Ideology over algebra
1 Introduction
One of the joys of being able to post my scribblings here at Blograde Dave’s place is that people who actually have very different political views from mine engage in debate and challenge me to develop my arguments. I can’t respond as quickly as Dave does to comments because I’m not as clever, but I always do try to respond.
Two recent comments in particular have taken my eye, and merit a separate blogpost to develop the discussion. The first comes from Barney, in response to my ‘Logic of the leftwing BBC’ post, and the other from Giles of Centre Forum, who built on his comments to my post about Philip Hammond on Newsnight (cross-posted at Liberal Conspiracy), with a post of his own at his new blog. While they are commenting on different posts, they are on a similarish theme and I’ll try and address them both here, however cackhanded an approach that turns out to be, and however shamelessly I borrow from a post I wrote ages ago at the Bickerstaffe Record.
2 Barney
Let’s start with Barney’s comment (or a salient section of it) in response to my assertion that Keynesian economic stimuli make sense.
‘There is a reason why fiscal stimulus is doubted as a policy; there are few, if any, examples of it working.’
He then helpfully links to a European economics paper which suggests that fiscal stimulus is not as effective as Keynesians suggest, and which I’ll come back to below
What the Keynesians advocate is in fact, as Barney suggest, advocated by Krugman in a post a few months ago, and set out in the following algebraic sequences (which I’ve filled out with words a little for clarity on Krugman’s somewhat elliptic quick working):
(Nb Skip this bit if it’s not your bag – it’ll still make sense if you go straight to the end of the workings.)
Notation
1) c = the marginal propensity to consume i.e. Krugman uses an assumption of half (0.5) additional money coming into the economy through increased public spending will be spent rather than saved.
2) m = the share of ‘marginal’ ’consumption that is spent on imports — initially for individual county, then for the EU as a whole.
3) t = the share of an increase in GDP that accrues to the government in increased taxes or reduced transfers.
4) Y=GDP, dY=change in GDP,
5) D=Deficit, dD=change in deificit,
6) G=Government purchases and dG=change in Government purchases.
The workings
If government purchases (dG) increase through public spending, this will raise GDP directly, to the extent that domestic goods and services are bought, and indirectly, as the rise in GDP induces a rise in consumer spending.
We have then in algebraic terms: dY = (1-m)dG + (1-m)(1-t)c dY
Or, fiddling around with both side of the equations, we can have: dY/dG = (1-m)/[1 - (1-m)(1-t)c]
That is, the ratio of the increase in GDP (the country/EU ‘wealth’) to the additional deficit incurred is calculated from the marginal amount not spent on imports divided by the increased taxation level staying in the system multiplied by the amount of money not spend on imports then factored to take account of what’s really spent and not saved. Sort of.
He then factors in how much the budget deficit is increased by an increase in government spending. This is not one-for-one, because higher spending leads to higher GDP and hence higher tax revenue.
This is written as: dD = dG – tdY
The ratio of the increase in GDP to the increase in the deficit is dY/dD. Taking the above into account, the first equation above can be filled out to:
dY/dD = (1-m)/[1 - (1-t)(1-m)c - t(1-m)]
According to Krugman, the average EU country spends about 40 percent of GDP on imports, and collects about 40 percent of GDP in taxes. (Krugman assumes for convenience that the marginal rates will be are the same as the average). That sounds about right overall.
He also assumes, as noted above that the marginal propensity to consume is 0.5.
So, in algebraic terms for an average EU country m = 0.4, t= 0.4, c = 0.5.
He then represents a coordinated fiscal policy by looking at the numbers for the EU as a whole. The only difference is that m falls to 0.13 (ie. one third of m = 0.4), because about two-thirds of the imports of EU members are from other EU members.
And he gets the following results:
FISCAL EXPANSION IF ONLY ONE COUNTRY DOES IT (and imports therefore make up 40% of additional spend)
dY/dD = (1-m)/[1 - (1-t)(1-m)c - t(1-m)]
dY/dD = (1-0.4)/[1 - (1-0.4)(1-0.4)0.5 - 0.4(1-0.4)]
dY/dD = 0.6/[1 - (0.6)(0.6)0.5 - (0.24)]
dY/dD = 0.6/[1 - 0.18 - 0.24]
dY/dD = 0.6/0.58
dY/dD = 1.03
Ratio of the increase in GDP to the increase in the deficit = 1.03
COORDINATED EXPANSION ACROSS EU (and imports reduced by two thirds)
dY/dD = (1-m)/[1 - (1-t)(1-m)c - t(1-m)]
dY/dD = (1-0.13)/[1 - (1-0.4)(1-0.13)0.5 - 0.4(1-0.13)]
dY/dD = 0.87/[1 - (0.6)(0.87)0.5 - (0.348)]
dY/dD = 0.87/[1 - 0.261 - 0.348]
dY/dD = 0.87/0.391
dY/dD = 2.23
That is, the ratio of the increase in GDP to the increase in the deficit = 2.23
It doesn’t really matter that much if you don’t want to work through all the algebra, because the essential point is that, according to Krugman, coordinating fiscal policy internationally gets you a better return – more than two times as much.
The research Barney chooses to highlight casts cast doubt on the validity of this approach:
‘Proponents of discretionary fiscal stimulus hope for a Keynesian multiplier effect. It follows from the national accounts spending identity when combined with the textbook Keynesian consumption function. The latter has current income as the main driver of consumption spending. A government-induced increase in total spending then raises income and boosts private consumption, which in turn raises total spending further.
Does the multiplier work? The recent debate in the US indicates quite some disagreement even among Keynesian economists. President Obama’s advisers Christina Romer and Jared Bernstein estimate that 1% of government spending would generate a 1.6% increase in GDP……………
Our analysis suggests government spending quickly crowds out private consumption and investment, because forward-looking households and firms will consider eventual increases in future taxes, government debt, and interest rates.
In a recent paper, Tobias Cwik and I assess the magnitude of Eurozone stimulus and construct a range of impact estimates……..
Our findings confirm the earlier analysis with models of the US economy. Once you allow for a significant role of forward-looking behaviour by households and firms, there is no multiplier. The expectation of future tax increases, or rising government debt and future interest rate increases leads to a reduction in private consumption and investment spending…………’
Leaving aside the difference between the 1.6x multiplier effect on the US economy suggested by Obama’s economists and Krugman’s 2.3x effect (in Europe), the essential thing to note here is that the Keynesian algebraic formulations are called into question on the basis of a missing independent variable – the ‘forward-looking behaviour by households and firms’ and’ the expectation of future tax increases, or rising government debt and future interest rate increases.’
This is the core of the matter – the Keynesian stimulus only works if there is a wider Keynesian environment in which it can operate; in circumstances where households and firms are uncertain about the effects of national debt and interest rates, it doesn’t work (I’ll leave aside the notion that tax rises damp down investment, save to note that I have spent time disputing that here).
Conversely, surely goes the argument, if households and firms are sanguine about government debt, on the basis that it’s not that big really, and sanguine about interest rates, then investment will take place, and growth will occur.
It seems to me that this is a classic example of the importance of political context for economic policy making and implementation, which I set out in this recent post, and in which I quoted Massimo de Angelis:
‘Keynesianism is defined in terms of an expansionary strategy of growth. Embedded within a social and institutional framework that enables the different interests in society to remain on a dynamic balance within a regime of capitalist accumulation…..Keynesianism was never just an economic theory, it was also a form of social practice – it needed institutions that allowed the theory to work, and it implied a vision of power relations amongst classes in society.’
In other words, the success or failure of economic policies depends upon who has political power, and who has the dominant ideological narrative. At the moment, the neoliberal discourse of the need to balance national debt holds sway over all else, and thereby effectively emasculates other approaches; ideology is stronger than algebra.
This brings us to Giles, and a seemingly totally different kind of comment.
3 Giles
Giles comments on my view that what he calls the ‘trampolining’ of credit ratings by the International Credit Rating Agency Standard & Poor’s.
‘I still think the idea that such a blatant movement from the highest rating to one of the lowest can only be cockup, not conspiracy. If there was a plot to put terrible securities into a government/tax-payer protected haven, then you would choose a target less conspicuous than something recently downgraded past junk. Paul, IMHO, overestimates the perfidy, and underestimates the potential incompetence, of staff at S&P: rating thousands of tranches of difficult RMBS etc, with all the problems of asymmetric information/lemons etc that goes into it, is never easy.’
Here, Giles thinks I’m wrong to impute dastardly motives to the people at S&P, even though he has already accepted that downgraded a tranche of investments from the highest grade to the lowest and then back again within a week is pretty odd.
But what he is content to write off as cock-up, I prefer to regard as handy evidence of systematic exploitation by capitalism of the working classes, deliberately upgrading investments so that they can benefit from taxpayer money – another purchase of toxic assets, this time by the back door. Neither Giles nor I will ever know what truly went on in that week, thougn my best guess was that calls were made by people with influence over S&P to make sure that any ‘objective’ rating of the investments was quietly disregarded in favour of whoever was making the call’s offshore bank balance.
The point is that the unwritten rules of the capitalist game were exercised.
Which brings us back to Barney.
4 Back to Barney
In another salient part of his comment, Barney – like Giles – criticises what he sees as my tendency to conspiracy theory – my tendency to believe all capitalists are evil conniving bastards.
‘There are lots of intellectually honest people’, he chides me gently, ‘who genuinely think that high national debt is a bid thing for…’
And yes, I agree. I don’t for one minite thing that all capitalists and supporters of capitalism are personally malevolent to towards the working classes. But I do think that at a structural level capitalism is such that it exploits the working classes, using decent-hearted people and sometimes not so decent hearted people to do so.
In the case of the S&P shenannigans, the system was such that the naked power of capital got its way, and the investments were upgraded probably against some individuals’ better judgment. It wasn’t an active conspiracy, most probably, but it was symptomatic of a controlling ideology which has it that it’s the investors that matter most, not the people who pay their taxes to bail out and support those investors (and yes, I know about pension funds – let’s not go there)
And so too, in the wider economy, the controlling ideology has it that it’s the ‘markets’ that decide on whether public services should be cut, not democratically elected governments.
At the top of the capitalist tree, it’s all about systems and structures. No one is to blame. As George Osborne said when he decided shortselling was not the work of evildoers, but just a part of the system: ‘No one takes pleasure from people making money out of the misery of others but that is a function of capitalist markets.’
Funny, though, when you’re at the bottom of the capitalist tree, it’s not the system that made it happen – it’s all your fault because you’re lazy, evil and poor.
Challenging that hegemonic state of injustice, as I was saying to Sunny just the other day, is quite a job, but it’s worth doing it if our algebra is to count more than their ideology.
Paul
I’ve greatly enjoyed this piece, and the other from last year on the Bickerstaffe record that you directed me to. Apologies for being brief:
- glad you also think that blaming massive systemic issues on personal malevolence or incompetence would be nuts – I blogged furiously on the BBC’s portrayal of Lehmans collapse along these lines.
- I can’t deconstruct Marxism in a blog comment – but I think the old formulation of capitalists/workers has broken down a bit. 130 years ago, the bottom of society works – now the bottom 10% get most of their income from benefits. In the 1920′s, wealth inequality was such that the top % had 60% of the wealth – now they have 20% – which makes the sharp division between owners of wealth and the exploited harder to produce elegant systems from.
Owners of government debt include an awful lot of people who have worked all their lives and are now relying on the income stream (not inflated away) as a source of retirement income.
(http://economistsview.typepad.com/economistsview/2009/07/wealth-inequality.html)
By the way, i too think that short sellers are just fine. What do you want to happen to the share prices of banks that are taking too great a risk? Do you think it is right that the prices remain high?
Finally: I agree with the Keynesian multiplier logic, but note that it relies upon a crucial (and I think unspoken) assumption: the presence of economic slack. If we are at capacity, we just get inflation. You don’t need a bunch of graphs from me to prove it – just ask yourself what would happen right now if Iceland tried to get out of its problems with a massive stimulus programme . . .
see you around. BTW, sorry for that “lazy” gibe on Freethink – but I do think that often the truth is more messy . . . .
Good piece (maybe clean up last couple of paragraphs to remove typos?)
Looking forward to Giles and Barney’s replies…
Freethinking economist.
Capacity is the key issue here. And utilisation in the UK is very low. I.e. government borrowing wouldn’t crowd out private investment.
http://duncanseconomicblog.wordpress.com/2009/09/09/cameron-and-the-dark-ages-of-economics/
Sorry, spelling is my fault – edited.
Duncan, I could not agree more, and take my economics very much from DeLong and Krugman against Cochrane and Redwoodites
http://www.freethink.org/index.php/freethinkers/5-freethinkers/364-niall-ferguson-wrong
But the question of where our economic capacity IS may become problematic – why is deflation not occuring as anticipated?
Though I thought Ferguson’s Right wing views were perhaps more appropriate today on the Lehmans collapse – in a way, I reckon that the Right and Left have more in common on the Bankers than either would concede.
(Niall F today: http://www.freethink.org/index.php/freethinkers/3-unsorted-comments/528-should-lehmans-have-been-saved)
Freethinkingeconomist,
On the deflation point… It is happening. US, China, Eurozone, Japan, Sweden, Switzerland, Canada all experiencing deflation.
Only sterling’s fall has prevented it here.
But you’re right on capacity. It’s when capacity is not just idle but actually taken out of the system that we may have an inflation problem.
“Though I thought Ferguson’s Right wing views were perhaps more appropriate today on the Lehmans collapse – in a way, I reckon that the Right and Left have more in common on the Bankers than either would concede.”
Yes. In fact, one thing I’ve noticed is that leftists and in particular (intelligent) libertarians share a lot of common ground on the danger of corporate institutions that are too big to fail (libertarians are also generally very hostile to the prevalence of limited liability, which I think is right).
Unfortunately, the debate between the unthinking left and the unthinking right (i.e. wider than the minority of libertarians) often descends into kneejerk Michael Moore style ranting about “corporations” and kneejerk, unthinking defence of “entrepreneurs” – and it’s this unthinking debate that dominates.
Interesting post and responses. I hope you don’t mind if I gloss over the debate about S&P. I don’t know enough about it to make an informed comment. There are so many different points here I don’t know where to start; my apologies for the somewhat disorganised structure of my comments.
Taking the discussion of spare capacity first. It doesn’t follow simply from the fact there is a high degree of spare capacity that there isn’t crowding out when government injects. At least not directly.
The two effects that are discussed are (a) crowding out and (b) the accelerator. But there is also a third, for which I don’t have a catchy name. This effect is actually the one debated in the original blogpost; increased government borrowing putting downward pressure on consumption and investment due to consumers and businesses anticipating rising future taxes.
Paulinlancs argues that a positive attitude that is sanguine to debt would lead to growth. This is interesting on two levels. A meta level concerning the nature of social science and policy generally, and an ‘in-paradigm’ economic level. I’ll tackle the latter first and then move onto the more general point I think it raises.
The economic point is wrong because there would have to be tax increases in the future. Were there not to be then we would have a permanently higher national debt (unless you cut spending…). This would act as an anchor slowing the economy down. It would also mean that come the next recession, borrowing to stimulate out of it would cost more and lead to an even greater level of structural debt and resultant drag on our economy. Eventually this would have to be taxed away. So there is no way households can avoid the tax ‘bombshell’.
Of course they could all be self-sacrificing and spend now rather than save. But then when the tax increases did hit, these selfless households would suffer a significant fall in their consumption relative to the world where they’d anticipated the tax cuts and planned accordingly. The result of this would be a long period (as long as it took for the the tax cuts to be relaxed) where demand would be lower. During this period you would expect to see high unemployment. Which would be worse (short, sharp unemployment or long, shallow unemployment) is another question – but I think the latter, as it is long-term unemployment which really ruin’s people’s lives (though obviously unemployment per se it pretty awful).
The above is a pretty simple story. I’m sure people can poke holes in the particulars. But it is intuitively quite plausible and it is that intuition that I would ask people to consider.
Before tackling the ‘general’ bit in response to the blogpost, I’ll turn back to the arguments on stimulus. The crowding out effect and ‘reduction-in-demand-due-to-rational-foresight’ effect run against the various effects that make up the multiplier effect, of which the accelerator is a part. The models I linked to and which are cited in the blogpost take this effect into account and find very small multipliers. Some models find negative multipliers. The negative effects are in most recessions very strong.
But this recession might be different. Specifically I think the liquidity-trap characteristics of the current recession support arguments for the efficacy of fiscal stimulus. There is a lot of evidence that banks are using the money they are getting hold of to rebuild their balance sheets. It is this money that government debt soaks up, because it it is so liquid that banks can afford to hold it rather than common equity or hybrid capital whilst still increasing the liquidity buffer to lower their risks. Given that this money would never be lent in a month of boozy champagne dinners to most private firms, the total stock of capital available for private investment may not be reduced so much as in a normal recession, where banks have relatively fixed amounts they are prepared to lend out, because they’re not having money drip-fed by QE, and they haven’t just escaped Armageddon.
That argument is obviously pretty sketchy though, and I wouldn’t like to hang my coat on it. So I have quite a lot of time for people who say that fiscal stimulus is relatively ineffective, and that consequently the build up of government debt needs to be reduced to allow private firms access to capital. Cameron has been picked out here as economically uninformed. Whilst he may not be a Prof. he is not a stupid man. Cameron is a old boy of my college, so I have a bit of loyalty for him – I’ll declare that now. but that said, my tutor says he is one of the smartest guys he ever taught; as he did economics I’m guessing he isn’t relying on Wikipedia.
As for Krugman’s “dark ages” assault; he has been widely criticised by other economists for this. Most of them are sick and tired of being called ignorant, dishonest, or even malevolent by Krugman. Particularly risable is Krugman’s accusation that his opponents aren’t business cycle specialists. Whilst his own work is undeniably great, it is international trade theory – not business cycle. Of course that isn’t to say Krugman isn’t right, but his use of personal attacks doesn’t get anyone anywhere.
Finally I want to talk briefly about what I take to be a fundamental division in thinking between many on this blog and myself and my reading of the modern economics project.
I have been struck by much of the language used on TCF. I remember reading a post saying “we need an economy for the people, not people for an economy”. The title of this thread is also symptomatic: “Ideology over algebra”. This title is echoed I think, in the suggestion that the logic of the current situation is a product of the neo-liberal ideology.
This is a view that sees the world as ultimately something that we can cast as we see fit. I would like to believe this to be true, but I doubt it to be the case. I remember hearing Jeffrey D. Sachs talking about his role in, I think, Poland, after the fall of communism. He talked about harnessing the tides and the winds of the economy; he believed that the best we can do is to direct theses forces and manage them to maximise our benefit from them, while minimising the harm. Greenspan cuts to the core of this when he talks about human nature. He believes that crashes are inevitable because human beings inevitably succumb to excessive optimism. It is hard-wired into us.
I think this point underlies another disagreement which I would have with Paulinlancs. In an old Bickerstaffe Record post he attacks the idea that ‘money is finite’. He argues that the idea is a product of the neo-liberal ideology, and isn’t really true. Now I could write another post about why I disagree with this, but we should probably save for that for a rainy day. But I think it is again underwritten by a meta-social science belief that our systems are entirely a product of ideology (which is in turn a function of class). I don’t believe this is true, and I don’t think that many economists would sign up to it (not that means anything in terms of it being correct). I believe that the state of our world economy flows, in essence, from our nature as human beings.
I’m not sure if wandering into metaphysical speculation is either helpful or accurate. I would be interested to hear responses – particularly those ripping me to shreds.
Barney, I think the effect you are referring to is a bit like Ricardian equivalence. That is, households anticipating future tax rises etc negating any govt spending.
But I think your analysis ignores the possibility that extra growth will pay for the govt spending. To take it to extremes, imagine a society in which 50% are unemployed. Then ask whether borrowing from the 50% rich to do some useful work for the next 50% (planting crops, say) would increase society’s indebtedness. The answer is no – the income from the investments would fund the savings.
Very much Keynes’ thinking.
Barney @10: I’ll pick up your comment as it relates back to other comments in the thread – apologies therefore to others fot not commenting directly back but I think you’ll get the gist of where i’m coming from through this.
Barney, first thanks for the well structured comment; if you feel it lack structure I think that’s more to do with it dealing with an OP which in itself may have been trying to do a little too much.
I’ll leave the crowding out/spare capacity argument to one side as I think we may get other input on this either here or at Giles’s/Paul S’s/Duncan’s place.
The main issue I want to pick up is what I think is an internal contradiction you display. On the one hand you say that government debt has real consequence, whether we like it or not, and tie this closely to the argument that people act rationally in the context of the likelihood of future tax rises etc.. On the hand hand, you say that human nature is irrevocablu over-optimistic, and tends to ignore ‘realities’ when it suits, and that this is why crises will happen.
I think herein lies a key issue about the ideological framework that you deny has any significant import to the way the economy works. Put simply, when it’s in the interests of capital accumulation to have people on a real high, then so be it. When it’s in the interest of the ‘spatio-temporal fix-to-capitalist-accummulation-by-reducing-spending-drastically’ to have people on a real downer about the economy, then so be it. The hegemonic structure of capitalism is such that it can make those with power over labour – politicians but mostly banks and the ‘investment community’ – think the way it ‘wants’ it to.
So yes, I do defend the idea that the dominant ideology is of more importance than the arithmetic. This is where I think Krugman et al. get it most wrong (though I agree a little bit less of the ad hom stuff would be good) – they don’t connect the Keynesian arguments they set out to the ideological framework needed to implement it.
For that reason I’m lookin forward to anything Duncan Weldon may have to say in future about both some of the post-Keynesian economists that I’ve not yet read (Minsky et al) and how they set out Keynes in terms of class strucures, and in anything he might have to say on reclaiming JA Hobson. (And yes, Duncan, that is a hint.)
As a more general point, and picking up on something Giles said (I’ve forgotten where now), I think there may be a post emerging in my head called something like ‘Leftist economics, economists and the need to engage in (polite) polemic’.
But not now.
Right Paul, You’ll have your Hobson post this week. Given it’s your birthday and all.
Duncan
It is good that I can order senior economists around. If only it wasn’t restricted to the blogosphere. What preparatory reading of Hobson should I pretend to have done?
I can’t remember which chapter number but there’s a good discussion on Hobson in the General Theory.
Good point. It’s chapter 23, available here http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch23.htm
Also on same site is his debate with EMF Durbin from 1933 on underconsumption theory. See http://www.marxists.org/archive/hobson/1933/11/underconsum.htm
Duncan: yes it is Ricardian equivalence – I’ll blame memory blank for why I couldn’t remember the name. I know Ricardo reneged on the theory, and the empirical evidence is inconclusive (it certainly isn’t a 1 for 1 to effect), but it certainly has an effect.
As for the effect you mentioned. I didn’t ignore it. Suppose:
1) Year 1: GDP has been growing at around 2.0% for five years.
2) At that level of GDP growth the structural government tax and spend policy increases national debt at around 1% GDP/year.
3) Year 2: World asset prices collapse triggering recession. GDP growth falls to -0.5% for a year.
4) The main increase in Gov. borrowing isn’t to fund discretionary fiscal stimulus. It is due to additional benefit payments and reduced tax takes. Say this adds on an extra 5% to Government borrowing (which is less than what has happened in this recession).
5) However, that obviously isn’t enough to get the economy out of recession. Otherwise the Government wouldn’t need discretionary fiscal stimulus, and we wouldn’t be having this debate. So it injects an extra 1% of GDP, funded by gilt sales.
6) Year 3: the economy recovers to 2.0% growth. Government revenues and expenditure returns to pre-recession levels. So that year the total change to net government debt is plus 1% of GDP.
You continue on the structural path with 6.25% of GDP extra government debt.
I appreciate that is hardly a technical exposition of the argument. It is a long time since I studied serious econ and my mind will no longer express things in accurate formulae. But I think the main thrust is pretty clear: the growth you get from government spending can only return you to the old path (maybe a little bit above, temporarily). If that path was not revenue positive to a degree greater than the one-off increase in debt funding, then you get a permanent addition to government debt.
Paul: sorry I should have been more specfic with my Greenspan quotation. He was talking with particular reference to asset prices. In particular he was expressing the (well-grounded) opinion that when asset prices start rolling upwards, people become overcome by their lovely Keynesian animal spirits and start wildly overpricing them. When the correction comes, they are liable to veer the other way into absolute terror, selling everything they have (like Goldman Sachs stocks – bad move). Minsky has a beautiful model based on liquidity preference that explains this. (sorry can’t remember the citation).
This type of irrationality doesn’t extend to taxes. There is no rise and fall to get the animal spirits excited. That said, people clearly aren’t 100% rational. Otherwise Ricardian equivalence would hold true fully, and one wouldn’t even need crowding out effects to argue against fiscal stimulus. Which it doesn’t and one does.
Sorry 6% (6.25 is a leftover from an example when I was trying to make it mathematically accurate).
I know this is now an old post post. But I am slightly unimpressed that certain people lacked the balls to say they were wrong.
Barney
A lot of posts have floated under the bridge since then. Can you be a bit more specific, especially if it was me who was not impressing you. Sometimes it’s simply the time for commenting which is lacking rather than the lack of will to reimpress, and then the post’s a few days old, and then, well, you know how it goes…………but if you can identify briefly where you think the debate remained unconcluded, that’d be helpful
Sorry – had just got off the train after an hour and a half delay (on an already hefty commute), and had a few jars inside of me. I apologise for the lack of courtesy.
However, I am still slightly peeved by the lack of response to my post. Not because I think people have a duty to reply to me, but because I don’t think anyone gets anywhere by constantly flitting to new topics, without properly looking at the older ones. The comment wasn’t really intended for you, Paul, it was more at thread about government debt. I guess what irritates me is that, so far as I can see, freethinking was just plainly wrong – as far as I am aware no one holds the position he was advancing. I think my argument clearly demonstrated that. Of course, I am prepared to admit I may well be wrong in that beliefs – but it bugs me when there is no reply at all, not even one to say “you are obviously wrong” or “good point”. I know people are busy with other blogs and other enterprises, but if these boards are actually going to further anyone’s understanding arguments need to be carried to some form of conclusion.
Moan over. Been enjoying the other threads!
I’m an outsider to the debate, but what I would say is that based on my long experience of debate and persuasion, changes happen in small doses for individuals and the state of their knowledge.
For me, when I locate a gap in my understanding, I try to get around to reading about it (currently on quantum superposition, if you would believe) – and I know quite a few others to be the same.
But even people who don’t have such an open approach to things, it’s unnecessary to push things to the conclusion where someone says “good point” because they’ll already have internalized the information, if they are worth arguing with.
Dave – You don’t know about quantum superposition? What are you, a big thickie or something?
Barney – that’s helpful clarification.
First, in defence of, Giles at FreeeconThinkummy, he was just exploring the commenting at length thing while at the same time putting a lot of time into establishing a readership for his own blog (and that’s a reaso for the commenting), and he did admit to me on a comments thread at his place what a time drain it all can be, though clearly having a blog like his is a business decision as much as a labour of love. I don’t think he was being in any way deliberately disrespectful, and I suspect it just fell off his to do list in the face of other comments threads he was at and his own posts. When I get involved in several threads at once I start to forget where I’m supposed to be, too (mind you, I am v old).
On the more general point, I agree with Dave that while most comments threads simply die off, what is important is the internalisation. None of keep scores on who’s won or lost a debate – it’s all just a matter of keeping on learning – facts, viewpoints and methods of self-expression – to take out into the real non-blogo world.
What I really like about TCF, and why I wanted to start to post here (which I only did last month) is the high quality of comment threads, driven by Dave’s commitment to responding in detail to just about any compos mentis comment that comes his way (and my aspiration to do so), but I wouldn’t want to see that become a formal comments policy we have to adhere to. As said, comments threads do just die out and then the ideas/arguments get picked up in other places at other times, and if that happens where there are more people to engage/be persuaded/ do something with the new info/analysis, then TCF is doing its job.
Barney
Sorry you were disappointed not to get a reply – even more sorry that I failed to pick up on the idea that you felt you had disproved the entire theory of government spending/not saving in a deflationary slump can pay for itself with future income. I did not know that you thought you had done that – if I had, I might have interrupted a rather busy week (LD conference etc) to jump in and make a comment.
I’m still not sure where you have done that. Surely not here:
“That argument is obviously pretty sketchy though, and I wouldn’t like to hang my coat on it. So I have quite a lot of time for people who say that fiscal stimulus is relatively ineffective, and that consequently the build up of government debt needs to be reduced to allow private firms access to capital.”
To give an example from recent events: the VAT cut, the only really discretionary thing the govt has done: the CEBR, hardly a poodle, found that as a result of the cut we have had greatly increased retail sales over the counterfactual, so that its putative 12bn cost is in fact closer to £6bn (there’s a post somewhere on Freethink.org about this).
But I am clearly doing a very bad job of convincing you and must admit failure. I could try to do a long abstract thing about imagining an economy with 100 workers and 50 are idle and a central agency employs them using “savings” and the savings are found in the future incomes from the workers, but I think others – Brad DeLong in particular – do a far better job than I do:
http://delong.typepad.com/sdj/2009/09/a-magnificent-seven.html
is one I have not gone through yet:
http://delong.typepad.com/sdj/2009/01/time-to-bang-my-head-against-the-wall-some-more-pre-elementary-monetary-economics-department.html
amused me at the time. You have to put up with his rudeness, I’m afraid: BDL has an IQ near the impossible levels and it is worth getting through. The comments below it, in particular this astonishingly simple insight about Cochrane’s fallacy, are well worth browsing too.
http://delong.typepad.com/sdj/2009/01/time-to-bang-my-head-against-the-wall-some-more-pre-elementary-monetary-economics-department.html?cid=6a00e551f080038834010536f93cd9970c#comment-6a00e551f080038834010536f93cd9970c
Sorry to fob you off with another writer. I have a week’s reading to catch up – I am honestly not wanting to be either just a trackback tart or just hit-and-run. I will happily produce giant posts on the subject of how stimulus can OCCASIONALLY work (though mostly it does not) on my blog when I get through it all.
Oh, and Skidelsky’s Keynes book is good on this: plus Krugman, Return of Depression economics, of course: the babysitting co=op.
By the way, on your last point about the stimulus returning to previous levels of growth – yes, but this is still better than the counterfactual, surely (1931). That is the comparison to make (as I tried to get Liam Halligan to admit, unsuccessfully).