The Universe Of The Academic Economist

I LOVE it when Taranto starts with "Former Enron adviser"... too funny!

Now that's cultural relativism at its most basic, where one's beliefs are strictly bonded to one's role. So, Krugman in his role as leftist columnist supports extended unemployment benefits while Krugman as the author of the economics textbook rejects those same benefits and points out their harm.

Sounds a bit like Obama speaking to different audiences each day.

Uh-oh, spaghetti-O.

I hold a degree in economics, and there are a large number of peer reviewed papers demonstrating that employment insurance does indeed cause structural unemployment. (I know you don't like peer review, but there it is).

That is also what my textbooks said. The question is how much unemployment does it cause.

I don't know where Krugman gets off sometimes, I have read some of his articles and they are occasionally so opposite what I learned in economic studies that I'd often just drop his articles and move on. He's got a Nobel prize in Economics, but now he's kind of like the fringe professor that we all took the course in Keynesian from and shook our heads during the entire class at his antiquated teaching.

Meh he, any so called economist that believes the Dems and GOP are universes apart on economic policy obviously was blind to the fact both the Bush and Obama administrations are keeing the mint's printing presses going 24/7 in attempts to "print" their way out of stormy waters.

Dems and GOP have adopted "stagflation" as the normal state of the domestic economy.

Actually brings up another point, when I was taught about "economic stimulus packages" (as they are known nowadays) the economic evidence demonstrated that they never did much good, and most of the time would kick in AFTER the economy had recovered due to the time it takes to get projects going. Thus they would usually overinflate the economy. As we are now seeing in Canada.

Moreover a large number of papers, some seminal, demonstrated that the so called Great Depression was extended and worsened by government actions.

This is what we were taught and what later studies showed those of us who kept on with it. Whenever the media and government trot out these economics who "Most economists recommend government stimulus" I am always left wondering exactly who these economists are? Did I somehow miss the class where it was like "OK now this is the real class where, forget about everything you learned, we're going to teach you the truth: government can fix anything!"

@ The Fly:

Yeah I agree. Being a politician suddenly changes everything. Look at Harper and Iggy, both had real opinions based in fact before they got into Parliament. Now its all about pandering to the loud crowd, the media, and Quebec. Very few people can get into power and say plainly: "look people, government isn't the solution, government is the problem."

I agree with langmann, we all suffered through J.M. Keynes, and who could forget our own John Kenneth Galbraith. The only breath of fresh air was the Chicago school exemplified by M. Friedman. I did note in the weekend Nat'l Post an article about home ownwers in some U.S. cities hard hit by house price declines who find themselves with negative equity,and are reluctant to move to a job and have to sell the house at a loss and owe on the residual mortgage. Shades of Alberta in the NEP.

Mulroney demonstrated the problem with carrying out Keynesean economics quite clearly.

It becomes difficult to chop the bureaucracy that was instilled during tougher times when the good times come along.

So, the end result is an ever-growing bureaucracy.

Apparently, Stockwell Day is going to address the issue some time this week.

Saw him interviewed a couple of weeks ago and he gave a hint of things to come.

Hiring freeze, each department must find 5% in savings, review of program efficiency.

So, Day is doing what Keynes prescribed. Once the state infuses an amount equal to the slowdown in the private sector, it chops back its own role in the overall economy once signs of improvement start showing.

My prediction? There's going to be a lot of howling from the Ottawa-based media about how cuts are bad for the government.

My response? So what. It's good for the taxpayer.

The solution is to stop making the same mistakes choreographed by the London and Chicago schools of intervention and redirect to the self evidential corrective measures of the Austrian school. IOW - less Keynesian intervention, Friedman fiat monetarism and Galbraith's planned austerity and more Von Mises and Hayek faith in the grass roots economic forces (the consumers of goods, monetary systems, financial and investment products) to make market corrections.

DOWN WITH KEYNES, UP WITH VON MISES!!

The only breath of fresh air was the Chicago school exemplified by M. Friedman
Mikewa at March 7, 2010 9:57 AM

I used to think this. No more. Friedman's monetarism is not radically different than Keynesianism in effect. Friedman was pro fiat currency, pro-money supply expansion, and anti-gold (the barbarous relic). Like the Keynesians, he had no clue about the cause of booms and busts, because he had no capital theory. To understand how booms and busts are NOT endemic to capitalism, you must understand the Austrian theory of capital. Keynes didn't; Friedman didn't.

Read, Rothbard's Man Economy and State; read Jesus Heurta de Soto's Money, Bank Credit, and Economic Cycles and of course anything by von Mises, esp. Human Action.

Friedman was a great advocate of freedom but unwittingly supported policies that destroy it. Monetarism is a bust!

As to Krugman, his favourite subject -- one he looks forward to teaching each year -- is the "paradox of thrift", i.e., savings are bad for economic growth. Clueless.

When I first got on line 15 years ago, I was hungry for economic and monetary articles. The Netscape, Alta Vista, ect search engines kept pointing to this Krugman nutcase.

It took a couple of years to unwind the damage this twit caused. He does not live in the real world. He lives in a tenured-bubble.

Nobel prize!? Big deal - so did Gore. And Obama.

Right on, Me no Dhimmi :)

I get so sick and tired of people who think they know what Keynes meant; most of them don't have a clue.

He said run surpluses in good times, and deficits in bad times. Based on the previous 100 years of British history before he published, he had every expectation of the good years outnumbering the bad ones by a considerable margin. Apparently, he and Chamberlain were the only two men on the planet who didn't foresee Hitler.

What happens if you lose your job? Forgetting EI, you live on your savings until they run out, and then you try to live on credit. Once you get a new job, you pay down your debt. And the Canadian governments - and I'm not being partisan here, because Chretien and Martin started it - have been way more responsible than all the other "developed" countries in this respect. They paid down billions in national debt until this once in a generation downturn. Then Harper had to run deficits to keep some people out of penury, and to restore "animal spirits". And unlike Bush and Obama, his deficits went mostly to working people, not Bay/Wall Street bankers.

As I've said many times before, Harper has a minority. He's smart, but he has to be pragmatic. If he'd done nothing during this downturn, does anyone really believe a new coalition wouldn't have surfaced? And does anyone think that Iggy, Jack, and Jill (sic) would have done anything different, or anything better? I'd like to hear concrete ideas, not spurious speculation.

Although I had only two economics courses (elective requirements)so I am no expert but langmann points out a few things that a lot of us here have wondered about. I know it sucks to be unemployed but there are a lot of downsides of extending benefits. Also throwing money at stimulation only works if you are hiring a hooker. Building infrastructure isn't an instant fix. Things like that take months if not years to get up to speed and then once complete you are left with a bridge to nowhere and unemployed workers unless a positive economy creates a real construction market.

@ KevinB:

Alas as I have already described, Keyne's theory good as a theory, especially in its simple effects on macroeconomic aggregate GDP. However in practice as I have described, and as "set you free described": in practice it's not effective as most stimuli don't end up happening until the actual economy has recovered due to lag, and as Cole and Ohanian have described may have prolonged it. Then as set you free says, there are a whole load of rent seekers who prevent you from cutting back during the good years.

Moreover I think it sets up the worst moral hazard. I mean the Savings and Loan Crisis of 1990 that Clinton dealt with by buying people out of failure had a great deal to do with setting up the most recent failure of banks and FM/FM. If you know the government will bail you out if you fail, what stops you from pushing the limits?

Me No Dhimmi: As to monetarism, Friedman actually opposed the Federal Reserve. HOWEVER, since we are stuck with a Federal Reserve his main point was that monetary policy could work to worsen the economy and was counter to that Keynesian argument about borrowing out of a recession and increasing government spending and that monetary policy had no effect. He mainly proposed extremely limited government intervention as well as controlling inflation using monetary policy.

I do not think he would be happy with the trillions borrowed by both Bush and Obama as well as the high rate of borrowing due to low interest rates if he were alive today to speak about it.

Anyway I am very concerned with the large amount of borrowing going on now with low interest rates...

i hate burokkkrats

Texas Canuck said @ 4:59 PM . . .

Also throwing money at stimulation only works if you are hiring a hooker.

Can I use that line? Pleeeeese?

I knew it was Krugman even before I clicked the link. What a body-slam that was!

When I was last unemployed in California, my unemployment insurance payments were less than 25 percent of my previous salary. For lower-skilled persons, unemployment benefits are closer to 75 percent of their former wages. Insurance premiums are a percentage of income, but the benefit structure actually redistributes income to the poor.

So I had a strong incentive to find work fast and ended up taking a terrible job which lasted only five months. Luckily, one of the jobs I had applied for six months earlier was slow in their hiring process and I was able to make a hasty exit to a better, higher-paying job.

But for low-skilled people, why would they want to work 40 hours a week for 33 percent more pay when they can do absolutely nothing and collect a check. They can work odd jobs for cash and make up that difference. At the very least, they can afford to be picky about the jobs they accept. That's not a way to spur a recovery.

Furthermore, these 'extended benefits' aren't even paid for with the insurance premiums these people paid while working - they are not unemployment benefits but actually welfare.