Saturday, June 30, 2012
What utter self-serving drivel, Brad Delong!
I don't often read Steve Keen, but I'm calling attention to this one. It's not even economics, really.
It's outrage.
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9 comments:
OK - I read Keen's piece. There's something there, I suppose, but he is badly overplaying his hand. He's just being cranky.
I seem to recall PK writing something pretty critical of SK not too long ago. Maybe he got his widdle feelings hurt.
Cheers!
JzB
Keen's line seems to be Minsky good, Kindleberger bad.
Why this is his line God only knows...
Brad DeLong
Hello Brad DeLong. Thanks for the visit! Not an economist myself -- a convenient excuse, to be sure -- your four words "Minsky good, Kindleberger bad" don't help me understand what you are thinking. So let me tell you what moved me to link to Keen's post.
From Debtwatch, 13 June 2010: "A majority of the 16 individuals identified in Bezemer (2009) and (Fullbrook (2010)) as having anticipated the Global Financial Crisis followed non-mainstream approaches to economics, with most of them identifying as Post-Keynesian (Dean Baker, Wynne Godley, Michael Hudson, Steve Keen, Ann Pettifor) or Austrian (Kurt Richelbacher, Peter Schiff)."
That much I repeated here. Keen's next sentence tells you all you need to know: "The theoretical foundations of these authors therefore differ substantially from those of more mainstream neoclassical economists."
It is Keen's claim to fame, being one of 16 people who was right about the economy. You can't come in four years later and say you were right, too. No wonder Keen is torqued!
Myself, I'd much rather think about the economy than about personalities. But when I read Keen's recent post, what I thought of was how often I've seem Krugman take credit for things in his blog posts. He quotes somebody else, then says he said it first. Even if true it is irritating, and the irritation makes me doubt the truth of it.
Apart from that, from the bit Keen quoted of yours, this is really good:
"In particular, we understood that the rapid run-up of house prices, coupled with the extension of leverage, posed macroeconomic dangers. We recognized that large bubble-driven losses in assets held by leveraged financial institutions would cause a panicked flight to safety..."
Reading over your Perils of Prophecy, I see that you have written, "But we – or at least I – have gotten significant components of the last four years wrong."
If you said "four years" in your opening, rather than "five years", Keen might have let it go.
Still, sir, look at your conclusion. Either people "expect economic policy to be so dysfunctional" that we won't recover for another decade, or "financial markets’ ability to price relative risks and returns sensibly has been broken at a deep level..." Either expectations, or financial disfunction.
No.
Look at Keen's conclusion: "At some stage, the growth of unproductive debt had to falter, and when it did a serious financial crisis would ensue as aggregate demand collapsed. The policy rescues since that prediction came true have not addressed the fundamental cause of the crisis, which was the excessive level of private debt."
Look at mine: "Costs have consequences.... The excessive level of private debt was the fundamental cause of the crisis.... The need for deleveraging remains. I recommend direct action...
Look at your conclusion again, sir. You do not address the fundamental cause of the crisis. Excessive private debt is the primary impediment to economic growth.
Our primary goal must be to reduce private debt.
How is he badly overplaying his hand Jazz?
I think its less about pain to his feelings and more about pain to the rest of society as we listen to the DeLongs, Sumners, Summers etc debate the amount of pain that MUST be meted out to our working class while avoiding any pain to our job creators.
DeLong and Krugman, while certainly not as mean spirited as their colleagues on the far right, are still wedded to false notions about the differences between govt debt and private debt. They still are ignorant (at this point it must be willfully so) about how banks operate, thinking that a borrower is getting their money from a saver. If you cant get those two things right you will NEVER figure out the right prescription for todays financial situation.
Greg -
Krugman in particular has been saying since the beginning of the crisis was was going wrong and how to fix it. His prediction have been consistently correct. You can't call it self-serving drivel if what he says has been objectively correct and born out by actual results.
Keen is saying I got there first, and sticking out his tongue.
That is how he overplays his hand.
Cheers!
JzB
Several relevant paragraphs from Bill Mitchell: http://bilbo.economicoutlook.net/blog/?p=20040
Also, the Randall Wray article Bill Mitchell links to: BRAD DELONG: WE’RE ALL MINSKIANS NOW!
Art,
Seems as though Mike Konczal sees your point about private household debt. And Brad DeLong provides the coverage: http://delong.typepad.com/sdj/2012/07/olivier-blanchard-and-his-team-talk-sense-economists-squarely-in-the-bagehot-minsky-kindleberger-tradition-watch.html
Great link, Nanute. I hope both Konczal and DeLong are still concerned about debt tomorrow :)
I usually don't visit DeLong's site because my first comment there got deleted for being off-topic. As you know, I have only one topic.
We'll see if my reply to Troy today withstands the test.
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