August 2021

Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31        
Blog powered by Typepad

« PhD in the Philosophy of the Austrian School at UFM | Main | How to Explain the World Without Becoming a Bore »


Feed You can follow this conversation by subscribing to the comment feed for this post.

"But to concede that, to even consider the possibility that we’re in a demand-shortfall slump of the kind Keynes diagnosed, would be an incredible comedown for Lucas.

So he can’t and won’t consider the possibility."

So says Paul Krugman in the post linked here. I think this is true. I also think it is true that Krugman can't consider the possibility that the recession and subsequent slow growth is something other than a demand failure.

Each has his priors and they are strong indeed. Does that mean that each is acting "unscientifically"? Well, if you think that being a scientist means you are willing to consider all possibilities at all times, and that one -- albeit great recession -- is enough to switch your basic framework, then -- yes. I think Krugman and Lucas each have a simple-minded explicit philosophy of science. But neither acts in accordance with it.

I didn't hear the talk (and cannot find a video or transcript online), but his slides are available here:

It looks as if Lucas is making a pretty standard argument, with explicit comparisons between the Great Recession and Great Depression. The closest thing to RBC is his claims that policy blunders (read: negative technology shocks) stalled recovery in both episodes. I am disappointed that he doesn't take a more Austrian view of the expansion (like A. Schwartz and J. Taylor do!). But I don't think you can accuse him of problem denying.

Here are some lines from his slides to make my case:

"Milton Friedman, Anna Schwartz argue that this Fed failure was the
crucial policy mistake of the U.S. Great Depression. I agree." (p. 23)

"My view of 2007-08 crisis is based on parallels to 1929-33, but there are
obvious differences between these situations that must be respected." (p. 26)

"The economics of the 2008 “credit freeze” following the Lehman
Brothers failure were identical to the economics of the 1930s bank
runs" (p. 30)

"[I] Believe it is more accurate to say that the problem is government is
doing too much. Again, I see analogies to the U.S. of the 1930s
• Likelihood of much higher taxes, focused on the “rich”
• Medical legislation that promises large increase in role of government
• Financial legislation that assigns vast, poorly-defined responsibilities
to Fed, others
Are these conditions that foster a revival in business investment, consumer spending?" (p. 36)

Mario -
re: "I also think it is true that Krugman can't consider the possibility that the recession and subsequent slow growth is something other than a demand failure."

I can think of two times he considered this right off the top of my head:

He's fond of saying "this isn't your father's recession - it's your grandfather's recession", and going on to describe how his perscriptions are actually not typical prescriptions - they are due to the somewhat unusual circumstances here.

I wasn't even alive in 1981-1982, but Krugman was around and a lot of you were. Do you remember him pushing the 1981 equivalent of multi-trillion dollar fiscal stimulus at that time?

I thought we were talking about the current recession.

Sure, but each of them has clearly come to a conclusion on the current recession. Since we have no alternate universes handy, a good indicator of "are they open-minded to other potential causes of the recession" seems to me to be whether they've identified other causes of past recessions.

If they have and they've already broken orthodoxy in other cases there's no reason to think that their current position isn't a result of open-minded inquiry.

If, on the other hand, they are a broken record when it comes to the causes of other recessions we have reason to doubt their open mindedness in any circumstance.

I understand now your point. The ordinary recessions are for Krugman 1921 and 1981 and thus the GR is the exception.

Two points: (1) I do not know Lucas's position on 1921/1981 but perhaps his theory is more general when it comes to a universe of these recessions plus the current one; (2) Are these blog posts of Krugman his considered opinion on a par with his more in-depth analysis of the GR?

I think we know that there are fundamental differences in the way Krugman and Lucas each approach macroeconomic issues, even apart from the Great Recession.

My main point is that being scientific sometimes means refusing to entertain other views when one's priors (based on theoretical and empirical considerations encompassing a larger picture) are strong. This was the position of Popper and Lakatos.

I am not justifying either of their positions, except to say that this particular behavior of each of them is not evidence that either of them is unscientific.

Each party could be asked what kind of evidence or argument would require them to reconsider their priors. Lakatos was in favour of conservatively protecting the so-called hard core of the program by deflecting criticism. This is about as un-Popperian as you can get. If there are some assumptions that are supposed to be beyond criticism that is quite likely where maximum criticism is reqired.

Popper had his "principle of tenacity" which functioned in a way similar to Lakatos's hard core -- or so I have thought.

Nevertheless, I do not think most scientists could tell you beforehand what set of facts would "require" them to re-evaluate their priors. And re-evaluation is not the same as rejecting. It may simply involve a tweak here or a tweak there. Frameworks die hard.

My answer to Peter's question of what has to be contested: the identification of micro-founded macro with representative-agents models.

It looks the same, which makes it look very strange in the context of Popper's critical rationalism. But it is not meant to blunt the force of criticism which is the function of the Lakatosian injunction to protect the hard core. The idea is to promote pluralism, to allow programs to run in parallel to deliver whatever value they may have insead of dropping a program like a stone at the first sign of problems.

I think it is fair to say that the Lakatosian program has delivered next to nothing of value in eonomics and the Popperian critique of the deeper philosophical, methodological and metaphysical assumptions of programs has hardly got off the ground due to the ban on metaphysics that was imposed by the positivists. When this proceeds the Austrians should be the major beneficiaries due to the compatibility of Aust ec with the Popperian metaphysical research program.

love is blind, the lovers look at piffle which does not see them to do

The comments to this entry are closed.

Our Books