Pau Krugman's austerity predictions aren't aging well.

jmotivator said:

Follow the argument, Jasper. Surealistik offered an article as a counter argument with the assertion that it was "much less partisan" than KLATTU's -- as if Surealistik's assurance carries any more weight than KLATTU's. Surrealistik's only argument to prove their source is less partisan than KLATTU's source was the use of sourcewatch.

So Surealistik made began with an ad hominem fallacy and then tried to prove their point by using sourcewatch, a website dedicated to supporting ad hominem fallacy.

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OK, whatever. Following that were a dozen points or more on the merits, so whether it's ad hominem to point out bias AND whether ad hominem in that case is illegitimate, because is not always illegitimate, is water under the bridge. I and others have addressed the merits of that article several times. If you want to engage on the MERITS, you can do so, but I don't care about your ad hominem obsession in this thread. If I'd read the thread before commenting I'd have ignored the points entirely.

Bottom line is IMO and based on the merits, the FEE article was bad for the reasons I've stated, and the ways it's bad is entirely consistent with them being a right libertarian think tank pushing their own agenda and in this case using at best incomplete if not intellectually dishonest arguments.

Renae said:

Obama's stimulus delayed recovery - POLITICO

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OK, the linked article above does not even argue what the headline promises. If you want to quote from the article any evidence that the stimulus DELAYED recovery, do it.

Why the ‘Obama Recovery’ Took So Long - WSJ

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That article is behind a paywall so I can't address it. If you want to quote from it, be my guest.

Access to this page has been denied.

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[/QUOTE]

Again, that article doesn't even attempt to prove your point. There is this bit:

In an executive summary, the report's authors note the economy's problems didn't start with President Obama, but they didn't end with him, either, as the media and White House frequently suggest. The study makes a devastating case that something has gone very wrong with the U.S. economy in the past 20 years or so.

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So, essentially starting at the end of the Clinton era, through Bush II and now Obama, growth per capita has slowed to a crawl. So how does that prove stimulus delayed the recovery? It doesn't.....

JasperL said:

OK, whatever. Following that were a dozen points or more on the merits, so whether it's ad hominem to point out bias AND whether ad hominem in that case is illegitimate, because is not always illegitimate, is water under the bridge. I and others have addressed the merits of that article several times. If you want to engage on the MERITS, you can do so, but I don't care about your ad hominem obsession in this thread. If I'd read the thread before commenting I'd have ignored the points entirely.

Bottom line is IMO and based on the merits, the FEE article was bad for the reasons I've stated, and the ways it's bad is entirely consistent with them being a right libertarian think tank pushing their own agenda and in this case using at best incomplete if not intellectually dishonest arguments.

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I was pointing out that Surealistik had derailed the discussion by trying to make a "My sources is less biased than your source" argument rather than actually arguing the points made by the two sources AND that Sourcewatch is Ad Hominem for lazy people, which it is. Everything written in Sourcewatch could be true and it would still be an invalid source in a debate because, by design, it is meant to shoot down arguments based on their source, rather than the merits of the argument presented.

jmotivator said:

I was pointing out that Surealistik had derailed the discussion by trying to make a "My sources is less biased than your source" argument rather than actually arguing the points made by the two sources AND that Sourcewatch is Ad Hominem for lazy people, which it is. Everything written in Sourcewatch could be true and it would still be an invalid source in a debate because, by design, it is meant to shoot down arguments based on their source, rather than the merits of the argument presented.

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Bull****. Your obsession with ad hominem derailed the thread. His very first post linked to an article that took on the FEE article on the merits, and you've done NOTHING in this thread but obsess about your flawed view of what is an ad hominem, and your bone headed opinion that it's always a logical fallacy. That might be a good thread topic, but this thread is about the FEE article and in general the merits of austerity versus monetary and fiscal expansion. You can't be bothered to make any merit-based argument. More than that, you've ignored, like you are with me, the merit based arguments I've made in favor of this stupid obsession of yours.

If you want to have the last word on your ad hominem, have at it, but I don't care to discuss it. I'd rather engage on the merits of this topic. If you don't want to or cannot do that, fine. I'll let you go your own way.

MTAtech said:

Let's all take the wayback machine to early 2009, when the WSJ, the Austrians, and the other usual suspects were screaming about soaring rates and runaway inflation. Those, like Krugman, who understood IS-LM [IS-LM stands for investment-savings, liquidity-money] were predicting that interest rates would stay low and that even a tripling of the monetary base would not be inflationary. Events since then have been a huge a vindication for the IS-LM types, including Krugman.

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Oh really? IS-LM, huh? That sounds suspiciously like ISLAM, because Krugman is one of those Obummer lovers and everybody knows Obummer's a secret Muzzie!


The above is pure preemptive strike sarcasm, and should not be taken seriously.

JasperL said:

Bull****. Your obsession with ad hominem derailed the thread...

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*sigh* Then why are you responding? :lamo

And no, the only exchange that KLATUU and Surealistik had had up to the point of my original post was on whose source was less biased. :roll:

jmotivator said:

*sigh* Then why are you responding? :lamo

And no, the only exchange that KLATUU and Surealistik had had up to the point of my original post was on whose source was less biased. :roll:

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So, do you think the FEE article proved the point it was intending to make? I thought it was hopelessly unpersuasive myself, with conclusions that the author had to know were intellectually at least incomplete if not outright dishonest.

KLATTU said:

Paul Krugman’s Predictions about “Austerity” Aren’t Aging Well - Foundation for Economic Education

But as Austerity’s authors show, in some cases austerity was expansionary. And, in large part, it happened for exactly the reason Krugman denigrated. Where austerity is based on spending cuts rather than tax increases, “private investment rises within 2 years,” and by the third year is above the previous level. Contra Krugman, Alesina, Favero, and Giavazzi attribute this to increased business confidence.

Britain, Krugman’s “demonstration that the Austerians had it wrong,” has, in fact, shown the opposite.

The Conservative government implemented a program of budget cuts. Over a 5-year period exogenous fixed measures amounted to almost three percent of GDP, two-thirds expenditure cuts, and one-third tax hikes. It was harshly criticized by the IMF, which predicted a major recession. The latter did not materialize and the IMF later publicly apologized. The UK grew at respectable rates.

comments welcome.

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Can you explain using your own words, and using the internet only to document your factual assertions that cutting domestic spending have benefited those in the lower half of the income distribution more than they would have benefited from expanding domestic spending and making the well to do pay for it with higher taxes? A rise in the gross domestic product can happen at the same time of increasing poverty.

Mycroft said:

Perhaps Krugman should return his Nobel Prize.

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First of all, this comment is out of context. Nobel Prizes are not awarded on the basis of everything someone does, but on specific elements of what someone has done and Krugman received the prize for his work on international trade, not for his work on business cycle theory. The man actually transformed how international trade is studied, basically extending the methods that were being implemented in the early 1980s to the more complicated case involving many countries. That is a very substantial achievement, irrespective of his later work on business cycle theory.

Second of all, this probably never occurred to anyone reading his columns, but Krugman's arguments actually make sense and actually do follow a lot of published works in top economic journals. He might be wrong to one degree or another, but those are not unsubstantiated partisan claims. He made them palatable for the public, but the arguments he made basically followed some of our best knowledge at the time he made them. All of the oddities he talked about between 2008 and 2012, you can find in a brilliant article by Eggertsson, published in 2011. It's neat because Eggertsson used a simplified model that allowed him to draw graphs, so anyone who understood econ 101 can get the gist of what he is saying, even if they have no idea how the math works.

Third of all, this is a very contentious problem in large part because it is hard to estimate the impact of increased expenditures. The problem, as with all empirical work using field data (as opposed to random trials), is that you need to make assumptions about how things work to pin down estimated effects. In most cases, more than one approach sounds reasonable and, when you are lucky, they all give roughly the same answer. It's not the case with the effect of government spending. Results seem quite sensitive to how you estimate the effects.

MTAtech said:

Events since then have been a huge a vindication for the IS-LM types, including Krugman. The last ten years are a complete vindication of Krugman and other Keynesians.

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If you are curious about how economists actually work nowadays and how we would approach the IS-LM model in particular, you might be interested in this post.

There are entire hosts of problems with the IS-LM model that make it an unworkable model. It doesn't take foresight seriously, it lacks a production sector and a labor market, etc. and, obviously, government spending doesn't materialize out of thin air. Something a professor of mine did for bachelor students was to combine the IS-LM model with a production sector, a labor market and make sure governments followed a budget. It still has a lot of problems, but you can at least then ask how well it fits the data. The problem is that your primary sources of cyclical behavior are monetary shocks and spending shocks and that is a HUGE problem. Why? Because it means the cyclical component of investment and consumption will move in opposite directions, though a robust feature of macroeconomic data in the US, as well as abroad is that this correlation is positive (that is the essence of the Barro King curse).

If you are curious, this problem also plagued many New Keynesian DSGE models, as well until the work of Ascari, Phaneuf, and Sims (2019). If people are curious about how well these model fit the data:
APS March 2019.pdf

On page 38, they show what we call a cross-correlogram. Essentially, you take variables (Y := GDP, C := consumption, I := Investment, L := Labor) and filter out the trend components. If I am not mistaken, in other words, they used growth rates. Once you have the data, you compute correlations of the type COR(Y(t), C(t-k)) with k=0,...,4, for example, meaning you'd like your model to not only be correct as to the sign of how Y and C move AT THE SAME TIME, you would like also the MAGNITUDE to be correct AND you would this to also be true for delayed values of C. You do it for all combinations of variables in the data. Then, because DSGE models are essentially a system of stochastic difference equations, you can simulate data. You simulate, say, a thousand history of exactly the same length as in the data. In each of them, you compute those statistics and then report the averages across your thousand runs as the model-implied values, or theoretical values. If your model is good, you should be close to the data.

So, what the figure shows is (1) a typical NK DSGE, (2) their NK DSGE (the benchmark) and (3) the data. Anyone who knows what is a correlation is more than knowledgeable enough to understand that figure and, if you do check it out, for the first time in your life you will have a real idea of how well up-to-date economic theory fits the data. The crux of the Barro-King curse is in the second line, third column: typical NK models understate those cross-correlations, specifically. What you can see in that figure is 100 correlations used to evaluate where the model does well and where it fails.

Dragonlady said:

The numbers show that this is the LONGEST sustained period of growth in American history.

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I already disputed this one elsewhere, but for the benefit of people here, if you take as given that recessions are correctly dated by the NBER, use some measure of real GDP growth like the one provided directly on FRED and define sustained recovery as how many quarters of positive growth you get after a recession, there are clear examples since 1947 where you get longer sustained growth -- and we probably could find longer periods still if we could go back further by merging old datasets.

Real Gross Domestic Product | FRED | St. Louis Fed

You can use the percentage change in the Edit Graph. To be fair, however, notwithstanding the two short blips below zero, it is a long period of growth. In other words, if by the growth you mean expansion as defined by the NBER, it is the longest on record since 1947. And for people who care about, you can get an idea of how at risk we are of entering into recession in real time:
DS_forecasts

Kotchoni and Stevanovic show in a paper that this model predicts recession rather well some ~3 quarters in advance and, that historically when you get a bowl shape for probability, you will get a recession in the US. The horizontal bar indicates the critical level for probabilities. So, it's possible that by the end of the year or early next year, the US economy will enter a recession.

Dragonlady said:

Now the same people who touted Obama's recovery as the "worst in history" are looking at the growth of the economy under Trump, wherein both GDP and employment are growing at a slower rate than it did under Obama, and pronouncing the economy as "roaring", and "the best in history" and giving all credit to Trump.

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We can check that using that same link. If you eyeball the quarterly real GDP growth rate, there seems to be a before and after the Great Recession, but not a before and after Trump. More to the point, until we get a few years after Donald Trump has left office, whether in 2020 or in 2024, it is ludicrous to expect that any difference you would get before and after Trump mean anything. Nobody here seems to know, but those numbers are estimates, in part because it requires filtering out seasonal patterns. As time goes forward, the last few points on that figure will be revised and some revisions can be very substantial, anywhere around a full standard error above or below what you see. So, the Trump figures of the most recent 4 or 5 quarters are not only just a few observations, they are a few unrealiable observations.

But if we take figures at face value, the high points under Trump are indeed lower than under Obama, as Dragonlady correctly pointed out. But, again, everyone involved in this dispute over a handful of figures under Trump and a handful of figures under Obama is probably just arguing over meaningless noise.

Dragonlady said:

And the guy who told ME that I need to take an economics class, asked how the country benefits by zero interest rates. REALLY????

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This discussion should be had in good faith, but it is particularly amusing that someone who probably took no more than one or two courses of economics at college or even in high school feel they can question your qualifications.