“This House Believes We Are All Keynesians Now”

That is a VERY peculiar debate.

Zingales is arguing against the motion. Yet yet he lists Alan Greenspan, Ben Bernanke and George W. Bush among his pantheon of Keynesians. DeLong is arguing for, and is at pains to point out how many people aren't.

And within the framework they are jointly adopting, Zingales makes some early hard yards by pointing out how awesomely expansive (nah! Profligate!) both fiscal and monetary policy have been over the last 8 years. Yet we have had anemic job growth, lackluster productivity improvements and merely average GDP growth.

It's gotten to the point, quite frustratingly, that the reason the "We're all Keynesians (or if you ask Newsweek, Socialists) now" refrain is so tacitly accepted by the bien pensant, and almost everyone else, is almost entirely the result of rhetorical dishonesty and intellectual laziness. Of course, it was political posturing and outright deception to preach a free market philosophy from the bully pulpit for the last eight years, but it takes a special brand of media douchebag cum moron to take the GOP on their word over the last two terms. One can assume that the large majority of pundits and reporters on the right and left might not be able to draw you a demand curve if you asked, but they certainly all have Google and know how to use it, or at the very least know how to get to the library and inquire about this so-called "free market ideology". It either displays true willful ignorance of the very subjects these people cover, or conscious deception when Christ Matthews says that we got to where we were because of the laissez-faire policies of the Republicans. And the fact that many, including the self-professed intellectuals of this country, get their news from these people, is precisely why ... We're all Keynesians now.

On a slightly related note, when are we going to get to hear that Naomi Klein prebuttal!!!

Re: "But his response to the challenge he erects seems to amount to the contention that this squad of bona fide geniuses are really benighted halfwits guilty of an elementary error...":

Exactly so. I have learned more about asset prices from John Cochrane than anybody else. And yet--I seem to have fallen into some bizarro world in which they are making an elementary mistake that Charlie Kindleberger, Peter Temin, and Barry Eichengreen taught me back in 1980 had not been taken seriously in 50 years.

It is terrifying.

Is being terrified by commonplace academic disagreement the new version of having your head explode? Or is that still going on too?

Dammit Brad, I was going to argue that you were merely arguing that they are bona fide geniuses guilty of an elementary error.

"DeLong is getting crushed in the voting" - not really, at all.
The poll asks you to vote on whether or not you agree with the proposition, "We are all Keynesians now." You are not asked which of the two debaters is "winning."
My guess is that most people vote based on their pre-existing opinion about Keynes, and nothing either debater says would affect most votes.
(Really, isn't that how you voted?)

And, I would add, the typical online reader of the Economist is more likely to disagree with the house's proposition (we are all Keynesians) than to agree by, oh, 2:1. If the debate were being hosted at, oh, The American Prospect with the exact same entrants and remarks, I'd guess that the polling ratio would be reversed.

Hey Airman,

If you think the Economist is like the Cato Institute, you are sadly misinformed. Hasn't been libertarian/free market for years.

We are beyond Keynes now.

Even Keynes stated that government spending beyond a certain ceiling will only make things worse. He stated that ceiling at 25% of GDP which we are well beyond if you include Federal, state, and local spending:
http://corner.nationalreview.com/post/?q=NmQ2NT...

I guess the house proposal is obviously false, so I would vote "No". But it was, in my opinion, very poorly chosen.

Zingales is arguing the point in which everyone, including DeLong, agrees, i.e., the financial crisis can't be solved with Keynesian polices.

So far, neither Zingales nor anybody here addressed the crucial problem: Is fiscal policy *the most effective* instrument available right now to fight rising unemployment? Why, or why not?

When debating DeLong, Michael Boldrin advanced 2 points against fiscal policy (and the stimulus package in particular) - after wasting 1 hour of debate talking about the banking crisis.

1 - Government spending is not very effective against unemployment because it will be focused on jobs that require qualifications the unemployed do not have - current unemployed labor is not sufficiently flexible to do the new jobs, therefore the spending will be ineffective.

2 - The Obama administration will incur in such a loss of political capital by pursuing fiscal policies, that it will not be able to take the unpopular but necessary measures to fix the banking system.

I would like these 2 points to be discussed, but it looks like this debate is heading in a familiar direction - Zingales saying "Fiscal policy will not fix the banks problem", DeLong saying "It's not meant to. But it will combat the unemployement/falling demand snowball".

Point # 2 is a political question, not an economic one. On the merits it's clearly wrong. People like their bread and circuses. Improving employment will make Obama's job at other reforms easier, not harder.

Point # 1 is an interesting one. But as others have pointed out, 4 years ago there weren't all these licensed builders, real estate agents, and mortgage brokers either. People can adjust quite rapidly when it's in their self interest. One of the other economists at the debate pointed out how rapidly, under wartime conditions, entire armies can be raised and trained. People change jobs all the time.

And finally on Point # 2, there are lots of things that need doing, and lots of idle hands about. One doesn't need to instantly retrain people as nurses (Boldrin's example). Rather you give folk an income and the time to undertake their own retraining.

This is now the second DeLong debate that I've seen or read (I watched the video debate posted at Thoma's site as well.

Is it just me or does DeLong argue ideas through anecdotes and he said/she said type statements?

His video debate solidified this impression.

Shouldn't someone go through and delete all of DeLong's comments, and tell him he's being a troll?

The most amusing thing: DeLong's suggestion that the the Bush years were boom years! Well, now he tells us. What a hack.

"Bad corporate governance coupled with bad government policies has destroyed the financial sector, scaring investors and freezing lending."

OK, how can we take anyone seriously who says something so stupid. What has scared investors and destroyed the financial sector is financiers making really really really bad investments. If we can't agree on that simple point, wondering which economist we all are, is a waste of time.

The voting was not for who won the debate -- the question was "are we all keynesians now" which Brad argued that we aren't (he argued for No!) since it appears that exhibit A: Luigi Zingales, is still 100 years behind on economic policy.

And it's a bald stretch to call any of those people on the list "geniuses". Economic research is rather subjective. The field has traditionally been dominated by conservatives, so if you're conservative, you're likely to get your research published. Among thinking economists, there's a consensus that technology shocks have nothing to do with the current crisis, and yet that's what Prescott won his Nobel for -- an idea which is now completely discredited (except in the eyes of many conservative economists, for whom it is like the Penteteuch...)

Zingales basic premise is that the economic crisis and the banking crisis are completely separate. This is simply not so. Were the economy to grow at 10% next year, there would be no banking crisis (or, at least, a much more manageable crisis). Think about it -- 10% growth implies unemployment down at 3% -- suddenly, lot's of unemployed people who are struggling with credit card debt and mortgage payments will have a much easier time, the housing market would turn around, corporate profits would be fat, and the Dow would hit 10,000 again... The automakers would certainly be able to sell SUVs again... Christ, 10% growth and Madoff would likely be back in business! On the other hand, every month that 650,000 people lose their jobs, that must imply at least another 30,000 defaults of some kind... Especially, the people losing their jobs now are not likely to have suspected it one year ago... Zingales is arguing that even if we were to suddenly employ 4 million more people, it would have no effect on the banking crisis; conversely, he argues that if 4 million more people lose their jobs, more people won't default.

Zingales makes no sense.

"The field has traditionally been dominated by conservatives, so if you're conservative, you're likely to get your research published." -Thorstein Veblen

Bullshit.

"Economists are often thought of as conservative, but that was not the case in
the previous study nor in this one. In this study, 47 percent of the students classified
themselves as liberal, 24 percent as moderate, 16 percent as conservative and
6 percent as radical. (Six percent stated that politics were unimportant to them.)
These percentages are very similar to the last study, although the share of those
identifying themselves as radicals declined (from 12 percent). The students perceived
their views as slightly more liberal than those of their parents, 40 percent of
whom they classified as liberal, 36 percent as moderate, 16 percent as conservative
and 3 percent as radical." -Colander, David. The Making of an Economist, Redux. Princeton: Princeton University Press, 2008.

Arnold Kling made a superbly clarifying comment over on Atlantic Business -
http://business.theatlantic.com/2009/03/who_is_... Short excerpt: it "is unfair to Keynes to imply that his view of slumps is that they are caused by underconsumption. His primary explanation for a slump was a decline in "animal spirits" in the business sector. Another explanation was an increase in "liquidity preference" among households and investors. Both explanations apply in today's economy, although in modified form. The loss of "animal spirits" can be seen in the housing market, which is no longer animated by the spirit of ever-rising values. "Liquidity preference" can be seen in surge in demand for U.S. Treasuries...... (go read the rest.)

So how did Brad and Luigi do?
1) Points to Brad for eviscerating Say's Law. Germane and convincing.
2) Points to Luigi for emphasizing the central role of trust, and how much reform of financial governance will be necessary to rebuild it.
3) But Zingales's prescriptions will affect the long term, not the short. Keynes might note that in the long run we are all dead. So: one key issue is how immediate-term the policy response must be. I think this is a point of difference: DeLong would argue that the ship is going down in the short term, and we need short-term action. Does Zingales agree?
4) So, in other words, points to Arnold for pointing out that the key issue is really "what is the right prescription for the economy today."
5) Naturally, Arnold favors appropriate tax cuts over "government spending, no matter where or when." This is closer to the crux of the real debate: I'm sure Brad would favor more - and more immediate - spending than Arnold. I doubt that he would say "no matter where and when" any more than Arnold would say that about tax cuts.
6) This is the debate I would like to hear.