Filed under: A Milder Despot
George Mason economist Russ Roberts and Nobel laureate Paul Krugman recently got into a little spat over a claim that Russ made on his blog:
Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews. Whose evidence is better? I’m not sure it’s a meaningful question. My empirical points about Keynesianism won’t convince Krugman. His point don’t convince me.
Russ got jumped on by a good portion of the blogosphere for this claim with the powerful argument of “Aha! See, those libertarians just want smaller government no matter the evidence. We lefties are all looking for evidence first and foremost, and that’s why we’re Keynesians.”
For a more detailed post, you can read Russ’ long defense, but I think that he’s making a claim more about philosophy than economics. Is Krugman a Keynesian because it’s what his values align with or is he a Keynesian because he walked into Econ 101, bringing no bias with him, completely open-minded, and decided that Keynesianism as a general economic guide makes the most sense? Krugman and his defenders are basically claiming the latter, which seems pretty preposterous.
Regardless, that has now led Adam Ozimek at Modeled Behavior to posit that Russ Roberts is wrong because he and others can favor policies that run in opposition to their worldview at any given time. He’s called this challenge “Now Less Than Ever.”
Deregulation is important, and necessary, and too much regulation is a problem. But it’s not the problem the economy is facing right now. Attempts to focus on regulation are a distraction, and we’re not going to deregulate our way to full employment. We need to focus on deregulation now less than ever.
So now it’s your turn. Help prove Russ Roberts’ cynicism wrong, and tell us what favorite policies of yours we need Now Less Than Ever.
Ezra Klein also asks conservative bloggers to take the challenge. Far be it from me, a humble freelance conservative, to claim the mantle of all conservative bloggers, but I’ve got an easy one: tax cuts!
As a conservative who believes our looming entitlement-driven budget crisis is possibly the greatest policy problem facing the country right now, tax cuts are a nice long-term goal but something certainly unnecessary as the United States faces a tidal wave of red ink. The CBO’s alternative fiscal scenario, which is usually my baseline for budgeting, puts our tax burden at around 19% of GDP in 2020. That’s a fine number. It could even stand to be a bit higher. But I don’t think that tax cuts are something in the cards right now. Paul Ryan’s budget (which I’ve had high praise for) is lacking in specificity on tax reform, and also includes slight cuts relative to this baseline. I think that’s a mistake.
Tax reform is certainly needed, but even though I think a state that taxes at a lower rate than 19% of GDP is going to have more growth, the deficit that the United States faces due to out-of-control spending is a much larger problem. In fact, the CBO warned that debt is going to be a significant drag on growth in their standard ten-year budget window. We need tax cuts now less than ever.
Filed under: A Milder Despot
Samsung this morning announced that its components cooperation with Apple will continue.
The Korean firm supplies memory chips, display panels and other components for Apple products… Apple was Samsung’s second-largest client in 2010 after Japan’s Sony Corp, accounting for four percent of its 155 trillion won ($142 billion) annual revenue.
While this wouldn’t ordinarily be a huge deal, the worldwide patent battles between the two hardware giants makes a status-quo business partnership between the two odd. Animosities are brewing; Samsung recently pulled its new tablet from the Australian market in light of a court injunction.
Ars Technica’s Chris Foresman had a good rundown of the clashes between the two companies in a number of different countries.
[A] German judge upheld an injunction barring Samsung’s German subsidiary from selling its Galaxy Tab 10.1 in the European Union, even though a Dutch court disagreed on the validity of Apple’s registered Community Design. Still, the Dutch court did issue an injunction against Samsung’s Galaxy S smartphones based on an Apple patent for photo management on a mobile device. Samsung has until October 13 to find a workaround for that infringement, which may simply require a software update for an included photo gallery app.
The German decision is strange because it focuses on what the photo application for the Galaxy S looks and operates like. Do consumers care? Do consumers even pick up a Galaxy S and think “Wow, they sure ripped off Apple here”?
Accusations of patent infringement has become a favorite tool of both large corporations looking to maintain market share, as Apple and Samsung are proving, and small “patent troll” firms that make a quick buck by registering dozens of patents, filing lawsuits and settling. Tim Lee ran down these problems in a National Review piece a few weeks ago, and comes to a reasonable conclusion with a pessimistic outlook:
software patents are unnecessary because software is already eligible for copyright protection. Not only is copyright law simpler and less expensive than patent law, it also doesn’t have patent law’s problems with inadvertent infringement. As long as programmers write their own code from scratch, they can be confident they aren’t infringing others’ copyrights.
Unfortunately, given the political influence of large companies with substantial patent portfolios, there’s little hope of Congress’s reversing the legalization of software patents by the courts. The best hope for reform is that the courts will correct their own mistake.
The lack of sour grapes between Apple and Samsung in their announcement of their business cooperation is a sign that patent lawsuits have become standard operating procedure for tech firms. This is a troubling sign.
Filed under: A Milder Despot
Karl Smith is not enthusiastic about the current crop of GOP candidates.
What is necessary is that the Global Financial system is stable; that the geopolitical realm is as calm as can be managed; that both the Enlightenment and Global Capitalism continue to thrive. And, as a bonus that the First Republic of the United States still stands.
If we can have all that, I am going to call it a win.
Sadly, however, only three GOP candidates gave me confidence that they could contribute to this result. Those were Mitt Romney, Tim Pawlenty and Jon Huntsman. Tim Pawlenty dropped out. Jon Huntsman is going nowhere fast. That pretty much just left Mitt Romney.
While I don’t disagree that this is an acceptable bar to have to clear, I do disagree on who would clear this bar – it’s going to be pretty much everyone currently in the GOP field, save for Ron Paul. The degree to which the DC establishment GOP machine will infiltrate the presidency of any of the candidates might astonish Karl. And outside of Ron Paul, I don’t see a candidate with the conviction to ignore their professional advisors on a question of, say, abolishing the federal reserve.
He also underestimates what has become the lament of grassroots laissez-faire conservatives: the immense pressure to “do something” in light of a crisis. So if we agree that TARP was necessary to secure one of Smith’s above criteria (global financial stability), who do we think would, given the extraordinary power of the Presidency, actually do nothing as they watched the world collapse around them?
At this point in the election cycle, the speechwriters and rhetoricians are running these campaigns. It’s a question of who-says-the-biggest-piece-of-news, not who-has-the-best-plan. That gives publicity to the extreme statements of the Bachmanns and Perrys.
So here’s a question back to Smith: Which of the potential candidates, if they garnered the nomination and won the Presidency, would wreak more havoc upon the world than Barack Obama’s predecessor George W. Bush? Bush is a man described by a good number of historians as the worst president of all time. Would he say that a Bachmann Administration, or a Perry Administration, or a Gingrich Administration are, in his mind, instantly contenders for worst Presidency of all time?
I’m not psyched about the current crop of GOP candidates either. They’re all certainly sub-par and, though I’m a Republican, would be tough to tell if they’d be marginally better than another four years of Obama.
Now, maybe I could be naive and wrong. Maybe these people are legitimately insane and would take a burning sword to the United States’ complacent, affluent status quo as global leader, advisors and beltway elite be damned. But I don’t foresee a global collapse of the financial system, a nuclear war, or Hell on Earth coming during a 2012-2016 GOP presidency.
Well, unless Ron Paul is sitting in the Oval Office.
Filed under: A Milder Despot
SPOILERS ABOUT VERY GOOD PIECES OF POP CULTURE CONTAINED WITHIN
On Fareed Zakaria’s CNN show recently, Paul Krugman said
If we discovered that space aliens were planning to attack and we needed a massive build-up to counter the alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months… there was a Twilight Zone episode about this in which scientists fake an alien threat to achieve world peace. Well this time we need it in order to get some fiscal stimulus.
World War II nostalgia seems to run rampant on the left. If only we could tap into some kind of mankind-unifying principle, in which people stop responding to financial incentives and place patriotism over dollar, we’d have fiscal stimulus big enough to drag us out of any depression.
Krugman readily acknowledges the role that science fiction has in his life. Foundation, Isaac Asimov’s sci-fi series revolving around the lionization of a social scientist, partly influenced Krugman to go into economics. Here he also draws upon the Twilight Zone as a thought experiment. But perhaps the most apt comparison is to Alan Moore’s Watchmen, in which an explicitly left-liberal utilitarian businessman (Adrian Veidt, known as Ozymandias) unites the world by artificially engineering a fake alien threat. Veidt calculates that the world is going to destroy itself via nuclear war, and thus concocts the outside aggressor. In the process, he kills half the population of Manhattan.
Outside of the broken windows fallacy, there is of course something to this. If you could unite the financial system to magically drop their free-market concerns and mobilize in some kind of war effort, you might be able to create the economic conditions for effective stimulus. As Megan McArdle posits,
[W]hat if Keynesian stimulus works, but no one can ever actually afford to do it, short of something like World War II, where the government can tap into a patriotic outpouring of national savings by issuing bonds with negative real yields.
There are two problems: this world does not exist, and World War Two was a massively un-utilitarian exercise that resulted in death and destruction worldwide.
Krugman is positing something even less likely than a world war in his fake-alien-invasion idea, where no wars are actually fought, no one is killed, but somehow you actually do get that magic patriotism that countercyclical fiscal stimulus advocates are looking for. This is, of course, impossible. But it does mean that Krugman might think that Ozymandias was right.
Filed under: A Milder Despot
Pushback is really needed on this, clearly, despite Walt’s more-charitable-than-his-usual-angry-demeanor.
Economists were absolutely divided on the stimulus at the time, and they continue to be. Two hundred economists agreed that the Obama stimulus plan was a bad idea, signing onto an incredibly controversial statement that basically subscribed to freshwater principles.
Now, Walt would have you believe that these economists “don’t count,” despite 95% of them actually being academics not the “business economists” he likes to degrade. I would mention nobel laureates Gary Becker and James Buchanan, but Walt would have you believe that they don’t count either. Then I would mention monetarists like Scott Sumner, but Walt would have you believe they don’t count either. Then I would hide behind the GMU economists, but Walt would have you believe that they don’t count either. I would mention Greg Mankiw, but of COURSE he doesn’t count either, because he disagrees with Paul Krugman. I guess, then, I would have to mention Tyler Cowen, who is the sole economist alive in America today whose opinion Walt disagrees with but still is allowed to speak with Walt’s respect.
These people are freshwater and saltwater, neoclassicists and behavioralists, Keynesians and monetarists. The reason that there was such a broad-based opposition to the Obama stimulus is because the stimulus was so poorly designed. As I’ve said all along, it was the equivalent of throwing money at the wall and just hoping some of it worked.
And of course, to the stimulus’ credit, some of it has worked. Aid to the states has proven more effective than previously predicted but, of course, many states are using stimulus money for short-term gain while exacerbating their long-term fiscal crises.
Additionally, as Walt said, the length of the downturn has provided a retort to the timeliness objection to this parcticular stimulus and to anti-stimulative efforts in general.
The stimulus has also proven less effective than predicted. In particular, infrastructure spending and projects that composed a great deal of stimulus spending have seen virtually zero effect on unemployment. Census spending has actively crowded out private efforts. Now these may not be terrible disasters, but they speak to the “throwing money at the wall” strategy and the general poor design of the whole endeavor.
Republican arguments about the stimulus not creating a single job are disingenuous. The stimulus has done some good. But it’s also been a big waste and actively harmful in a few cases. Almost a trillion dollars was spent. The bill will come due at some point. And while it’s our structural debt rather than massive one-time debt that is the bigger long-term problem, spending nearly 10% of GDP on one piece of legislation doesn’t help.
All of this measurement of the stimulus is largely moot because, at this point, we certainly don’t know what kind of effect the stimulus is having. It’ll be years before we know definitively what’s worked and what hasn’t worked. And maybe not even then (see: anti-Depression measures).
Now, as to the state of the macro community, it’s more correct to say that they’re divided but mostly in favor of some kind of stimulative action by the government when it comes to countering recessions. What I’ve just discussed is opposition to Obama’s stimulus, not general stimulative efforts. It would be correct to say that, for the most part, Mankiw-ian New Keynesians, Cowen-like behavioralists and even Sumnerian monetarists would be in favor of well-designed stimulus. That would leave the Becker neoclassicists and Kling-Mason schoolers as against it, which is a much smaller group of people.
However, to sum up, both of Brooks’ quotes were right.