Believe those who are seeking the truth. Doubt those who find it. Andre Gide


Wednesday, August 29, 2012

Kotlikoff Speaks Out

Laurence Kotlikoff
I haven't had much time to blog lately, but I thought I'd link up to this piece by Laurence Kotlikoff, which caught my eye: Economists Risk Labeling as Political Hacks. An excerpt:
Professional Rot 
The decision of the 500 U.S. economists, many from the leading ranks of the profession, to trade in their credentials as economists for that of campaign workers is just the latest sign that something’s rotten in economics. The documentary “Inside Job,” demonstrated how prominent economists failed to disclose, as standard ethics require, when they are being paid for their professional opinions. 
Then there is the increasingly nasty op-ed war pursued by political economists, such as Paul Krugman and Glenn Hubbard, who have so closely aligned themselves with one of the two parties that it’s impossible to know where their politics stop and their economic analyses begin. 
The worst part of all this is that the new political economics routinely diverges so far from economic theory and fact.
Agree? Disagree? (Please -- no mindless drivel -- I will delete) 

17 comments:

  1. I don't know about Hubbard, but one thing I've always appreciated about Krugman is that he is more against Romney than he is for Obama. Sure, we all know who he's going to vote for. But even when he would have said Obama was doing a lot right (2009/2010), Krugman was one of the most prominent critics of Obama.

    I think Kotlikoff is going a little overboard here. The Romney signees probably all have a more nuanced position, just like Krugman does with Obama.

    The public debates among economists can be harsh, but I've never gotten the impression that it's ever really driven by partisanship - and to the extent that party plays a role it is much more of the "Rs/Ds are REALLY bad!" variety, not the "Ds/Rs are great at economics!" variety.

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    1. I agree with Daniel's POV regarding Krugman.

      You do know where Krugman stands and he criticizes everyone and everything from that POV regardless of political party.

      I read Krugman as a European Social-Democrat, and because of that I do feel that I know where his political analysis ends and his economic analysis begins. Krugman's integrity is to me largely beyond question.

      I do however question the integrity of the economists supporting Romney for the very simple reason that I do question Romney's integrity and sincerity. The economists in Romney's campaign team seem to provide him with arguments in support of his platform, rather than that his platform seems to be based on arguments as opposed to political convenience.

      To illustrate the difference: I can't imagine the economists supporting Romney or the economists on his economic team to question Romney, whilst Krugman has questioned Obama's policy in the past as well as Obama's political judgement.

      For the record and what it's worth: my own political sympathies are with Neoliberalism/Classical Liberalism.

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  2. I think that part of the problem is that to get (and keep) a major government job as an economist (like a member of the CEA or Fed board governor), economists have to play to one or the other party line. I suspect that Mankiw has often said things he didn't wholly believe because of this, and maybe Hubbard too (he was, after all, aiming for Bernanke's job when Bush was president).

    I do agree with the above to comments about Krugman. He's never had a successful career in government mostly because he won't keep his mouth shut when his side does something he disagrees with.

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    5. An instance is reported where good solid Federal Reserve research---Foreclosing on Opportunity: State Laws and Mortgage Credit by Karen M. Pence, Federal Reserve Board of Governors---is presented to a governmental body and inappropriately rejected as example of possible spill over effect of the battle words between Krugman and others.

      And this is removed? It's your blog, do what you want, but here we are trying to credit your employer with good work, which was intended as a compliment to you, trying to use that work in a common sense way, telling you of our frustration, and you remove the comments?

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    6. AH, I am not interested in compliments. I am interested in arguments supported by reason and facts. I repeatedly warned you to support your allegations with evidence and you failed to do so.

      You now cite a 2003 paper by Karen Pence which suggests that "defaulter friendly" foreclosure laws tighten borrowing constraints (reduce loan size). An interesting piece. But I'm not sure what it has to do with any of the points you were trying to raise initially.

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    7. I still don't believe you read our comments. The local gov't agency to whom we presented Pence's paper refused to believe it. It seems to me that economists need to be very careful of being perceived as political, for once they do such their words become, in effect, "lawyer" talk or spin and people and politicans can more easily say, "I don't believe you" and do what either group wants to do.

      BTW, White just made a different but related argument in his Dallad Fed piece:

      A consideration that applies to both household and company spending is the message given by ultra easy monetary policy. To the extent that such measures are unprecedented, indeed
      smacking of desperation, they could actually depress confidence and the will to spend. Keynes references to “animal spirits” in the General Theory would seem appropriate here. Indeed, the greater the respect held by the public for the central bank in question, the more likely this outcome might be.

      This is the best critique I have seen of Krugman's print money now argument.

      In sum, it seems to me that an argument can be made that the economists have gotten very sloppy and have failed to keep in mind how hard it is to build the public's confidence or trust.

      For example, Romney's attacks on the Fed have been shameful, for they do real damage by undermining public confidence.

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  4. Agree.

    Krugman is *far* too political to call what he does economics. But the people that love him and the people that hate him are also doing politics, in my opinion.

    But then, my opinion is probably "meaningless".

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  5. I think it's silliness. If one candidate's economic plans and views are (in your view) superior to the plans and views of the other guy, I don't see any problem in signing on with that candidate's economic vision. If the stuff you do every day as an economist matters then voice your opinion and try to change things. If it doesn't matter then you can stay quiet, but perhaps should also consider what value your profession has.

    This goes for whoever, not just the Romney signers. Obama had a similar list in 2008 (that faced far less criticism) and I had no problem with it either. Still expecting another to pop up eventually.

    Making ridiculous personal attacks against other members of the profession and acting like there's a horrifying freshwater conspiracy to drown Keynesians is far worse than political advocacy.

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  6. Economists each have their own political views that are independent of their professional work. And I'll grant that one might sign a statement endorsing a candidate whom they support for more nuanced reasons than those put forward in the statement. But you still have responsibility for what's in the statement you've signed.

    In particular, I can't imagine how so many intelligent economists could agree with the following: "Governor Romney would.... End the exploding federal debt," when there's no precedent in the last 60+ years of political history to indicate the party they're endorising will actually do this. Nor is there much in the curent platform of the candidate they're endorisng to suggest as much.

    It's this kind of behavior that lends support to the perception that all economists are political hacks who simply pick a theory that is consistent with their prejudices. We might know this isn't usually the case, but it gives the broader public that impression, and that's bad for the profession.

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  7. Broadly, I agree. However, I think that a lot of what Kotlikoff says mostly applies to the loudest voices in the profession and that is not likely a representative sample.

    Where I agree with some others, such as Daniel, is with regards to signing a statement in support of a candidate. If somebody signs petition favoring Obama's or Romney's economic policies, I'm willing to give them the benefit of the doubt that they are signing it because they, in their professional opinion, think this is the candidate that has the best economic policies.

    I disagree to some extent with Daniel's point above. I agree that Krugman is more anti-Romney than pro-Obama. However, Krugman has never met a Republican policy he liked. Regardless of your political persuasion, I cannot imagine that Republicans have been wrong on every single issue of our time. In addition, Krugman's views on particular issues (e.g. government debt) seem to change as the party in office changes.

    Where Krugman runs into trouble with right-leaning and non-Keynesian economists (which are admittedly overlapping groups) is when he makes statements as though they are an unequivocal truths when, in fact, there is disagreement in the literature. For example, despite what the comments on his blog attest, this is clearly the source of Steve Williamson's frustration with Krugman's public statements.

    But Krugman is not alone in this. There are certainly others (on both sides of the aisle) who do the same thing.

    However, where I disagree with Kotlikoff is in drawing conclusions about the profession as a whole. There are many economists who routinely do not speak out and who do not take parts in public debates. Thomas Sargent, for example, immediately springs to mind. Whenever I have read any comment by Sargent in the media, it is generally thoughtful and nuanced. That is something I appreciate as an economist, but is unlikely to sell newspapers and spark debate in the blogosphere. This also means that people like this are drowned out in the public conversation.

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  8. I think everyone has to have a right to endorse or criticize a political platform. But it does mean that you truly believe to the best of your ability that whatever you are being a signatory to is true. So the question is do all those signatories really believe that the conclusions that they seem to be endorsing are going to be 'the' outcomes of Romney's plan? I certainly hope not for the sake of their students!

    Whether Romney is going to be able to implement the plan when he comes to power is a different question altogether. Fundamental changes in taxation policies or for that matter any other policy that has been in place for a long time is not exactly going to be a politically sustainable task. I clearly see a time consistency problem here. On the other hand one could argue that someone has to start the debate and may be two elections down the line we might be able to muster enough public opinion to get to the fundamental changes. Kotlikoff's arguments against programs like Social Security being unsustainable still stand though.

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