Response to Brad De Long (Star Wars Themed)

by robekulick

So there was an unexpectedly large response to my post yesterday (https://robekulick.wordpress.com/2012/01/02/the-real-housewives-of-academia/). I have to say I was very excited that Scott Sumner posted a link to my blog (http://www.themoneyillusion.com/?p=12472) on his website and that Brad De Long actually wrote a response in the comments to the article. Since this entry is going to address Professor De Long’s comment, I’ll reproduce it here:

“There is the question of how one should treat people like Fama, Lucas, and Posner–who haven’t read or don’t remember the literature, hasn’t thought the issues through, and yet accuses Larry Summers and Christy Romer of being corrupt job-seekers and Paul Krugman of being… well, it’s not quite clear what Fama, Lucas, and Posner are accusing them of.

My view is that if Lucas, Posner, and Fama are–without talking to Christy or Larry–going to–falsely–accuse them of saying things about how the economy works that they don’t believe, those of us who do talk ought to deliver a little pushback.”

First of all, I’ll just start by saying again how much I respect Brad De Long’ s work. I also note that I am a frequent reader of his blog. That is I was a frequent reader of his blog before the dreaded specter of comps (the final exam at the end of the first year of economics graduate school) entered my life.

I agree that healthy pushback is an important thing in these debates. I even agree that passionate and strongly-felt pushback beyond what is normal in academic discourse is a necessary part of communicating in the blog format. However, sometimes from reading your blog, especially when you’re writing on a subject in conjunction with Paul Krugman, this is the impression one gets:

A long time ago, in a galaxy far, far away (Chicago in the 1970s), an evil economist named Robert Lucas ,

conspired with Robert Barro (although Barro was actually at Harvard)

to destroy macroeconomics. They developed a powerful theoretical edifice, New Classical Macroeconomics:

that ushered in a dark age of macroeconomics that has lasted until the present day.

But in the ashes of the financial crisis, a new hope rose to prominence, Paul Krugman (okay he’s been around for a long-time, but lets just say that post-crisis Paul Krugman has been very focused on this “dark age of macroeconomics” issue).

Aided by Brad De Long,

these economists have fought to protect Keynsian macroeconomists like Christina Romer

from the evil forces of the classical macroeconomists.

Anyway, I had never used pictures before yesterday in my blog and if I do to much more of that in the next week or two, the gimmick will quickly go from quirky and fun to blah, so I’m going to change course here.

Let me put my feelings on this issue in context. I went to Princeton for my undergraduate degree in economics and my very first macroeconomics professor was Paul Krugman. For about three years I was an ardent Keynesian and lectured my parents on the importance of Keynesian policy on every vacation, like any good know-it-all college student does. But beginning in my senior year of college I discovered Milton Friedman, which disabused me of my ardent Keyensianism. Five years later, I’m a first year PhD student at the  University of Maryland (and a micro guy to boot). At the moment, I don’t have strong beliefs one way or the other on macroeconomics, so I would think I’m exactly the sort of person that both sides of the economic blogging world would want to sway. And while I’ve found that much of the lively debate between econ blogs  induced by Professor De Long and Professor Krugman is constructive, there are episodes that really don’t leave a good impression with me. I’ll detail here one such episode that has bothered me for awhile:

In August 2009, Richard Posner wrote an editorial for the Atlantic criticizing the claims  about the stimulus Christina Romer made in a presentation when she was still working for President Obama’s administration. Romer’s claims can be summarized based on her claim on p. 13 (http://www.whitehouse.gov/assets/documents/DCEconClub.pdf) where she argues that GDP would have been 2.3 percentage-points higher but-for the economic stimulus package.

Now what’s interesting here is that at this point Richard Posner had come out as a surprising advocate for economic stimulus given his affiliation with the University of Chicago. He outlined his new found belief in stimulus in two books, A Failure of Capitalism, and the Crisis of Capitalist Democracy (both of which I read) and explicitly rejected the macroeconomic views of his Chicago colleague, Robert Lucas. So what was Posner doing criticizing these claims about the Stimulus? My reading of his work is that he thought that if the claims for the stimulus strained credulity then people would turn against stimulus as a policy even if it was the correct policy.

Anyway, in this editorial  http://www.theatlantic.com/business/archive/2009/08/honesty-about-the-stimulus/23472/, Posner outlined his misigivings about Romer’s stimulus presentation. Particularly, Posner was concerned about the lack of rigor in her analysis. He concluded with the following argument that ignited a blogosphere firestorm:

“This raises the question of the ethical responsibility of academic economists, such as Romer (and Krugman, and Lawrence Summers, and many others), who write for the media or join the government, either to adhere to academic standards in their nonacademic work or to make clear to the public that they are on holiday from those standards and that what they say in their public-intellectual or governmental careers should not be thought identical to their academic views. As an academic, Christina Romer was a respected student of the business cycle, and actually expressed skepticism, no longer in evidence, about the efficacy of stimulus programs in arresting economic downturns. The statement in her talk that she thinks the allocation of moneys by the stimulus bill is just right is hard to credit as her professional opinion. But as chairman of the Council of Economic Advisers, she is a spokesman for the Administration, and I would guess that her public statements are vetted by the President’s political advisers. ”

De Long fired back a very strident response on his blog, http://delong.typepad.com/sdj/2009/08/richard-a-posners-ethical-lapses.html, accusing Posner of “Seven major ethical lapses.”

De Long had a good point, which had to do with an argument Posner made about the size of the stimulus relative to the size of the purported effect. De Long argued that Posner’s numbers were off by a factor of 16, and in isolation of the other issues De Long was correct on this point. However, the rest of the blog entry was less compelling. There was a strange focus on similar estimates of the effect of stimulus made by Mark Zandi, McCain’s chief campaign manager. Krugman also addressed the issue, but as far as I know he only addressed the “factor of 16 issue”, though there could be more that I never read  http://krugman.blogs.nytimes.com/2009/08/21/sour-sixteen/. Posner responded, noting the validity of the criticism of his calculation but arguing that the main issues behind his criticism were still valid.

http://www.theatlantic.com/business/archive/2009/08/christina-romer-defended-by-an-angry-academic-colleague/23541/

http://www.theatlantic.com/business/archive/2009/08/christina-romers-more-than-100-billion-mistake/23848/

The problem I had with Professor De Long’s reaction was that whatever your feelings about stimulus, in the end Posner makes a sort  of irrefutable point. A lot of factors were affecting the economy at the point in time Romer examined, making it pretty much impossible to reliably tease out the effect of the stimulus with the degree of accuracy a good academic journal would generally accept. Or lets put the issue this way, if as a graduate student seeking publication in a reputable economics journal,  I submitted the analysis that Romer performed as a causal analysis of the effect of the stimulus on GDP I would be summarily rejected everywhere. Now this doesn’t mean that Romer’s analysis lacks any import as a piece of evidence…I don’t find it very compelling, but in the absence of an alternative econometric analysis, I don’t have anything better to stand on. But I don’t think its unreasonable in this context to say that Romer was acting more in her role as a member of the administration than as a dispassionate scientist. Furthermore, Professor De Long’s emphasis on Mark Zandi was sort of a non-sequitur. Posner never, as far I know, held Zandi’s analysis as a paradigm of economic methodology. In fact, I sincerely doubt that Posner thinks very highly of John McCain or Mark Zandi. From things Posner wrote around that time, I think it is more than likely Posner voted for President Obama, though that is of course just speculation on my part.

So my problem is from the reactions of De Long (and not so much but to some extent Krugman) you sort of get this impression of Posner:

which really isn’t warranted considering the entire story.

I of course have to repeat at this point that I have the utmost respect for Professor De Long’s economic insight and shouldn’t be interpreted by anyone as a rejection of his ideas on macro. I think it will be awhile until I make up my mind on macroeconomics. But in the mean time, pushing back against someone’s ideas doesn’t necessarily require turning economics into Hoth (the ice planet in Star Wars where the 2nd movie begins in a battle between the empire and the rebels).

***

Addenda:

Scott Sumner turns the “dark age of macro” argument against the revival of old Keynesian economics:

http://www.themoneyillusion.com/?p=12529

Tyler Cowen levies a philosophical criticism against Paul Krugman’s approach:

http://marginalrevolution.com/

Paul Krugman says sorry I’m not sorry:

http://krugman.blogs.nytimes.com/2012/01/03/the-mendacity-of-dopes/

 

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