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Perhaps somewhat - but I don't see any reason to think it's the "jobs deficit" that is the politicized part of it. Not that I would accuse you of bad faith in calling the budget deficit a "problem" - but I would hope you'd extend the same courtesy to people who disagree with you.

When I look at the budget deficit and the unemployment rate (which I think could be called a "deficit" - it's a "labor demand deficit"), I think the most obvious "real problem" is the labor demand deficit, and the less frightening, more "politicized problem" is the budget deficit.

The debt is a different question of course. I'd still probably call the "jobs deficit" a bigger "real problem", but that assessment might obviously change ten, twenty, thirty years out. But the budget deficit? No.

We can accuse each other of being politicized or we can just understand why it is we disagree. I think it's quite unfair for you to accuse reasonable analysis of being "politicized" - and the more I get called that, the more I get tempted to assume bad faith in people who put budget deficit concerns above job deficit concerns (and I really don't like assuming bad faith on anyone's part).


Your points are well taken.

But when people who know better use terms that confuse issues, or change their point estimates on impact for partisanship reasons (either left or right) I think we have moved from the art of political economy (which I think is what you want to talk about, and which does have wiggle room for disagreement among reasonable people) to politicized economics.

When supply siders argued that deficits don't matter, that is a big a hoax as when contemporary Keynesians overestimate the effectiveness of fiscal policy. We can, and must, I would argue, do better in practicing the "art of political economy."

Or do you think I am being unreasonable?

No I think you're very reasonable, and I agree economics gets politicized. I would just point out that merely identifying a jobs deficits as a problem (it's an NYT op-ed - the language doesn't bother me that much) isn't tantamount to politicization.

I think there would be disagreements on "overestimates of the effectiveness of fiscal policy" or any of these questions. It's pretty tough to identify politicization, because I think in most places guilty parties aren't even aware they're doing it.

I think the most abused studies out there are Barro's multiplier and Reinhardt and Rogoff's work on public debt. I personally see a stimulus that is smaller than what a lot of independent Keynesians have been advocating, so I personally see politicization on the part of the Obama administration in the direction of understimating fiscal stimulus. The politicization doesn't make me happy, I can assure you.

But see - I imagine you wouldn't think of this as politicization.

So should I call the Barro multiplier estimates politicized? That's a little unfair. I think his WSJ op-eds applying those estimates borders on politicization. And how should I take libertarian bloggers that pass Barro's estimates around? I can think of them as wrong or politicized - and in all likelihood it's a mix of both. I don't think there's any good way to tell that a given person is "politicized" unless you follow them for a while and know them well.

And speaking of overestimation and underestimation - I think overall we overestimate the amount of politicization out there among economists and bloggers, we underestimate the amount of good faith problem solving.

When someone disagrees with us we have three options: (1.) we're wrong, (2.) they're wrong, know it, and are playing politics, and (3.) they're wrong and don't know it.

(1.) is unsavory for people to consider and (3.) is a lot of work for most people, so (2.) is what we inevitably latch on to.

(1) There is more to unemployment than a "labor demand deficit." I have a post at ThinkMarkets on the issue.

(2) Barro is a very careful researcher. If you haven't read the underlying research (not just the op eds presenting the conclusions), I wouldn't be offering assessments.

(3) There is 60 years of macro theory that calls into question the efficacy of fiscal policy.

A different NYT article focuses on the complexity of the unemployment problem, focusing on hitech.


Jerry -
1. I'm personally interested in the matching and labor dynamics literature, and I thought the points you raised in your post were exactly right. I don't think there's particularly good reason to believe that that's the dominant factor in this case, but it is certainly a factor. I hope you didn't interpret my citation of demand conditions as being exhaustive - it absolutely wasn't (as I should hope you don't think heterogeneous labor is an exhaustive explanation).

2. I have read the underlying research and I agree completely that he's a careful researcher. My concern is the way things like his WSJ articles have applied his findings - as I said in my original posts, I think the underlying research is sound and it's not surprising or problematic at all for me.

3. And there is over 80 years of macro theory that supports it. What is your point? That identification problems are rife in macro? That a lot of this stuff remains uncertain? That we've had to adjust the details over time as we learn more? I'd fully embrace all of that. I hope you're not arguing that the door is conclusively closed on fiscal policy.

And I should say - it's the same with Reinhardt and Rogoff. The work they do is fantastic. The problem usually comes in when it gets in the hands of journalists or politicos.

Into 1960s, most economists believed in the efficacy of fiscal policy and the impotence of monetary policy. By the 1970s, they understood the importance of monetary policy. The only question was whether there was a role for fiscal policy.

What changed the profession's mind was a combination of theoretical and empirical work, plus the experience of stagflation.

Barro's results are not remarkable. What is remarkable is listening to economists spouting policies discredited by the 1980s.

The politization I see is on the side of those advocating government spending as a cure (in some cases when their own research shows the opposite). Alternatively, they can plead willful ignorance.

"Barro's results are not remarkable. What is remarkable is listening to economists spouting policies discredited by the 1980s."

I don't see anyone denying Barro's findings, Jerry - least of all me. As you say, they aren't remarkable. Why would you expect a substantial fiscal multiplier in the years that Barro looked at?

Once again Daniel has missed the point and tried to move the discussion of on a tangent.

"Once again Daniel has missed the point and tried to move the discussion of on a tangent."

This is no tangent. The Barro estimates came from a period when no one identified weak demand as a substantial problem - so why would you expect higher multipliers and why would you even consider applying the estimates out of sample.

So what would be the solution of it and how can we manage it for the next term of it.All we know that these are the bigger problem of our life and we have been effecting by it from a long time.

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