David R. Henderson  

Krugman's Bait and Switch

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Paul Krugman has a post on the importance of MIT economists in policy discussions. Had he simply made the point that they are highly influential, his post would have been fine. We could still argue about which of the influences have been good and which have been bad, but there is no doubt that MIT graduates have had a large role in policy debates.

Here are the people he lists, along with the years that they were granted their Ph.D.s:

Ben Bernanke 1979
Olivier Blanchard 1977
Mario Draghi 1976
Paul Krugman 1977
Maurice Obstfeld 1979
Kenneth Rogoff 1980

Paul then goes beyond that, to compare the influence of MIT and the influence of another source of much of recent economic thinking: the University of Chicago. There's nothing wrong with making such a comparison and, with a fair comparison, I wouldn't be surprised if MIT, for good or ill or, more likely, a mixture, does come out as more influential.

But here's how he does it:

You might ask, how does this list compare with similar lists you might draw up for other schools, Chicago in particular? The answer, I'd submit, is that there is no comparison. It's true that the more or less Keynesian view of macroeconomics common to everyone on this list is by no means unchallenged in the real world; but the anti-Keynesians don't really turn to academic economists for guidance. When a politician like Scott Walker tries to appeal to the conservative macro brains trust, it's not some version of the Chicago Boys -- it's Stephen Moore, Art Laffer, and Larry Kudlow.

See what he did? He measures the Chicago influence by the fact that Scott Walker and, presumably, other Republican politicians, don't seek advice from Chicagoans.

But wait. If the criterion for influence is, as it seems in Paul's mind to be, whether U.S. politicians who are considering running for President call on economists for advice, then wouldn't it then be reasonable to ask from whom Democratic politicians--Hillary Clinton, say, or Elizabeth Warren--are seeking advice? I don't know the answer to that question, but that is the relevant question Paul should be asking, given his criterion for Chicago. But here's what I'm willing to bet at even odds: Neither of them has sought advice from any of the six people he listed. Here, for example, is a recent NY Times piece that mentions Clinton's advisors on economic policy: none of them is named in Paul's list above.

And here's what I'm willing to bet at 10 to 1 odds: Neither of them has sought advice from one particular person on the list: Paul Krugman.

Aside:
This is not to say that they wouldn't do better if they did seek his advice. If they asked textbook Paul (or 1990s Paul--take your pick), as opposed to New York Times Paul, if there were significant downsides to raising the minimum wage, they might get the answer that there are. If they were to ask Slate Paul, as opposed to New York Times Paul, if it's a good idea to insist on higher wages for third world people who work in "sweatshops," they would get a good answer.


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COMMENTS (22 to date)
Eelco Hoogendoorn writes:

Seeing as how Keynesianism is essentially the art of telling advance auctioneers of stolen goods what they wanted to hear all along, I would hardly be surprised if they came out on top in such a contest.

Are there any historical examples of Keynesians advising a politician that now is the right time for saving rather than stimulus; and how long did their consultancy gig last?

David R. Henderson writes:

@Eelco Hoogendorn,
Seeing as how Keynesianism is essentially the art of telling advance auctioneers of stolen goods what they wanted to hear all along, I would hardly be surprised if they came out on top in such a contest.
A good point, though somewhat overstated. Keynesianism isn’t essentially that at all, although many politicians and economists have used Keynesianism to push for more government spending that they would have wanted anyway.
Are there any historical examples of Keynesians advising a politician that now is the right time for saving rather than stimulus; and how long did their consultancy gig last?
Yes. Larry Summers in the first year of Clinton’s presidency. And he lasted quite a while.

foosion writes:

Eelco, Krugman has been an advocate of counter-cyclical policy - saving during good times and stimulus during bad times.

Do you remember back as far as the early GWB years?

Jim Glass writes:

Paul doesn't mention that the Democrats on the Senate Budget Committee just picked as their Chief Economist an MMTer?

Stephanie Kelton, University of Missouri.

Presumably on the input of the Dem's ranking member on the Senate Budget Committee, Bernie Sanders, a self-described socialist.

But, hey, Sanders went to the University of Chicago, so more influence points for its team! Maybe that's the reason why Paul doesn't mention it? :-)

khodge writes:

Accepting his column at face value, one can easily see that Prof Krugman's standard for "influential" or possibly even "best in the field" is solely the qualification of influential in government. This is even a bigger, more hidden, and, perhaps, more nefarious bait and switch than your post notes.

Eelco Hoogendoorn writes:

@David: yes, im being slightly hyperbolic. Indeed, the general point is that not all economic philosophies will appeal to politicians equally; and the notion that economic theories should be judged by their appeal to politicians strikes me as something so misguided that even the empiricists and theorists should be able to agree on that.

Chris Wegener writes:

@David


As far as I can tell from your writing you hold economic outcomes to be the optimal way to structure the world.


Are you really willing to say that it is better for 16 million workers to have less money to take home and spend on their families and their lives that 500,000 workers do not lose their employment?


Regards,

Chris

Andrew_FL writes:

@Chris Wegener-Are you really willing to say that making a group of people slightly better off, is worth making the lives of another group much worse, as long as the former out number the latter? That's appalling.

It's a nice bait and switch, though: the 16 million who supposedly benefit, they're people with families (they mostly are not). But the 500,000? They're just "workers."

khodge writes:

@ChrisW
David did not actually say it but I think that a reasonable conclusion is more along the lines of: Krugman is impressed by the fact that the economists who speak for the party that currently holds the White House are economists who think like him, i.e. are under the illusion that economists are capable of successfully micromanaging the economy.

The rest of the economists are not delusional. Both sides have trained economists and you are not correct in your "factual" assertion that either side can easily engineer the trade-off that you present.

David R. Henderson writes:

@Chris Wegener,
As far as I can tell from your writing you hold economic outcomes to be the optimal way to structure the world.
No.
First, I don’t believe in “structuring” the world, unless by “structuring” you mean setting up certain rules and having certain laws.
Second, the kind of laws I want are ones that maximize, or that come close to maximizing, people’s freedom.
Are you really willing to say that it is better for 16 million workers to have less money to take home and spend on their families and their lives that 500,000 workers do not lose their employment?
No. So, for example, if you showed that those 16 million people paid higher taxes to subsidize jobs for the 500,000 people, I would be against it. And, by the way, numbers like that--millions of people paying higher taxes to help hundreds of thousands of people--summarize a lot of government programs: subsidies to professional sports, for example.

Don Boudreaux writes:

@Chris Wegener:

Suppose the president of the United States randomly chooses 500,000 of the lowest-skilled workers in America and, with Congressional and Court approval, orders these workers to quit their jobs. “You must remain unemployed indefinitely,” the president commands these workers. “My reason for ordering you to enter and to remain in the ranks of the unemployed is that, by removing you from the workforce and thereby artificially reducing the supply of labor, the wages of 16.5 million other low-skilled workers will rise (according to research done recently by the Congressional Budget Office). So do not despair! Your sacrifice is for the greater good. My policy easily passes the cost-benefit test.”

Would you favor such a policy? If not, why do you (presumably) support minimum-wage legislation knowing that it will force thousands of low-skilled workers into involuntary unemployment? While I understand that you can point to differences between a policy of raising the minimum wage and my hypothetical scenario, please explain which of those differences are substantive. Which of those differences make one policy of forcing a half-million workers into unemployment acceptable (that is, a policy that passes your cost-benefit calculus) while the other policy of achieving the exact same outcome is unacceptable (one that fails your cost-benefit calculus)?

Brian Kayes writes:

@Chris Wegener:

16 Million workers (many from middle class families) would receive higher wages, but many, many more millions, including those 16 million, would lose purchasing power through higher prices caused by raising the minimum wage.

Doug Pinkard writes:

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Andrew_FL writes:

@Brian Kayes-I'm sorry but that's completely wrong. I thought we'd disposed of cost-push inflation theories decades ago.

Chris Wegener writes:

@David You, everyone, believes in structuring the world.

I do mean regulation and laws as does every person in the world, as everyone lives within that structure that human society creates either de jure or ad hoc.

I also believe in freedom but to have individual liberty is necessary but not sufficient. An necessary condition for liberty is that everyone has access to housing, food, medical care, work and education.

@Don We already arbitrarily leave around fifteen percent of the population unemployed because of the structure of our Corporate dominated economy. We could provide a negative income tax to provide a base income for every person in the country. That would eliminate the need for a high minimum wage as well allow everyone to find work that is worth compensation.

@Andrew No. In my view we would find that the number of unemployed would not be as high as the CBO estimates, but if that is the trade off then yes, sixteen million "workers" better off does offset the pain that the displaced workers would feel. I suspect that using "dynamic scoring" would show that the additional economic activity generated by the increase in wages would more than employ the displaced workers.

Regards,

Chris

Jay writes:

"We already arbitrarily leave around fifteen percent of the population unemployed because of the structure of our Corporate dominated economy".

Forgive me, that sounds like something I would hear at an Occupy rally, can you please explain what you mean?

Chris Wegener writes:

@Jay
I slightly overstated it, as of Jan 2015 the Labor Department estimates that individuals that would want to be employed but are not is 11.3 percent of the population. True unemployment rate

Corporations are sitting on over two trillion dollars of cash available to be invested or used to hire workers but they are not.

Sadly there is a continuing desire to overwork existing employees rather than hire new workers. Unemployment is viewed as a necessary means to hold down wages and increase corporate profits.

Corporations have failed to share any of the results of productivity growth with labor since the eighties.

I offer Productivity and Compensation

Regards,

Chris

Andrew_FL writes:

@Chris Wegener-A speaking of false theories that never die, now we have the High Wage Doctrine!

I still can't believe you think it would be okay to force a smaller number of people to lose their jobs if it meant a slight increase in the income of a larger number of people.

The horrors we unleash when we permit interpersonal comparisons of utility...

But no, you're completely wrong. If anything, CBO is underestimating the disemployment effects. The High Wage Doctrine is false.

Jon Murphy writes:

So, I read Krugman's criticism that people like Scott Walker don't go to academics for advice, but rather go to people with real-world experience. Seems like a rather odd criticism.

SMV writes:

Chris Wegener

"An necessary condition for liberty is that everyone has access to housing, food, medical care, work and education."

Chris - How much and at what level is housing, food, medical care, work and education does a person require before they have liberty? Were people not free 100-200 years ago when medical care was far more likely to kill you than cure you? When education occurred at home or as on the job training?

If they were free than 99% of people in America are free today. If they were not free than people living 200 years from now will look back and claim that 90% of Americans are not free today.

In reality Liberty is totally independent of prosperity. A very rich person under home arrest in their mansion is not free, while a poor person who is free to work towards their dreams has liberty.

SMV

Chris Wegener writes:

@SMV
The level of housing, food, medical care, work and education as are what would be considered "reasonable" the most litigated word in the English language.

To presuppose that comparing the minimum to what existed two hundred years ago or what exists in another part of the world is irrelevant to those who live in the United States.

Liberty presupposes that one has achieved at a minimum Maslow's hierarchy of Safety.

For a person who lives comfortably without fear for their life and enough financial security to look forward to the future to pontificate upon the freedom of a "poor person to work towards their dreams" is living in Lala land and refuses to seriously discuss the reality of life for more than half the population living in the US.

That poor persons "dreams" are to have enough to get through tomorrow without going hungry or losing one of their jobs or having tragedy befall themselves or their family. That is not "liberty."

Regards,
Chris

Dave Tufte writes:

Bernie Sanders is considering a run for President, and his choice of economist is even further out of the mainstream than the ones Krugman worries about.

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