Marion Fourcade et al.::
The Superiority of Economists:
“The dominant position of economics within…

…the social sciences in the United States… the relative insularity of economics… the tight management of the field from the top down, which gives economics its characteristic hierarchical structure. Economists also distinguish themselves from other social scientists through their much better material situation (many teach in business schools, have external consulting activities), their more individualist worldviews, and in the confidence they have in their discipline’s ability to fix the world’s problems. Taken together, these traits constitute what we call the superiority of economists, where economists’ objective supremacy is intimately linked with their subjective sense of authority and entitlement. While this superiority has certainly fueled economists’ practical involvement and their considerable influence over the economy, it has also exposed them more to conflicts of interests, political critique, even derision.

Simon Wren-Lewis bends over so far backwards to be fair that, I think, he loses sight of the ball:

Simon Wren-Lewis:
Understanding Anti-Keynesians: “I have always thought it important to try and understand…

…where the other side is coming from…. Let me single out three Keynesian propositions.

1. Aggregate demand matters, at least in the short term and in some circumstances (see 2) maybe longer.
2. There is such a thing as a liquidity trap, or equivalently the fact that there is a zero lower bound to nominal interest rates matters.
3. At least some forms of fiscal policy changes will impact on aggregate demand, and therefore (given 1), on output and employment. Because the liquidity trap matters, when interest rates are at their zero lower bound we should use fiscal policy as a stimulus tool, and we should not embark on fiscal austerity unless we have no other choice.

If propositions (1) and (2) strike you as self evidently correct… I would… note that there are large numbers of academic macroeconomists… who dispute one or both…. Tyler Cowen… talks about a ‘so-called’ liquidity trap…. Many macroeconomists… did think as recently as ten years ago that there was a broad academic consensus behind both (1) and (2). I was one of them….

However, my reason for including (1) and (2) is that if you accept these two points, point (3) follows…. The two sides are not symmetrical…. Keynesians are happy for central banks to undertake various forms of unconventional monetary policy, the aversion on the other side to using fiscal policy seems more absolute…. An easy answer is that it is all political or ideological…. That in my view would be a sad conclusion to draw, but it may be naive to pretend otherwise. As Mark Thoma often says, the problem is with macroeconomists rather than macroeconomics.

I can think of two alternative explanations…. The first comes from thinking… [that] money is very important, and… to therefore feel that monetary policy has to be the right way to stabilise…. The second is… the New Classical revolution…. For some, the association of fiscal policy with old-fashioned Keynesian ideas set down deep roots… some notable academics were surprised that New Keynesian models actually provided strong support for the use of countercyclical fiscal policy in a liquidity trap.

I should really stop there, but having started with Tyler Cowen’s post, I really should say something about his comments on the UK…. Why the obvious fact that other things besides fiscal policy are important in explaining growth in any year is thought to be an anti-Keynesian point I cannot see. And if the case against Keynesian ideas rests on the incorrect forecast once made by a prominent Keynesian then this is really scraping the barrel.

Douglas Holtz-Eakin:
Structural Reforms to Reduce Debt and Restore Growth:
“The second flaw in recent policy approaches…

…has been its misguided reliance on temporary, targeted piecemeal policymaking. Even if one believed that countercyclical fiscal policy (‘stimulus’) could be executed precisely and had multiplier effects, it is time to learn by experience that this strategy is not working. Checks to households (the Economic Stimulus Act of 2008), the gargantuan stimulus bill in 2009 (American Recovery and Reinvestment Act), ‘cash for clunkers’ (the Car Allowance Rebate System), tax credits for homebuyers (the Federal Housing Tax Credit and the HIRE Act, consisting of a $13 billion payroll hiring credit, expensing of certain investments, and $4.6 billion for schools and energy), the Small Business Jobs Act of 2010, and the state-local bailout Public Law 111-226 ($10 billion for education, $16 billion for Medicaid) have all failed to generate growth. The policy regime of macroeconomic fiscal (and monetary) fine-tuning backfired in the 1960s and 1970s, leaving behind high inflation and chronically elevated unemployment, and it is working no better in the 21st century…

Simon Wren-Lewis:
Understanding Anti-Keynesians: “I should really stop there…

…but having started with Tyler Cowen’s post, I really should say something about his comments on the UK…. Why the obvious fact that other things besides fiscal policy are important in explaining growth in any year is thought to be an anti-Keynesian point I cannot see. And if the case against Keynesian ideas rests on the incorrect forecast once made by a prominent Keynesian then this is really scraping the barrel.

Must- and Shall-Reads:

• Chuck Marr and Robert Greenstein: Tax Extenders Package Is Fundamentally Flawed
• 2014 PKConference

*

1. Mark Thoma:
   Some good job news for a hard-hit group :
   “The ‘hollowing out’ of America’s middle-class jobs in recent years is a trend that started before the Great Recession…. But where do those who have lost their jobs go?…. Many people believe most of those who lose middle-class jobs end up worse off than before, but recent research by economic policy analyst Ellie Terry and economist John Robertson of the Federal Reserve Bank of Atlanta finds… ‘of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later…. What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession.’… We still have plenty to fret about over employment across all skill levels, especially middle-skill jobs. But it could be even worse…”
2. Martin Wolf:
   Radical cures for unusual economic ills:
   “Crises are cardiac arrests of the financial system…. The time to worry about a patient’s lifestyle is not during a heart attack. The need is to keep them alive…. In my book, The Shifts and the Shocks, I suggest that a number of shifts in the world economy created chronically weak demand in the absence of credit booms… excess savings in emerging economies… shifts in income distribution, ageing and a secular decline in the propensity to invest in high-income countries… globalisation, technological innovation, and the growing role of the financial sector. It is not enough to clean up…. Policy makers also have to eliminate the dependence of demand on unsustainable credit. Without that, even a radical clean-up will not deliver buoyant demand…. The crisis left a grim legacy. The eurozone has done a worse job of dealing with this than, say, the US. But the origins of the crisis are to be found in longer-term structural weaknesses. Policy has to address these failings, too, if exit from the crisis is not to be the beginning of a journey into the next one. The answers are likely to be unorthodox. But so, too, is today’s economic condition. Rare ailments need unusual treatments. So look for them.”
3. Anne Laurie: Monday While-We’re-Waiting Open Thread » Balloon Juice:
   “Matt Yglesias… [on] the new Wingnut Wurlitzer meme: ‘Conservative pundits who didn’t like the bipartisan comprehensive immigration reform bill that passed the US Senate in 2013 also didn’t like Obama’s deportation relief through executive action. They object to both the content… and to the process… as roughly akin to overthrowing the democratic constitutional order through military force in order to establish a brutal Latin American dictator…. There are many things one could say about this comparison, starting with the fact that unlike a proper caudillo such as Augusto Pinochet, Obama hasn’t had thousands of people detained and tortured without trial. Or, indeed, that it was actually Obama’s predecessor who was having people detained and tortured without trial. But perhaps the strangest thing about it is that when American conservatives analogize Obama to a Hispanophone military dictator, we are meant to understand this a criticism when the historical reality is that American conservatives have generally been quite enthusiastic about caudillos…. Indeed, thanks to the miracle of modern-day traffic recirculation methods, old National Review content singing Pinochet’s praises falls directly adjacent to complaints about Obama’s caudillismo…'”
4. Paul Krugman: Keynes Is Slowly Winning: “Back in 2010… I read the OECD Economic Outlook which called not just for fiscal austerity but for interest rate hikes–350 basis points on the Fed funds rate by the end of 2011!–because, well, because. Now the OECD is calling for fiscal and monetary stimulus…. It’s not the same people…. A new chief economist, Catherine L. Mann, whose excellent research has always been pragmatic…. But by selecting Ms. Mann the OECD was making a statement, and my sense is that the ground is shifting…. It has taken a while. In early 2013, with the infamous growth cliff at 90 percent debt and the case for expansionary austerity collapsing, many of us thought we had the austerians on the run. But we underestimated the extent to which officials and, to some extent, the news media had a professional stake in the positions they had staked out…. This still goes on. Simon Wren-Lewis complains, and rightly, about ‘mediamacro’–and his government has learned nothing. The Bundesbank is still what it always was. But the hawks seem in retreat at the Fed; Mario Draghi… sounds an awful lot like Janet Yellen; the whole way we’re discussing Japan is very much on Keynesian turf…. Businessweek was declaring that expansionary austerian Alberto Alesina was the new Keynes; now… Keynes is the new Keynes… Paul Singer complaining about the ‘Krugmanization’ of the debate…. Partly, I think, it’s just a matter of time…. The refusal of almost everyone on the anti-Keynesian side to admit any kind of error has gradually made them look ridiculous. All of this may be coming too little and too late to avoid policy disaster…. But it’s something to cheer, faintly…”
5. Marcel Fratzscher: Germany’s Four Neins: “Germany’s stance toward Europe has become one of rejection and disengagement…. Germany has all of the leverage it needs to implement the stability-oriented reforms that it wants for Europe… can compel France to pursue deeper reforms in exchange for more time to consolidate its deficit. Germany cannot, however, indulge its obsession with supply-side reforms without also pursuing growth-enhancing policies….
   The key to ending the European crisis is a stimulus plan that addresses deficiencies on both the supply and demand sides. That is why Germany’s refusal to help find a way to finance the proposed European investment agenda… is a mistake. Equally problematic is Germany’s focus on maintaining a fiscal surplus…. Germany’s fourth policy mistake is its apparent withdrawal of support for the ECB…. If Germany refuses to take a more reasoned approach, it risks undermining the ECB’s credibility…. The question is whether Germany’s leaders will recognize this before Europe’s economy falls into an even deeper slump.”

Should Be Aware of:

• Josh Marshall: Making Sense of Darren Wilson’s Story)
  Ta-Nehisi Coates: Barack Obama, Ferguson, and the Evidence of Things Unsaid
  Richmond Ramsey:
  Fox Geezer Syndrome

1. Chris Blattman:
   Should we believe the institutions and growth literature?: “The empirical institutions and growth literature… I find it more compelling and rich than the statistical literature, but they’re nice complements…. A few quick thoughts and pointers: The institutions literature has focused too much on constraints and not on capacity…. You might argue a third dimension of institutions is the political machinery that gets developed to answer the question ‘Who decides?’…. ‘How to manage peaceful political transitions as the relative power of different interest groups change?’ is a really, really, fundamental question a society has to answer….The slightly less-read stuf…. Tim Besley and Torsten Persson’s work on state capacity…. Some of the small-sample comparative case study work in Latin America, such as Jeffrey Paige or James Mahoney. most economists only read Engerman and Sokoloff. There’s a huge comparative politics…. One of the nicer, more concise summaries is in John Ishiyama’s short textbook…. There’s a growing empirical micro literature that uses subnational or individual data to show how important are things like social norms, rules, decision-making processes, and all the other things we think of as ‘institutions’ at the micro level….One of the takeaways that is hard to reconcile with the macro literature is that these local institutions appear to be quite malleable in the short term. How do we understand persistence at the macro level then?”
2. Kevin Drum:
   Obama’s Immigration Order: Lots of Sound and Fury, But Not Much Precedent | Mother Jones:
   “Eric Posner warns that President Obama’s recent executive action on immigration… ‘may modify political norms.’… And since most of the regulatory apparatus of the government is fundamentally liberal in nature, a political norm that allows presidents to suspend enforcement of rules they don’t like benefits conservatives a lot more than it does liberals…. Political norms matter, as Republicans know very well, since they’ve smashed so many of them in recent years. Still, there are a couple of reasons that there’s probably less here than meets the eye, and Posner acknowledges them himself. First… the specific actions he took are justified by statutory language and congressional budgeting priorities that are unique to immigration law… [as] Posner himself agrees…. But there’s a second reason that Obama isn’t seriously breaking any political norms: they were already broken years ago. Posner himself tells the story…. Agency regulations and executive orders are already major battlegrounds of public policy that are aggressively managed by the White House, regardless of which party is in power. Has Obama expanded this battleground? Perhaps. But… immigration law is fairly unique in its grant of power… we don’t really have to worry about President Rand Paul rewriting the tax code from the Oval Office…. The kinds of things he can do are about the same now as they were a week ago.”
3. Noah Smith:
   Fake Aspergers, Guys?: “This is something I’m hearing more and more often these days: right-wingers, at least the smart ones, are just people with Aspergers, whose condition prevents them from being socially sensitive enough to feel the vibes of political correctness…. It occurs to me that it’s not that hard to fake Aspergers… just talk about nerdy stuff, get a blank stare on your face every once in a while, intentionally ignore social cues, etc…. It’ll be fun–if you meet a girl who you know is too pretty to sleep with you, instead of bowing and scraping ineffectually before her majesty and beauty, you can say un-PC stuff that sends her into spasms of ineffectual rage! Wheeeee!!… One thing… annoys me…. Real Asperger’s guys are usually not right-wing types who brashly declare their disdain for social cues by talking about rape around girls. Most of them are kind, good-hearted people who occasionally say offensive or hurtful things simply by accident, and are very very slow to realize it–but when they eventually do realize (or are informed by friends), they are generally remorseful and distressed. They are people with a real, if minor, disorder, who almost all wish they didn’t have the limitations they have…. I wouldn’t like to see those real Asperger’s people given a bad name by swaggering right-wing jerks…”

Martin Wolf:
Radical cures for unusual economic ills:
“Crises are cardiac arrests of the financial system…

…The time to worry about a patient’s lifestyle is not during a heart attack. The need is to keep them alive…. In my book, The Shifts and the Shocks, I suggest that a number of shifts in the world economy created chronically weak demand in the absence of credit booms… excess savings in emerging economies… shifts in income distribution, ageing and a secular decline in the propensity to invest in high-income countries… globalisation, technological innovation, and the growing role of the financial sector. It is not enough to clean up…. Policy makers also have to eliminate the dependence of demand on unsustainable credit. Without that, even a radical clean-up will not deliver buoyant demand…. The crisis left a grim legacy. The eurozone has done a worse job of dealing with this than, say, the US. But the origins of the crisis are to be found in longer-term structural weaknesses. Policy has to address these failings, too, if exit from the crisis is not to be the beginning of a journey into the next one. The answers are likely to be unorthodox. But so, too, is today’s economic condition. Rare ailments need unusual treatments. So look for them.

Anne Laurie:
Monday While-We’re-Waiting:
“Matt Yglesias…

…[on] the new Wingnut Wurlitzer meme:

Conservative pundits who didn’t like the bipartisan comprehensive immigration reform bill that passed the US Senate in 2013 also didn’t like Obama’s deportation relief through executive action. They object to both the content… and to the process… as roughly akin to overthrowing the democratic constitutional order through military force in order to establish a brutal Latin American dictator…. There are many things one could say about this comparison, starting with the fact that unlike a proper caudillo such as Augusto Pinochet, Obama hasn’t had thousands of people detained and tortured without trial. Or, indeed, that it was actually Obama’s predecessor who was having people detained and tortured without trial.

But perhaps the strangest thing about it is that when American conservatives analogize Obama to a Hispanophone military dictator, we are meant to understand this a criticism when the historical reality is that American conservatives have generally been quite enthusiastic about caudillos…. Indeed, thanks to the miracle of modern-day traffic recirculation methods, old National Review content singing Pinochet’s praises falls directly adjacent to complaints about Obama’s caudillismo…