Arnold Kling  

Tyler Cowen writes for the NY Times

Perspective on the Eurozone Cr... Sentence to Ponder...

His latest column ends,

The reason that we aren't getting more expansionary macro policy is fundamental: a lack of trust. It's not an easy problem to fix, but the place to start is by recognizing it.

Two possibilities.

1. He is being Straussian. What he cannot say in public is that the lunatic left has become unhinged from reality, complaining about "austerity" as if the problem these days is governments are not spending enough. He cannot say that what we are seeing is chickens coming home to roost (in Europe, in state governments in the U.S., and, unless we pull back from the brink, in the U.S. federal government) from spending and borrowing too much. He cannot point out that since the beginning of the recession, 6 million private sector jobs have been lost (as opposed to the 0.6 million public sector jobs he moans about). He cannot point out that the problem in the public sector is primarily a sticky-wage problem. Instead, he must be subtle and indirect and say, "Yes, you are right that we need more government spending, but we have a trust problem to deal with."

2. He has gone native.

Comments and Sharing

COMMENTS (17 to date)
Greg G writes:

There is a third possibility. He is free to say what he thinks. He thinks for himself and does not routinely parrot the more predictable GMU Economics Department talking points.

John Thacker writes:

3. If you read the article closely, he gives much stronger reasons in favor of monetary macroeconomic expansionary policies, while cautioning against fiscal expansionary policies. Therefore, he is actually taking a Sumner/Kling position.

Tyler Cowen writes:

My main point is simply how little policymakers can do, compared to the expectations (and demands) of many. I explicitly write that I'm not going to address whether or not we should have cut that spending at the state and local level. I definitely agree we are spending and borrowing too much and I have argued that repeatedly in a variety of forums, though that is not my intent in this particular column.

Joe Cushing writes:

On your points. I think this never ending financial problem proves one of the keynesian central arguments wrong. Keynesians always like to argue that the reason the economy didn't get better is that we didn't spend enough. "If the government had spend X number of Dollars, Euros, etc more, the economy would have turned around." They love to make this argument. Yet here we are standing at a time when governments around the world have spent themselves to the brink of collapse. They have spend every last dime they can beg, borrow, or steal and yet they have not created prosperity by doing so. Keynesians can no longer make the argument that they should have spent more because they have spent it all. There is no more money left to spend. The countries that have spent the most are the ones in the most trouble while the ones that have spent the least or have cut spending or at least cut spending growth, are the ones in the best shape.

Why can't anyone remember that two of the most prosperous times in American history the 1920s and the 1950s were times when the government shrank quickly and sharply. After WWII the government laid off millions of people and the economy rocketed. In the 1920s Harding did the same thing and got the same results.

I say we lay off 2 million government employees, sell 50% of all government real estate assets, and repeal half the laws governing business. Then we will see the economy rocket.

Seth writes:

Why can't he say it in public?

Becky Hargrove writes:

Sure, trust is messed up. But so is democracy, because everyone on both sides has used it for too long, to build up their walls against one another. At first finance flourished, because of the negotiating price of those high walls. But now it is difficult to flourish, and it takes a lot of money just to participate in the whole structure.

bryan willman writes:

as the median voter comes to realize that what they pay for government will per force cost more than what they get, the debate will change.

government is like insurance - wothwhile but only to a point - and most must pay more than they get or it cannot work.

some part of keynsian failure is that govts only follow half of it - they don't do contractionary things in good times.

an issue every bit as big is that macro policy in general depends on manipulating behavoir - and as more and more people recognize the manipulation, they individually and collectively become harder to manipulate.

Jon writes:

Tyler has always gone native. That's what it takes to be influential. His first bout of this was writing a book to kick the Austrians--an easy group to kick since they are long since dead but also kicking them is a big signal.

Tyler has done this a few other times since. Maybe he thinks he is sincere--we've never met, but I see more that he has both social intelligence and intellect. That means being willing to pay the piper when it does not matter to win the points that do matter.

Regarding the decline in government output: the issue remains that the private sector is growing just above trend but trend growth won't close the employment gap. Still we appear to be getting just as much growth as the fed wants, but the debt is expanding and that at least implies either an increasing tax wedge in the future or a crowding out in the credit markets in the future. Both expectations are distorting AS and reducing the sustainable trend growth at our current inflation rate.

I agree that cutting government output is an AS shock--really we need to maintain services but cut costs. Cutting salaries shifts AD but that is something the fed can compensate. They cannot compensate the absence of a bus route or a congested freeway or the increasing compliance cost of regulations.

badabing writes:

[Comment removed for supplying false email address. Email the to request restoring this comment and your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.--Econlib Ed.]

Jeff writes:

I, for one, often read things TC writes and suspect him of being Straussian.

Mike W writes:

How much "influence" do economists who are not policymakers really have? When academics become biased celebrity economists...Krugman, Stiglitz, Blinder, Laffer, they lose the objectivity and credibility that provided what influence they had? Are they then just providing arguments to support what whatever side the public wants to take?

Just wondering.

blink writes:

Describing the "problem" Tyler writes, "for better or worse, those voters have lost faith in the social returns of these jobs and our ability to afford them." If he is right, then the only it is only the tone that is off: change the conclusion from hand-wringing to celebration and you have and article suitable for a different publication.

VangelV writes:

It looks to me that Tyler seems to have a lot of time for the Chicago neo-Keynesians and is having trouble admitting that the only ones who can and have consistently predicted future events are the Austrians. Hopefully he has yet to join the dark side but the more and more I read of his most recent writing the harder it is to avoid that conclusion. Of course, Arnold could be right and Tyler may have gone Straussian but that is a hard case to make yet.

DK writes:

"He is free to say what he thinks"

That's not a description of Tyler Cowen that posts at Marginal Revolution, though.

steve writes:

I think Cowen is supporting Sumner when he talks about expansionary policy, though I guess it would also hold true for fiscal policy.


Nick writes:

The fact that he is so utterly convinced that all the evidence points to "more expansionary macro policy" that those that disagree with him must "lack trust" is itself troubling. Clearly some people think the evidence points in a different direction, an ignored option in Cowen's world.

Like generations of economists before him (the vast majority of which were wrong), he seems to lack any kind of capacity self-doubt. As Russ always reminds us, the macro project's evidence is extraordinarily weak.

Praxeologue writes:

Am I alone in smelling the influence of his friend Robin Hanson's work on signalling?

I presume Tyler's macro expansion comment refers to some form of fiddling with the monetary system.

In essence, such tinkering is an attempt to fool people about the value of money or the assets being fiddled with. Done badly, it will be transparent and confidence lost quickly.

What if the problem, as ex Austrian Tyler should well know, is an economic structure that has emerged dependent on an interest and debt structure that is unsustainable. How will fooling people a little longer really help the underlying cause at all?

Comments for this entry have been closed
Return to top