David R. Henderson  

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I've been busy in the last week with end-of-quarter classes and two speeches, the latter of which I'll report on today or tomorrow. Which is why I hadn't replied to Jeff Sommer's criticism of me in the New York Times. But now I have time.

In "Good Morning: You're Nobel Laureates," a December 3 piece on Thomas Sargent and Christopher Sims, the most recent recipients of the Nobel prize in economics, Jeff Sommer writes:

So it comes as a surprise, not least to Mr. Sims and Mr. Sargent, that these two now find themselves thrust into an uncomfortable spotlight. Conservative voices, like the editorial page of The Wall Street Journal, have claimed them as their own. The men's work on economic cause and effect and the theory of rational expectations -- which maintains that people use all the information available in making economic decisions -- proves that Keynes had it wrong, these commentators say.

Of course, the editorial page of the Wall Street Journal is conservative. But click on the link and it leads you, not to the Journal's unsigned editorials, but to my piece on the Nobel prize winners back in October. I'm not a conservative, as even a cursory look at the easy-to-get evidence on the web (Google "David R. Henderson") or even a quick phone call or e-mail to me would have confirmed.

This is a mistake that many New York Times reporters make. Many of them seem to have a congenital inability, or, at least, unwillingness, to distinguish between libertarians and conservatives. The differences are not small. Think: Iraq war, sanctions on Iran, the drug war, the USA PATRIOT Act, protectionism against China, and our views on the rights of Julian Assange, to name six off the top of my head. (Even here, it's true, that some people who call themselves libertarians have advocated the Iraq war and the USA PATRIOT Act.)

Now look at Sommer's whole sentence:

Conservative voices, like the editorial page of The Wall Street Journal, have claimed them as their own.

Put aside the fact that I'm not a "conservative voice.'' What if I were? Or what if, even, Jeff Sommer had got it right and claimed me as a "libertarian voice?" Can you find anywhere in my article that he cites my claiming Sargent and Sims as ideologically "my own?" Nope. My article was entirely about their views on economic analysis, not about their advocacy of any specific policy. Here, for example, is a key paragraph in my article:
This conclusion [of Sargent's] was at odds with the Keynesian model, which dominated economic thinking from the late 1930s to the early 1970s. The Keynesian model posited a stable trade-off between inflation and unemployment. In 1970, major U.S. econometric models, built on Keynesian assumptions, predicted that the government could get the unemployment rate down to 4% if it accepted an increase in inflation to 4%. In a 1977 article titled "Is Keynesian Economics a Dead End?" Mr. Sargent wrote, "[I]nstead of 4-4, in the mid-1970s we got 9-9, a very improbable occurrence if econometric models of 1969 had been correct."

Notice that my analysis is entirely about Sargent's analysis of the economy and how it undercut the dominant Keynesian model of the time. The other parts of my article are similarly analytic about economics, not about ideology.

This is not the first time Jeff Sommer has made these two mistakes in characterizing my work. Here's what he wrote in October, just after the prize was announced:

Journalism abhors a vacuum, however. Others assigned ideological views to the Nobel laureates.

An op-ed piece in The Wall Street Journal on Tuesday carried the headline, "A Nobel for Non-Keynesians," placing the professors in the camp that opposes the interventionist philosophy of the influential British economist John Maynard Keynes.

Again, I assigned no ideological views to Sargent or Sims.

Postscript: What I'm about to criticize is not Jeff Sommer's fault, assuming he quoted Tom Sargent correctly. Again, assuming the quote is correct, this is a criticism of Tom Sargent. Here's the quote:

Mr. Sargent says his most important work is spoken "in the beautiful language of math." He knows it's not widely understood.

"The kind of work we do, that real economists do, will never catch on with the public," he says.

Real economists, Tom? Give me a break. Oh, we poor put-upon economists who can't figure out how to say things in words that non-mathematicians can understand. Oh, the humanity.

Jeff Hummel and I attended a talk that Sargent gave at Hoover a few years ago on his book about small change. Sargent wrote out an equation and I wrote it down and started thinking through it. He quickly drew a conclusion from it and I looked around the room and saw that a whole lot of other people, including some young hot-shot Ph.D. students from Stanford's grad program were looking puzzled like me. Jeff Hummel, seeing my puzzlement, whispered a completely verbal explanation that didn't rely at all on the equation. I understood it instantly and Jeff turned out to be right.

Later in the seminar, Sargent laid out a model with one good and money. I didn't have to be a mathematician (although when I graduated with a Bachelor of Science and a major in math, I won the University of Winnipeg's gold medal in math) to understand the problem with that. I stuck up my hand.
"Yes?" said Sargent.
"If there's only one good, why would anyone bother to hold money?" I asked.
Sargent dismissed my question as being just clever but not insightful.

Comments and Sharing

CATEGORIES: Macroeconomics , Money

COMMENTS (23 to date)
Yancey Ward writes:

Two camps- Keynesians and Everyone Else?

Tom West writes:

> Two camps- Keynesians and Everyone Else?

If you look at the Internet, I'd say it's pretty clear that for the majority of people on any given issue, there's "the camp I'm" in and "everyone else".

Not only that, but attribution error is pervasive. There is strong slant towards assuming that anyone who presents any evidence against one's position is "the enemy" or at least not a friend.

It's why politicians have a very hard time talking about rational trade-offs. To admit that one's position has *any* cost is to be seen as betraying one's position by the supporters.

Chris Koresko writes:

David Henderson: The differences [between libertarians and conservatives] are not small. Think: Iraq war, sanctions on Iran, the drug war, the USA PATRIOT Act, protectionism against China, and our views on the rights of Julian Assange, to name six off the top of my head.

The distinction between libertarians and conservatives strikes me as a matter of taxonomy more than anything else. I personally tend to view conservatives as libertarians who are more reluctant to base policy decisions on unproven theory: they are conservative in the sense of being cautious.

Take the drug war, for example. I think it's pretty common for conservatives to see that policy as a massive failure, and to criticize it in pretty much the same terms that libertarians do. The difference comes in what we imagine the alternative would bring. Would we see a modest increase in the use of recreational drugs, a collapse of the drug cartels as prices fall, and cultural changes which tend to moderate the adverse impact of addiction and related issues? Or would there be a large increase in the number of addicts, especially among children, with enormous social costs that far outweigh the already large cost of the drug war? Convince a typical conservative that the first picture is correct, and you'll make him an opponent of the drug war.

David R. Henderson writes:

Chris Koresko writes:
The distinction between libertarians and conservatives strikes me as a matter of taxonomy more than anything else.
Well, yes. The whole first part of my post was on taxonomy.

joeftansey writes:

Conservatism is characterized by intolerance. You can't use drugs cus we don't like them, and we'll shoot you if I have to. We're gonna help isreal exterminate the palestinians because they're our allies (???). We're gonna deport all the mexicans because they aren't american and therefore don't have rights. And ZOMG PRESS 2 FOR SPANISH? AAAAAAAAAA

GlibFighter writes:

Pity the poor math-phobic economist who has difficulty making his vapid generalizations fit the constraints of logical precision.

Glen Smith writes:

Most conservatives I know are just liberals with just cosmetic differences.

Eric Falkensntein writes:

No science ever defends its first principles. ~Aristotle

Lars P writes:

Perspective is an interesting thing. Most people tend to not care much about the differences of the clueless hordes who oppose their beliefs.

Freemarketers see socialists, communists, anarchists, social democrats and ever fascists as the same "socialist" bunch, even though they're in many cases each other's mortal enemies. The policy differences that they see as enormous will seem as mere details to those who think they've failed to understand a huge fundamental point.

Atheists similarly don't care much about the differences between different brands of theism.

If you're a convinced Americal liberal, the - from your perspective - minor taxonomical differences between the lunatics who worship the free market is similarly uninteresting.

John David Galt writes:

Once they were awarded to Gore, Obama, and Krugman, the Nobel prizes and the committee of Sweden's parliament that awards them have become as discredited (to non-leftist readers) as all the other "scientific authorities" that participated in the whitewash of ClimateGate and are preparing to similarly deny and cover up ClimateGate II.

Science only works if the people on whose shoulders you stand are honest. There is rapidly ceasing to be anyone credible on the left, whether on economics or any other science.

Chris Koresko writes:

David Henderson: The whole first part of my post was on taxonomy.

What I meant by that was only that taxonomy is somewhat arbitrary, and that it's valid to call libertarianism a branch of conservatism characterized by an increased emphasis on personal liberty in theory at the expense of the mechanisms needed to maintain it in practice.

GlibFighter: Pity the poor math-phobic economist who has difficulty making his vapid generalizations fit the constraints of logical precision.

Math is mostly a language that makes it convenient to express quantitative relationships and analyze their implications. It's a powerful intellectual tool, but it needs to be used with a degree of caution because it can make the silly appear sophisticated.

Consider the standard Keynsian model which can be expressed in just a handful of equations. In a few minutes you can derive the multiplier for government spending. But those input equations are deceptive -- the first one is a trivial accounting statement, and the rest are implausible assumptions. From them you derive absurd results that are (I suspect) widely accepted because the math gives them a false authority that a plain-English explanation never would.

In science, it's often said that if a researcher can't explain his work to a non-specialist then he probably doesn't understand it very well. I think that's usually true.

Glen Smith: Most conservatives I know are just liberals with just cosmetic differences.

I can't speak for the conservatives you know, but conservativsm as a philosophy starts with the recognition of the basic ("inalienable") rights of the individual, and recognizes that it's a rare and precious thing for a system of government to do a good job of protecting them. The US Constitution is probably the best example -- it's so good that it's difficult to make any fundamental change that improves upon it, even in theory. So we resist any attempt to change or re-interpret it without very good cause.

Liberalism (meaning Progressivism, I think) is different. It seeks, under various pretenses (or justifications, if you prefer) to centralize power in the Federal government, and more specifically in the executive branch, contrary to the design of the Constitution. Progressives see problems everywhere, and each problem is a reason to expand the scope and power of government. Think economic inequality (Fairness demands redistribution! Raise the minimum wage!), climate change (Tax the polluters!), recession (Raise government spending to stimulate the economy!), and war (Organize the economy on a war footing! Centrally plan production! Propagandize the citizens!), for a few examples.

B writes:

Probably because money is in the utility function or there's a cash-in-advance constraint? Now why did he do that. Because he wanted a quick and dirty way of putting money is model like 95% of monetary models do.

[B: Please see your email if you would like to comment further on EconLog. A valid email address is required to post comments on EconLog and EconTalk. You have not responded to our repeated email requests to validate your email address.You've posted comments under several nicks and email addresses, yet you have not responded to any of our attempts to touch base with you in email. It is not acceptable for you to deceive our readership by posting comments under multiple nicks. You have not verified your email address for any of those nicks. Your future comments are prohibited until you respond to our email. Feel free to email us at webmaster@econlib.org. --Econlib Ed.]

Thomas writes:

I consider myself a conservative, and in fact, objectively speaking, I'm probably a pretty orthodox conservative. And I think we agree on at least 3 of those 6. Maybe you are more of a conservative than you think.

ajb writes:

It is fair to criticize Sargent for his views on methodology. For better or worse, I believe that Sargent clearly believes (and has stated on multiple occasions) that only mathematical economics is economics. For Tom Sargent (as for a large number of leading theorists) all work by non-hardcore modelers (including theories by Friedman, Keynes, Hayek, Kuznets, Schumpeter, Coase, and many others) are merely pre-scientific conjectures.

David R. Henderson writes:

B speculates that Sargent introduced money in a 1-good model probably either because money is in the utility function or because there’s a cash-in-advance constraint.
Problem: Money would be in the utility function only if it gives utility. If there’s only one good, there’s no need for money, and, thus, it gives no utility.
Re cash-in-advance constraint, again there’s no need for cash in advance because there’s only one good.

vt writes:
"Once they were awarded to Gore, Obama, and Krugman, the Nobel prizes and the committee of Sweden's parliament that awards them"

The Nobel Peace Prize is awarded by the Norwegian Parliament, not Sweden's.

B writes:

[Comment removed. --Econlib Ed.]

David R. Henderson writes:

I don’t like the sausage.

Silas Barta writes:

Wow. Sargent's inability to translate math -- as well as his reply to your one-good/money question -- are exactly the kinds of things that signify a superficial understanding of the topic matter. (See my classification of understanding levels.)

Kinda scary that he's regarded as an expert, if I may be so bold.

David R. Henderson writes:

@Silas Barta,
You’ve gone much further than I would go in your criticism of Sargent. But I do think he has redefined a weakness as a virtue.
I think Tom Sargent is a first rate economist and an expert. That’s why I hired him to write this article for The Fortune Encyclopedia of Economics, the predecessor of The Concise Encyclopedia of Economics. It’s updated here.

Glen Smith writes:


Your description of liberalism describes just about every conservative I've met, read, heard or saw. They may use different words (much being new speak like calling for government expansion under the term "privitization" or "tax cuts") but they still want a nanny state just as bad or maybe worse than those they call liberal.

Liam McDonald writes:

Stop being so clever, David!

Arthur_500 writes:

As we back into the golden era of Keyne's reputation we can assume 10 year blocks of time. Those of my age graduated in the 1970's having been taught by those who graduated in the 1960's. Those instructors were in turn taught by those who graduated in the 1950's.

Therefore, it should come as no surprise that individuals KNOW that Keyne's theory is a FACT. After all they were taught that in school. Look at the success that Roosevelt had in fixing the Great Depression utilizing Keyne's thoughts!

Regretfully, facts are often not part of school curriculum. If you have a textbook and recent study contradicts the textbook it is much easier to ignore and continue with the planned curriculum. Remember, school is about geting the basic indoctrination and thought is not allowed until after one has acquired their doctorate.

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