…. Market clearing did not have to evolve from auxiliary hypothesis to dogma that could not be questioned. My conjecture is economists let small accidents of intellectual history matter too much…. I suspect that it was personal friction and a misunderstanding….

They circled the wagons because they thought that this was the only way to keep the rational expectations revolution alive. The misunderstanding is that Lucas and his colleagues interpreted the hostile reaction they received from such economists as Robert Solow to mean that they were facing implacable, unreasoning resistance from such departments as MIT. In fact, in a remarkably short period of time, rational expectations completely conquered the PhD program at MIT…. The self-imposed isolation, together with Lucas’s return to the intellectual environment at the University of Chicago, may in turn have fostered the switch to Stigler conviction as the default habit of mind…. When Lucas came back from Carnegie Mellon, he pulled off a coup that displaced Friedman. But Stigler stayed. Perhaps the right way to think of what happened is that he captured Lucas.

Here is the context of the quote from Stigler…. I think it is fair to read this as saying that to alter a science’s work, an idea has to tell the truth, but not the whole truth….

The techniques of persuasion also in the realm of ideas are generally repetition, inflated claims, and disproportionate emphases, and they have preceded and accompanied the adoption on a large scale of almost every new idea in economic theory. Almost, but not quite, every new idea. A few men have such unusual powers that their contemporaries recognize their claims without the usual exaggerations: Smith and Marshall are the only economists who seem to me indisputably to belong in this supreme class.

The rest have employed in varying degrees the techniques of the huckster. Consider Jevons. Writing a Theory of Political Economy, he devoted the first 197 pages of a book of 267 pages to his ideas on utility! Or consider Bohm-Bawerk. Not content with writing two volumes, and dozens of articles, in presenting and defending his capital theory, he added a third volume (to the third edition of his Positive Theoriedes Kapitals) devoted exclusively to refuting, at least to his own satisfaction, every criticism that had arisen during the preceding decades.

Although the new economic theories are introduced by the technique of the huckster, I should add that they are not the work of mere hucksters. The sincerity of Jevons, for example, is printed on every page. Indeed I do not believe that any important economist has ever deliberately contrived ideas in which he did not believe in order to achieve prominence: men of the requisite intellectual power and morality can get bigger prizes elsewhere. Instead, the successful inventor is a one-sided man. He is utterly persuaded of the significance and correctness of his ideas and he subordinates all other truths because they seem to him less important than the general acceptance of his truth. He is more a warrior against ignorance than a scholar among ideas.

Nor do I argue that a strong conviction of the validity of one’s ideas and energetic dissemination are sufficient to alter significantly a science’s work. It is possible by mere skill of presentation to create a fad, but a deep and lasting impression on the science will be achieved only if the idea meets the more durable standards of the science. Among these standards is truth, but of course it is not the only one.

Must-Read: Tim Hallacy: Superintendent of the Silver Lake Schools, KS: “I find it increasingly difficult to convince young people that education…

…is a profession worth considering, and I have some veterans who think about leaving. In the next three years I think we’ll have maybe the worst teacher shortage in the country–I think most of that is self-inflicted…

Must-Read: Paul Glastris: Apocalyptic Rhetoric): “First… [would] an otherwise sane and capable candidate might make crazy, reckless decisions…

…Richard Nixon’s own staff worried about him… especially when he drank. Ted Cruz put himself in this category when he bucked his own party’s leadership and forced a government shutdown over Obamacare in 2013…. Second… [does] a candidate play… [to] voters… [who] want to be told, things that are plainly false and politically toxic. Donald Trump’s questioning of the legitimacy of Barack Obama’s birth certificate in 2011…. This behavior is not limited to outsiders and mavericks…. On issue after issue, plenty of “sane” candidates and elected officials routinely feed The Crazy with over-the-top rhetoric…. Apocalyptic rhetoric encourages an apocalyptic politics in which it becomes acceptable to believe that desperate measures must be taken. It’s not crazy to worry about that.

Over at Grasping Reality: Weekend Reading: Kevin Hoover: The Poverty of Microfoundationalist Fantasies

Over at Grasping Reality:: Oddities in the Rhetoric of Economics: Paul Romer Confronts the “Adversarial Method” in the Presentation of Economic Theory

Over at Grasping Reality: Weekend Reading: Rick Perlstein: Press Coverage and the Republican Primaries: Rick Perlstein: The New Holy Grail of Republican Primaries: “The penumbras and emanations of Citizens United are changing the Republican campaign game…