"Blogging is Hard. Don't Let Economists Tell You Otherwise!"

It's not every day that I feel as if I am the equivalent of Paul Krugman (or that my lay economic opinion is equally as valuable as his), so today is a day I can rejoice.

But first I will explain.

Greg Mankiw linked an influential essay by Kartik Athreya, Ph. D. (a senior economist in the Federal Reserve Bank of Richmond's research department) which is titled "Economics is Hard. Don't Let Bloggers Tell You Otherwise". According to Dr. Athreya, simplistic economic pronouncements by bloggers (like yours truly) are about as helpful as simplistic economic pronouncements by elite economists like Krugman, and both should be ignored:

In this essay, I argue that neither non-economist bloggers, nor economists who portray economics -- especially macroeconomic policy -- as a simple enterprise with clear conclusions, are likely to contibute any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public.
Which would apply to Paul Krugman's latest pronouncement:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense.

[...]

....future historians will tell us that this wasn't the end of the third depression, just as the business upturn that began in 1933 wasn't the end of the Great Depression. After all, unemployment -- especially long-term unemployment -- remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven't yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

In his usual simplistic manner, Krugman maintains, of course, that we must spend our way out of debt with money we don't have.

And even though I am not an economist and therefore have no idea what I am talking about, I will nonetheless continue (in my usual simplistic manner) to maintain that spending your way out of debt simply does not work. I think that any temporary "relief" it might provides is as illusory as the apparent "recovery" of a medieval patient being systematically bled back to life. But what do I know? I'm just glad that for once, a knowledgeable economist thinks my opinion is as worthy of being ignored as Krugman's! And even Brad Delong's! Back to Dr. Athreya:

...I am totally puzzled by the willingness of many who fearlessly and breathlessly opine about economics, especially macroeconomic policy. Deficits, short-term interest rate targets, sovereign debt are all chewed over with a level of self-assuredness that only someone who doesn't know more could. The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the "Macroeconomic Policy is Easy: Only Idiots Don't Think So" movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it's all really very simple (and may even be found in Keynes' writings).
Wow. Being as worthless as Paul Krugman and Brad Delong is very humbling.

(I'm glad it's only for a day.)

posted by Eric on 06.28.10 at 01:05 PM










Comments

Generally speaking, economists suck. If you want to know what's the immediate cause of our floundering economic recovery, it's this: hundreds of thousands of small and medium sized businesses are being systematically squeezed by a policy of increased capital requirements mandated in the banking industry.
While on the one hand the Obama administration talks about banks lending, they are at the same time requiring them to increase capital.

For years, small businesses have relied on short term credit extended by banks and credit cards, to basically provide their working capital. This is now ending. I see it daily. My small mom & pop customers are losing their working capital. Those that survive will be the ones who are able to slowing build the capital needed through old fashioned savings. The others will slog along for awhile, and then fold.
The medium sized businesses that have some cash are saving it for the expected tax increases, and mandated health care, and who knows what else this socialist government has in store for them, like cap and trade. This means they are not hiring, and not expanding.

I know of one medium sized, over 5mm$ in sales, who is preparing to go Galt.
He & his family are so pessimistic that they don't think the November elections will make a difference. I hope he's wrong.

Frank   ·  June 28, 2010 9:31 PM

I wonder what she thinks of the Laffer curve, and if at 100% taxation you might get zero revenues.

It could be that's too simplistic too.

rhhardin   ·  June 29, 2010 5:55 AM

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