Comments on: The Incoherence of Neo-Keynesian Doomsaying

By: odograph

odograph — Sat, 07 Feb 2009 12:31:29 +0000

BTW, are you arguing for the full on “austerity” path? As we would perhaps propose to a 3rd world nation with a debt crisis?

Or are you merely positioning a milder, continued, deficit and debt as “non-stimulus”?

By: odograph

odograph — Sat, 07 Feb 2009 12:29:09 +0000

I've dropped the observation other places that we came out of the Bush years with a long history of Keynesian stimulus. We've had a solid 5 years, perhaps more, of deficit spending and tax cuts. We've had a war (or 2) fought not on cash accounting, but borrowed from the future.

That "irrelevant" line is both galling and strongly misleading.

The recent meme is that payroll taxes should be counter-cyclical. Solid. The only problem is it's too late. We were already doing tax cuts and deficits during the past, weak, misshapen, recovery.

So sure, make the rational case that the best path out of this mess is with reduced stimulus, if that is your belief, but don't forget your actual baseline.

By: Will Wilkinson

Will Wilkinson — Sat, 07 Feb 2009 02:26:59 +0000

Ooh. Thanks, Paul. This one's getting it's own post.

By: Cool Cal

Cool Cal — Sat, 07 Feb 2009 02:07:42 +0000

I'd rather beat a dead horse than thrash a straw man.

By: Paul Zrimsek

Paul Zrimsek — Sat, 07 Feb 2009 02:00:21 +0000

"Last but perhaps not least among causes of the consumer funk is the administration's own determined pessimism. Mr. Bush has a bully pulpit, and he is using it to preach economic alarm. This adds powerfully to the chorus of doomsaying. And when it comes to short-term economics, believing can sometimes make it so."

--Paul Krugman, 2/21/01

By: Michael Drake

Michael Drake — Fri, 06 Feb 2009 22:26:45 +0000

"the President or Nobel Prize-winning economist Paul Krugman...believe that countercyclical macroeconomic policy works largely by manipulating consumer and investor psychology"

This makes it sound as if they seek to manipulate c&i psychology directly. It seems to me, rather that the c&i psychology is an unknown factor encompassed by the relevant economic theory. To put it another way, they don't claim to have a psychological model; they claim to have an economic theory, and they claim that that theory implicates (in some impressionistic way) c&i psychology.

That issue is easy to conflate (and I think you may be conflating it) with the degree to which voter psychology has to be managed and leveraged to effect political goals. The political posturing doesn't do much as far affecting the economy, but it does a lot as far affecting the kind of policy that can get implemented and how swiftly it can be implemented.