David R. Henderson  

Russ Roberts on Motivations for Belief

Business Innovation in a Free ... The Top 1 Percent Includes You...

Pardon me for coming late to this discussion. I've been sitting on airplanes this week but am now back.

Russ Roberts recently wrote:

The evidence for the Keynesian worldview is very mixed. Most economists come down in favor or against it because of their prior ideological beliefs. Krugman is a Keynesian because he wants bigger government. I'm an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews. Whose evidence is better? I'm not sure it's a meaningful question. My empirical points about Keynesianism won't convince Krugman. His points don't convince me. I am not saying that we will never get any kind of decisive evidence on the question. I'm saying it sure isn't here now. [bold added]

I must admit I was shocked by the statement in bold. One person both Russ and I admired strongly is Milton Friedman. Milton was a Keynesian throughout the last half of the 1930s and through most, if not all, of the 1940s. After I had expressed disappointment, in my review of Two Lucky People, that Milton had not identified how he had shifted, I spoke to him at a Hoover event. He told me that there had been nothing close to a "Saul on the road to Damascus" moment. He said it was so gradual that he couldn't identify the change. Milton was someone who came to his views on Keynesianism from the evidence, not from ideology. The reason I'm an anti-Keynesian is not that I want smaller government. The reasons I'm anti-Keynesian, to the extent I am [I not totally anti-Keynesian], are that (1) I find most of the arguments unpersuasive and (2) the strongest evidence tends to go against the Keynesians. On (2), see my study of the post-World War II U.S. economy.

Moreover, not that it's common, but one can be a libertarian or conservative Keynesian. Alan Reynolds, who is not a Keynesian, once tersely expressed to me how that could be: "When you want to increase aggregate demand, cut taxes; when you want to decrease aggregate demand, cut government spending."

I think that when we choose a particular theory based on our ideology, we are in trouble. Of course, our ideology will influence us to be relatively closed or relatively open to various theories. We economists are human, after all, with all the weaknesses humans have. But we should, like humans generally, try to overcome our weaknesses.

Comments and Sharing

CATEGORIES: Macroeconomics

COMMENTS (24 to date)
Phil writes:

Perhaps there's a Bayesian reason for the bolded statement? Suppose you don't know if the Keynesian worldview is true, and assign it a 50% prior. If you are against bigger government, you consider the "side effects" of Keynesian policy negative.

Therefore, the expected value of Keynesian policy is much lower than the expected value of non-Keynesian policy.

It's like, you have a deadly disease. One doctor says, cut off your arm and you'll be cured. The other says, take this pill and you'll be cured. If the doctors are 50/50 to be correct, you want to follow the pill doctor. If he's the one that's right, you still have your arm.

Of course, this is an argument for being anti-Keynesian on *policy*, not on judging whether the worldview is correct.

Randy writes:

I find Russ' argument compelling because, while I can see that the idea of employing unused resources can take people off the streets to employ them in the politicial sector, I can't see that there is any feasible way to put them back into the private sector at some later date (and the historical evidence supports this). In other words, the reason to oppose Keynes is because the theory leads inexorably to an ever larger political sector.

John Lynch writes:

Having now read both Dr. Krugman's and Dr. Henderson's response to Dr. Roberts blog post, I must say that I think both have missed the point Dr. Roberts was trying to make.

Dr. Roberts' question is this: given that both he and Dr. Krugman are smart people and have seen the same evidence for and against Keynesianism, why do they not both reach the same conclusion?

The answer to this question cannot lie in the evidence for or against Keynesianism because both have seen this evidence. There are a variety of options, including dishonesty, which happens to be Dr. Krugman's usual explanation for the disagreement.

Dr. Roberts argues that each person has brought a set of ideological priors to the argument that invariably (and correctly, from a Bayesian point of view) alter the conclusion that one reaches about the evidence. Dr. Roberts, despite, we presume, being a man devoted to seeking the truth, has priors that indicate to him that small government produces better social outcomes. Thus, he finds the evidence against Keynesianism more convincing than the evidence for it. Dr. Krugman, despite, we presume, being a man devoted to seeking the truth, reaches the opposite conclusion. This is the context of his statement.

Unless Dr. Henderson or Dr. Krugman claims that he has analyzed the evidence without any prior beliefs, a claim that is almost assuredly absurd, neither one can claim that their conclusions regarding Keynesianism are based purely on the evidence; their priors must play a role.

This is the source of Dr. Roberts' continuing frustration with respect to economics as a science. The evidence for a great many positions, especially macroeconomic positions, does not appear great enough to form a consensus among economists regardless of their prior beliefs. Yet, almost all of these same economists treat their conclusions as based purely on scientific evidence and extrapolate accordingly.

You must explain why many intelligent people analyze the same evidence and reach opposite conclusions. Dr. Roberts' explanation is correct application of Bayesian reasoning to ideological priors. Dr. Krugman's explanation is that his opponents are dishonest.

Personally, I find Dr. Roberts' explanation both more plausible and more honest.

Rick Hull writes:

John Lynch,

I, and apparently Russ as well, could not have said it better. I applaud Russ for his candor and you for your rational analysis.

Stuart Williams writes:

Bayesian reasoning in this context is a fig leaf. Only if you take the view that evidence is malleable to the point that it is non-factual can you hover Bayesianly over the dispute, angelically plumping for the view that suits your prejudices. Krugman has pointed out certain facts which decide the issue one way or the other. Appealing to evidence from the post-WWII US economy is irrelevant since what we have now is not prefigured in that timespan. La trahison des clercs is a better explanation.

David R. Henderson writes:

@Stuart Williams,
Somehow I missed your point. Why is it that evidence on post-WWII doesn’t count?

Ak Mike writes:

Let me second Rick Hull - John Lynch very appropriately stated Russ Roberts' point. In my view, the point is incontestable.

I am quite surprised at Dr. Henderson for suggesting that his view of economic theory is unrelated to his world view. Does he really think that the reason he finds anti-Keynesian evidence so compelling, and pro-Keynsian evidence so weak, has nothing to do with his view of how the world works? How does he account for the fact that a lot of smart economists, who happen to have different political beliefs, seem to somehow evaluate the evidence differently?

Does he believe reporters for NPR and the New York Times when they say that they set their political views aside completely when they report the objective facts?

I just find it amazing that people can fool themselves into thinking that they can view the facts objectively and separate them completely from their deeply held beliefs.

David R. Henderson writes:

@Ak Mike,
On the contrary, my views have everything to do with my “view of how the world works.” That was precisely my point. My view of how the world works is separate and separable from my ideology. My ideology is about my political values, not about analysis. And no, I don’t believe that the reporters for NPR and the New York Times set their political views aside completely when they report. I don’t now Ak Mike read that claim into what I wrote.

Ak Mike writes:

Dr. Henderson - you wrote:

The reasons I'm anti-Keynesian, to the extent I am [I not totally anti-Keynesian], are that (1) I find most of the arguments unpersuasive and (2) the strongest evidence tends to go against the Keynesians. On (2), see my study of the post-World War II U.S. economy.

You assert that this view is entirely separate from your political views. I view this assertion exactly as I do claims made by reporters that their political views do not affect their reportage. Dr. Roberts is right, and you (with respect) are wrong on whether political views affect your theoretical position. Contrary to what you say, it is not merely a coincidence that your view of what evidence and arguments are the strongest happens to coincide with your support of free markets and less government. (Because, outliers notwithstanding, Keynesianism is most often correlated with a view that government is effective in general,and vice versa.) Others, whose political views differ, look at the same evidence, and are less persuaded by it.

I happen to agree with your political views and those of Dr. Roberts. However, I do not fool myself into thinking that I reach my own views on a variety of issues theoretical and otherwise based on a purely objective analysis of the evidence.

Tom West writes:

Contra-AK Mike, I do think there are those who come to their positions mostly by evidence.

However, since reality pretty firmly refuses to drop itself into any one ideology's camp, these people tend to have a set of beliefs that *don't* correlate neatly with any one ideology, nor do they make good persuaders, as they can usually point out evidence that both strongly supports *and* strongly undermines their chosen ideology.

Also, as Bryan has pointed out, there are a number of beliefs that are unrelated to the fundamentals of a given ideology, yet are widely held among those ideology's adherents. those arriving at an ideology by evidence alone will in all likelihood *not* share those subordinate beliefs and in doing so, alienate themselves from the mainstream holders of the ideology.

As a non-Libertarian, I will say Libertarianism seem to have less of this tendency than other ideologies, but I suspect that is also part of why they are less successful politically.

John Lynch writes:

Dr. Henderson, you said:

My view of how the world works is separate and separable from my ideology.
May I ask what you mean by this? Perhaps you and I (and Dr. Roberts) are speaking past each other. In my understanding, one's "ideology" is essentially equivalent to one's "view of how the world works." Can you provide an example to illustrate how you think they are different? Is there a situation in which one's ideology is not directly implied by one's world view? Or a situation in which one's world view cannot be directly inferred from one's ideology? I am struggling to see how this could be possible. I would honestly appreciate it if you could show you me what I am missing.

Also, I will be leaving town for the weekend, so my apologies if I cannot follow up any response you may have. A discussion like this would happen on a Friday!

Tom West writes:

May I ask what you mean by this?

Well, I can take a stab at this.

Different utility functions.

For example, ideologically, I am somewhat on the left. However, I can easily imagine deriving a different ideological take based on how I see the world working. For example, one could value Liberty over self-declared happiness, or the earnings of the 10th percentile income over the 50th percentile income, etc.

In fact, I often have to agree with much of the evidence that is brought up here, despite the fact that it does not "fit" my ideology (government failure, etc.) However, I consider many of the failures an almost inevitable outcome of attempting to do something which I consider important. In other words, I consider the price to be worth paying. Many may look at exactly the same data and decide the price is not worth paying.

Stuart Williams writes:

@Dr Henderson. How about suppressed demand? Cuts in government spending immediately after WW2 were at least balanced by greater consumer demand following the euphoria of victory and the return home of many thousands of servicemen. Is it not also possible that men returning to civilian jobs displaced women who had been paid at lower rates? In other words, the immediate post-war situation is most certainly not evidence that large cuts in government spending per se are the source of economic revival. My point was that the problems the US is suffering from now are utterly different from the situation following the war, and that to conclude that Keynesian analysis of "Depression Economics" is absurd. If that's your counter-fact to Krugman, I think you have to do better.

John Fembup writes:

It's at least mildly surprising that the name "Thomas Sargent" does not appear in this discussion.

Daublin writes:

This is way overblown. Read the first sentence of the quoted paragraph:

"The evidence for the Keynesian worldview is very mixed."

That appears to be Russ's view.

Heck, it's the view of anyone that is even faintly objective. Keynesianism gets a new footnote each time there is a new macro-economic event.

Mr. Econotarian writes:

When has this "big stimulus" worked to get any country out of a recession in the last 40 years?

For that matter, which country has devalued their way to prosperity?

People make these arguments, yet I don't hear the evidence.

I found Russ's answer refreshing, and an acknowledgement that the emperor has no clothes. I give him kudos.

Economics is too vague to conclusively prove one thing or another, and so people will always have a space to cling to their ideologies.

If anything, economics is a tool ideologues use to prop up their own beliefs. I think it always has been.

I can vaguely recall reading biographies of famous economists that stated the reason they went into the field is because they loved politics but wanted a more "rigorous" way to think about it.

Alan Watson writes:

I find the post-WW2 evidence persuasive, but why not also include other examples like the Harding administration's response to the post WW1 recession and the reductions in government spending in Canada and New Zealand? Citing multiple examples would be more persuasive because there is less likelihood that they are all flukes.

David R. Henderson writes:

@Stuart Williams,
Many of the questions you asked are answered in my piece that I cited. If you want answers, check out my piece.
@Jonathan Bechtel,
"Economics is too vague to conclusively prove one thing or another, and so people will always have a space to cling to their ideologies."
Wow! There are so many counterexamples to what you’re saying that I won’t try to give a complete answer here. Instead, I’ll probably post some of them. But here are some hints: rent control, free trade, and minimum wage (although this latter has taken a bit of a beating, there’s still a strong majority saying it reduces employment). If you say, well those are all micro issues, then how about this one: Milton Friedman’s accomplishment that outlasted him was to persuade over 90% of economists that “Inflation is always and everywhere a monetary phenomenon."
@Alan Watson,
Good point. The reason I cited only the post-WWII evidence is that that’s the one I studied and wrote about. The post-WWI evidence looks interesting also, but I haven’t looked at it carefully.

Steve Roth writes:

One would think you'd be equally shocked by his acknowledgement that his methodology is to pursue confirmation bias (and the imputation of that same methodology to his interlocutor).

Chris Koresko writes:

John Lynch, yours was the best blog comment I have read in quite a while. Thank you!

Eric Shierman writes:


I would be interested in your opinion on an article I recently wrote for the Oregon Catalyst that tried to weigh in on the Keynesian evidence:


Also, did you see Jeffery Sachs make Charlie Rose's jaw drop when he tried to convince him that there is no evidence that Keynesian stimulus works? it starts about 12 minutes into the 30 minute interview:


kyle8 writes:

The evidence against Keynesian stimulus is overwhelming especially with the recent experiences in Japan, and with our own stimulus fiasco.

My explanation for the continued acceptance of Keynesianism among many is partly ideology, but mostly because of rent seeking.

After all, the recent stimulus represented a massive amount of outright graft. One political party stole nearly a trillion dollars and gave it to their political cronies. Unions, government workers, GE, and Solyndra type companies.

Dr. Krugman is one of the worse rent seekers. He has gained wealth and influence being a reliable shill for that party, even to the extent of going directly against most of the things he wrote and taught back in the day when he won a Nobel prize.

RubberCity Rabble writes:

Your paper says all that post-WWII prosperity occurred with top marginal tax rates "from 94 percent in 1945 to 86.45 percent in 1946 and 1947 to 82.13 percent in 1948 and 1949" (p. 7). To generalize your conclusions about that boom, along with big cuts in gov't spending would we need to reinstate those rates? (You also mentioned the post-Cold-War boom on p. 18; between 1993 and 2000 the top rate was 39.6%)

Did top marginal tax rates somehow contribute to the booms you described? If not, would you say they had no preventive effect? How does one determine in advance when top marginal rates will have so little adverse impact?

Comments for this entry have been closed
Return to top