"Thus I find myself becoming more Paleokeynesian by the hour, as the world keeps hitting me on the head with a brick, pausing after each blow to say: "Now do you understand?!" "

"I think that, once one recognizes this fact that both Keynes and Friedman are to the activist left of even the left edge of today's policy spectrum, one cannot then escape the conclusion that today the entire right wing and a good part of the center is simply not sane. The position of the right today is, in essence, that (a) because the top managements of highly-leveraged money-center banks were unable to understand or control their derivative books, (b) tens of millions of additional people must be doomed to poverty and unemployment, for (c) the market giveth and the market taketh away: blessed be the name of the market.
"And this is simply nutso.
"Our technologies, resources, and preferences are what they were in 2007, and high unemployment because we will not repair our magneto is a choice, and a disastrous one, and an insane one, and a right-wing one.
"Acemoglu and Robinson, I think, want at some level to be thought of as Very Serious People, as part of the Bipartisan Center. They do, I think, fear that if they took those additional logical steps that they would find themselves dismissed as "shrill"--as like Paul Krugman and company.
"So they try to avert their own--and everybody else's--gaze from the fact that right now to be truly technocratic and nonideological is to be advocating policies that are left of the entire political structure."

--- Whether this is an accurate understanding of Acemoglu and Robinson, I think it is 100% correct about how _DeLong_ understands his situation. He really, really wants to be a sensible centrist non-partisan technocratic Very Serious Person, but is unable to do that honestly.

"When the Financial Times's Martin Wolf asked former U.S. Treasury Secretary Lawrence Summers what in economics had proved useful in understanding the financial crisis and the recession, Summers answered: “There is a lot about the recent financial crisis in Bagehot...”. “Bagehot” here is Walter Bagehot’s 1873 book, Lombard Street. How is it that a book written 150 years ago is still state-of-the- art in economists’ analysis of episodes like the one that we hope is just about to end? There are three reasons. The first is that modern academic economics has long possessed drives toward analyzing empirical issues that can be successfully treated statistically and theoretical issues that can be successfully modeled on the foundation of individual rationality. But those drives are disabilities in analyzing episodes like major financial crises that come too rarely for statistical tools to have much bite, and for which a major ex post question asked of wealth holders and their portfolios is: “just what were they thinking?”. The second is that even though the causes of financial collapses like the one we saw in 2007-9 are diverse, the transmission mechanism in the form of the flight to liquidity and/or safety in asset holdings and the consequences for the real economy in the freezing-up of the spending flow and its implications have always been very similar since at least the first proper industrial business cycle in 1825. Thus a nineteenth-century author like Walter Bagehot is in no wise at a disadvantage in analyzing the downward financial spiral. The third is that the proposed cures for current financial crises still bear a remarkable family resemblance to those proposed by Walter Bagehot. And so he is remarkably close to the best we can do, even today."

Read this, and remember (i) that Bryan Caplan thinks that the problem with democracy is that voters are irrational and make elementary mistakes in economics, and (ii) that Tyler Cowen thinks Bryan Caplan is a valuable social thinker.

DeLong is missing a trick. The rational-expectations dogmatist could simply insist that the true probability of an event like 2008 in 2008 _was_ 0.02%, and we were just unlucky.

(checks table) Yep, this applies.

Oh, this will not be good for the state of DeLong's soul.

"I stand before you repentant..."

Shorter DeLong: fucked is the new normal.

But Brad does not answer his question! Where oh where are the centrist technocrats?

"Knowing that the market is good, their task is to figure out why a good market has decreed that employment in America needs to fall by 8 million relative to trend. (It's not unlike grappling with a just and all-powerful God who doesn't mind a tsunami every so often.)

The workers-have-no-productive-skills explanation is the only one that makes sense, if we first start from the premise that the market is all-good. Never mind that we have a lot of evidence that the market is not good — that we have been periodically suffering from these finance-driven grand mal seizures of the body economic that we call the industrial business cycle for 185 years.

Nevertheless, you can shut your eyes — and economists are very good at doing so. It was Joseph Schumpeter, one of the smartest economists of three generations ago, who began a lecture with: "Gentlemen! A depression is a healthy shock! It is like an ice-cold douche!""

This, this, this.

I have just advised D.M. to use a copy of this figure in his dissertation proposal.

The explanation of when pricing errors are more serious than quantity errors is very nice.

"Did You See John Yoo's Easter Sunday Op-Ed? In the Washington Post: "Crucifixion is legal when ordered by the president in his role as commander-in-chief of the armed forces.""

"I hereby deny, abjure, and repent my previous allegiance to the gospel of "Greenspanism." I reject Greenspan, and all his works, and all his empty promises.

I will strive now to walk in the light."

This should make for some ... interesting discussions the next time DeLong gives a talk at Harvard. (Or make sure it will be a long time before he does.)

Ummm... maybe my memory is playing tricks with me, but this really sounds like the Brock & Hommes models from the mid-1990s...

I think this is slightly unfair to the 17th century Jesuits. It is not at all unfair to the Chicago School; if anything it is still too kind.

This has been another edition of patient explanations of things which are obvious to everyone who has actually bothered to think. Tune in next week...

OK, this is me disagreeing with an actual economist about the kind of economics he specializes in, but I think Brad is just wrong here. There is a lot of stuff wrong with Harvey's writing (horrible expression, the pretense to be able to say what historical events Really Mean by relating them to the Hidden Forces, etc.). But the plainest interpretation of both his original post and his follow-up is that (1) he thinks a sufficiently large stimulus _would_ work as economics, while (2) we will not be able to get a sufficiently large stimulus due to political and fiscal constraints. Brad is arguing against someone who believes (1') no stimulus could possibly work due to crowding-out effects. I truly don't see how Harvey is saying this. (Harvey, it must be said, does not help his own case.)

Wow. Brad's 100% right, Fama is screwing up something (the accounting-identity sense in which "savings" must always equal "investment") which is so basic that I learned it at my father's knee (quite literally).

Brad calls for packing the Supreme Court, until the surviving Bush vs. Gore justices step down. I approve.

Brad DeLong on the evolution and current state of central banking.

Far, far too generous. (For instance, _Essays in Positive Economics_ is appalling _as methodology_, never mind anything else.)

"Retire the Republican Party, give it an honorable place in American history for its long, successful run from Fremont to Eisenhower. And pass over what has happened since in silence."

Brad, tricked into appearing with Grover Norquist, loses his temper with the entire establishment.

"This is thoroughly unconvincing." Indeed it is! Now, why might a smart man like Friedman advance such a thoroughly unconvincing argument? Why might so many people be convinced by it?

note in passing: _none_ of his 3 ways of organizing R&D matches the (uniquely successful) system of modern American science.

Brad dates the Singularity to 1870.

Brad explains the facts of life.

I like the passing mention of "UC Sunnydale".

"the highest form of gesellschaft turns out to be where one becomes rich enough to purchase a reasonable facsimile of gemeinschaft as a luxury out of one's ample disposable income". Of course we've subscribed to one too...

"THERE ARE NO ATTRACTIVE MODERN CONSERVATIVES BECAUSE CONSERVATISM SIMPLY IS NOT ATTRACTIVE. DEAL WITH IT!! ... For Burke, conservatism is a sometimes useful rhetorical weapon, not a set of principles."

Brad reflects on the start of his economic history course; and also on the place of economics and scientific progress in modern history, and the reciprocity between history and social science

Henry Farrell on Brad DeLong on Timothy Burke on Dick Cheney, as viewed through John Padgett and Christopher Ansell on Cosimo de Medici.

"Is Huckabee's FairTax smoke and mirrors? Yes. Is it voodoo economics? Yes. But remember one more thing: It is more reality based than the proposals of the establishment Republican candidates."

Brad's _sentiment_ (John M. Ford's "Say what you mean; bear witness; iterate") is right, but his _mechanism_ is frustratingly vague.

Not sure this really covers all cases...

1992 paper on abuses of hypothesis testing --- specifically evidence that even the unrejected null hypotheses in most economics papers are in fact false.

DeLong on McCraw on Schumpeter; also DeLong on Schumpeter

D^2 on Brad DeLong on Milton Friedman. The first seems to have the better of the argument.

Henry Farrell on Brad De Long on James Scott on, in part, F. A. Hayek.

Why oh why do people fall for this sort of anthropic argument?

101 = modern political economy; 113 = American economic history