Damning on multiple levels.
Damning on the proposed benefits from hosting a World Cup. Damning on the idea that increasing government debt when stuck in a rut as Keynesian stimulus is largely a good move (in fact, in large parts, most of it has not been).
Especially damning on the impacts of using internal consumption as a driver to create escape velocity from bad times (sound familiar?).
I'm pretty sure this is an accurate synopsis of who Krugman is now...
Brazil is a mess. So frankly is the rest of the world. We're not "better" than everyone else. We're just "less bad," even with an awful unemployment situation, $16+ trillion in national debt, and a completely dysfunctional political system. Such is the state of the world.
What typically happens with these actual miracles is that shitty institutions win out. You can force growth under pretty poor political institutions for a while but, eventually, you lose out. You can go so far on political dictat, but all the while you are crowding out worthwhile and long-lasting entrepreneurs.
It's why China, with its poor political institutions and significant lack of property rights will eventually crater.
I'm pretty sure this is an accurate synopsis of who Krugman is now...
Haha, every Op-Ed he writes for the NYT can be summed up as follows:
- Republicans (especially tea partiers) are evil
- Spend, spend, spend and the economy will be great
- Anyone who doesn't agree with him is an idiot
About as convincing as the contention that austerity in Britain is the sole reason for their contraction in 12, and that other problems there and in the wider EU were not contributing factors.
Brazil has profound issues holding its economy back including, but not limited to corruption, a terrible educational system (particularly wrt to tech), a tragically mismanaged PBR, dated infrastructure, pronounced income inequality. They absolutely could make better use of free trade and a more independent PBR (which should be thriving), but trickle down policies would have failed too given the country's massive problems in many areas. A certainty.
One observation?
About as convincing as the contention that austerity in Britain is the sole reason for their contraction in 12, and that other problems there and in the wider EU were not contributing factors.
Just wrong. There is no logical fallacy.
Government stimulus being largely a "good idea" is something even Keynes would find laughable. And did find laughable, notably in his correspondence with Hayek. And his later disdain for stimulus being used as a political tool.
The only logical fallacy is this notion that Keynesian stimulus does not have significant short- and long-term downsides. Notably, the impact on the private economy on suppressing investment even at low levels.
Or the idea that it can be targeted. That's always been the mantra of fiscal policies; it can be targeted. And yet, largely, for 20+ years, it hasn't been.
About as convincing as the contention that austerity in Britain is the sole reason for their contraction in 12, and that other problems there and in the wider EU were not contributing factors.
Brazil has profound issues holding its economy back including, but not limited to corruption, a terrible educational system (particularly wrt to tech), a tragically mismanaged PBR, dated infrastructure, pronounced income inequality. They absolutely could make better use of free trade and a more independent PBR (which should be thriving), but trickle down policies would have failed too given the country's massive problems in many areas. A certainty.
It's not unlike India in that sense, in that they have groups that differ so widely within their borders. From rural, mostly indigenous people living in desperate poverty to an urban underclass that includes both the desperately poor and those whose lives aren't quite so tenuous but who live and work within a sort of gray market, to an elite of middle and upper class that are reasonably well-educated as a whole but that have their own problems. Top-down and one size fits all, be it the gospel according to the Chicago School or the gospel according to Keynes and his progeny, is unlikely to make significant progress and may do more bad than good in the long run.
Revisions of internal and external barriers to innovation and mobility can do a whole host of good.
No, he wasn't.
But his policy prescriptions ignore even a rudimentary cost-benefit analysis.
There's plenty that can be done that would be seen as traditional "Keynesian stimulus", such as building dams or irrigation systems, but these are done in limited scenarios.
Krugman would have made a difference had he not ventured into tilting at windmills. He sees overboard reactions to what can be sensible policies, and his prescription is to go over-board on what he considers correct.
So for instance, while steep and drastic tax cuts in struggling, undiversified Kansas have failed miserably, they likely could succeed (and have to an extent) in neighboring booming Texas.
But, there's been a lot of analysis that has argued that the economic growth was higher and unemployment lower because of the stimulus. Do you agree or disagree with that?
1. Still rely on an implicit assumption of a Phillips Curve relationship; fiscal policy can be used to reduce unemployment and generate positive returns that will be capitalized on.
2. With 1., it means that they discount the future heavily. In other words, they care about short-term outcomes.
3. Ignore the impact of crowding out (how government investment eliminates private investment). While it's certainly not 1-to-1, many good faith estimates have it at 30%.
4. They ignore the flypaper effect (money tends to stick where it hits) and the fact that fiscal policies have become less targeted. This means that we get money in less than useful places.
Newer Keynesians have started to realize this, and have developed models on precisely where to attack (the structural limitations of why prices and wages change at different rates).
Neo-neo Keynesianism is focused on changing political institutions and on less broad-scale government intervention, scaling it down to a more micro level. They estimate that this drops government involvment by about 75%.
It encourages the use of less short-term demand side policy, and more long-term demand side innovation. It promotes broader use of social safety nets while the private sector does much of the heavy lifting.
So for instance, while steep and drastic tax cuts in struggling, undiversified Kansas have failed miserably, they likely could succeed (and have to an extent) in neighboring booming Texas.
You can hesitate, but it's in black-and-white in Hayek's correspondence with Keynes. Skidelsky also goes into it.
Nice little shot, but Keynesianism as it stands (and as it is advocated for) considers none of those factors. I certainly do, but that certainly wasn't the point of the thread.
The federal government is a terrible choice to distribute stimulus. The problem is it's the only choice we have. So, problematic as it is, the only question that matters is if we'd have been better off not doing it at all. I find it hard to believe that's true, especially considering state a and local "austerity" measures from budget constricted governments.
But, there's been a lot of analysis that has argued that the economic growth was higher and unemployment lower because of the stimulus. Do you agree or disagree with that?
Short-term, most likely yes.
Long-term, I suspect no (after about 20 years). I think most will view the stimulus and the myriad policies enacted by the government and the Fed as simply prolonging a structural reformation of the economy to put us back onto a better path (say, reducing the deficit, putting more sense into the corporate income tax, revamping the income tax system itself).
Just like, at the time of the Great Depression, the Fed's actions were seen as helpful, while FDR's policies were seen as hurtful, there has been a reversal of the two. The Fed significantly harmed recovery, and while FDR's policies hampered growth in the long-run in certain systems, they helped provide the structural transformation (with increasing life expectancy, social safety nets were much more needed) that led to some benefits.
Now, that's not to say that a lot of the New Deal policies didn't have significant blowbacks today (wage freezes are bad), but the TVA and other innovative programs were ncessary).
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4. They ignore the flypaper effect (money tends to stick where it hits) and the fact that fiscal policies have become less targeted. This means that we get money in less than useful places.
The federal government is a terrible choice to distribute stimulus. The problem is it's the only choice we have. So, problematic as it is, the only question that matters is if we'd have been better off not doing it at all. I find it hard to believe that's true, especially considering state a and local "austerity" measures from budget constricted governments.
Even though it's nice, the opposite of stimulus is not austerity.
We know that people anticipate future tax increases due to federal stimulus. We know that private investment is surprisingly responsive to income.
You can couple local stimuli (with the federal government giving them money) to target certain areas of need (infrastructure revampment; unemployment training assistance) with short-term changes to taxes or investment benefits, and can achieve something similar.
It won't look as fancy in the short-run (and may actually cause a slower return to good times), but it's a much more sustainable policy that utilizes the benefits of federal stimulus, and mitigates some of the larger downsides.
Here's a simple way at explaining why predictions are fraught with a lot of issues.
Imagine a baseball hitter hitting a ball. You are a fielder. You get to see 1 second after he hits the ball. Then close your eyes.
Now, try to field the ball. If you are close to the batter, it is likely you come close to fielding the ball. The farther away from the batter you are, however, the farther away from the ball you get.
This is predicting/forecasting.
If we are a short distance away from the event, we predict with error, but we get in the ballpark.
Farther away from the event, we really can't predict much. There is simply too much uncertainty.
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4. They ignore the flypaper effect (money tends to stick where it hits) and the fact that fiscal policies have become less targeted. This means that we get money in less than useful places.
The federal government is a terrible choice to distribute stimulus. The problem is it's the only choice we have. So, problematic as it is, the only question that matters is if we'd have been better off not doing it at all. I find it hard to believe that's true, especially considering state a and local "austerity" measures from budget constricted governments.
Even though it's nice, the opposite of stimulus is not austerity.
We know that people anticipate future tax increases due to federal stimulus. We know that private investment is surprisingly responsive to income.
You can couple local stimuli (with the federal government giving them money) to target certain areas of need (infrastructure revampment; unemployment training assistance) with short-term changes to taxes or investment benefits, and can achieve something similar.
It won't look as fancy in the short-run (and may actually cause a slower return to good times), but it's a much more sustainable policy that utilizes the benefits of federal stimulus, and mitigates some of the larger downsides.
So, if not austerity what would you call it when state and local governments cut spending?
On a lesser level, however.
It's what the gold standard imposed (austerity) in the 1920's and 1930's, and why we struggled for so long to escape from that hell.
Back to the British example..."austerity experienced major drawbacks in Britain, thus it is ill-advised as a policy". Logical fallacy, as it is more complicated than that. Probably was in Britain at that time, but it has its uses in a different context.
If I implement a broken-windows approach to policing in New York, it may work because NY, as a rich city with much going for it, is largely "police-able" (sorry) to begin with and set up for success. If I do so in Detroit, results will differ. Is either a categorical validation for the policy? No, you take into account regional nuance.
Wasn't taking a shot. You don't have to get defensive when someone expresses disagreement.
I didn't think that I had to keep reminding people of that point, much like I don't feel the need to harp on the fact that the Phillips Curve was proven to be bunk for decades.
So, in your thoughts that I am leaving out some relevant information about regional or local differences, I most certainly am not. Again, this has been the criticism leveled at federal demand-side policies even before Keynes started the theoretical looks at them.
So yes, there is a categorical denial that the quasi-Keynesianism used by policymakers doesn't work en masse. Study after study have shown that (it's why we are on the 2nd round of revamping Keynes).
And no, this does not mean that unremittant monetarism or laissez-faire is the appropriate response to crises.
But demand-side levers pulled by policymakers today all over the world do not work, in large parts. Something that was recognized by Keynes in the 1920's, which is why allowing the bastardization of his work is a huge black mark on his legacy.
Austerity typically does take into account regional variation, as the cuts are much less politically feasible. So the impacts in Britain do not tend to shed as much light on the overall policy as a whole, unlike typical demand-side stimuli that we see today.
It's why Friedman espoused a rule-based (and constant) monetary policy, so that regions could acclimate to it, and why he so considerably targeted Keynes as his target of ire.
And if you want to know what regional variations the newest Keynesians use (if you think that the point about policymakers ignoring it is bunk):
1. Unemployment rate of a region
That is typically the only regional variable that is highly controlled for in most analyses. So even the newer breed of Keynesians (and the policymakers) fail the sniff test, which is why the assertions that broad-based demand-side policies are failures.
In comment 11831614 BeerFridge said:
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So, if not austerity what would you call it when state and local governments cut spending?
It's austerity. It's also penance for running a de facto stimulus program when it was not needed. There are difference in localities, and I'm sure exceptions can be found to what will state in generalities, but as a general rule most states and municipalities increased their work forces in the years running up to 2008. And it happened in spite of IT advances that militated for a decrease in the number of state and local workers. Do you really need the same number of workers in a state department of taxation when an increasing number of returns are e-filed and payments are made on line? Do you really need the same number of local workers when property taxes and many other fees are paid on line? And all these folks are ringing up pensions, vacation days with which to spike their pensions and retiree health care benefits that will come due in the future. Between 2002 and 2008 attrition, and not layoffs, could allowed the size of the workforce to better reflect the demands placed upon it.
So when the shit hits the fan, as opposed to attrition, you now have layoffs. The criteria for layoffs may or may not result in the most effective work remaining with the state/municipality. And at least some of the money necessary to get through the bad times has been spent during the good times.
posts by the field: 18
Multiple back to back posts, and the rare, but wonderful three in a row post.
posts by the field: 18
Multiple back to back posts, and the rare, but wonderful three in a row post.
You're right. These are becoming a waste of my time...
Fuck off.
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In comment 11831614 BeerFridge said:
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So, if not austerity what would you call it when state and local governments cut spending?
It's austerity. It's also penance for running a de facto stimulus program when it was not needed. There are difference in localities, and I'm sure exceptions can be found to what will state in generalities, but as a general rule most states and municipalities increased their work forces in the years running up to 2008. And it happened in spite of IT advances that militated for a decrease in the number of state and local workers. Do you really need the same number of workers in a state department of taxation when an increasing number of returns are e-filed and payments are made on line? Do you really need the same number of local workers when property taxes and many other fees are paid on line? And all these folks are ringing up pensions, vacation days with which to spike their pensions and retiree health care benefits that will come due in the future. Between 2002 and 2008 attrition, and not layoffs, could allowed the size of the workforce to better reflect the demands placed upon it.
So when the shit hits the fan, as opposed to attrition, you now have layoffs. The criteria for layoffs may or may not result in the most effective work remaining with the state/municipality. And at least some of the money necessary to get through the bad times has been spent during the good times.
To the extent that these are "countercyclical" they represent one of the insuperable problems of Keynesian economics in a democracy. Even if you accept in broad and general terms his principles (and as many have pointed out HE did not countenance a lot of what has been done in his name) it is almost impossible to overcome the public reticence to "remove the punch bowl when the party is getting started" or to adjust workforces downward when the tax coffers are reasonably well-stocked.