Un-Discourse Situations...

I can think of seven wedges between the national net savings-investment rate as estimated by the National Income and Product Accounts and statistical estimates of the change in total measured household net worth:

1. There is a gap between the rate of return on the average investment made in a year and the cost of capital, which means that $1 of savings on average produces more than $1 of value.
2. The NIPA may well understate corporate savings and investment by counting a bunch of investments in organizational form as corporate operating expenses.
3. All of us free-ride on technological research and development, reaping where we do not sow, gathering where we do not scatter, and profiting where we do not save and invest.
4. Shifts in the distribution of income away from labor and toward capital increase measured household net worth--which includes the increased expected future profits from capital--but not true household net worth--which also includes the decreased expected future wages of labor.
5. Declines in interest rates make the future more valuable relative to the present and so raise measured household net worth today--which is measured in today's dollars--without any outward shift in the true consumption-possibilities frontier.
6. Government deficits that raise the debt lower national savings but not measured household net worth.
7. Good news about the future produces windfall gains and bad news windfall losses which alter this year's household net worth without telling us much about over-all long-run accumulation trends.

I was sitting on the right end of an nine-person panel at the New School Friday morning http://www.cepa.newschool.edu/events/events_schwartz-lecture.htm#webcast. Bob Solow was sitting on the left end--Solow, Shapiro, Schwartz, Rohatyn, Kudlow, Kerrey, Kosterlitz, Hormats, DeLong. Bob Solow expressed concern and worry over the declines in the U.S. savings rate over the past generation. Larry Kudlow, in the middle of the panel, aggressively launched into a rant--about how the NIPA savings rate was wrong, about how the right savings rate was the change in household net worth, about how there was no potential problem with America saving too little, that the economy was strong, and that that day's employment report had been wonderful, and that Paul Krugman had predicted nine out of the last zero recessions, et cetera, et cetera, et cetera.

What is one to do? You watch a guy--Bob Solow--one of the smartest and most thoughtful people I know, having his intellectual impact neutralized by a guy--Kudlow--who really isn't in the intellectual inquiry business anymore. Kudlow clearly has not thought through the biases and gaps in the household net worth number: if he had, there is no way he could say what he is saying.

On paper, in print, on the screen, one can point out that the employment report was anemic--it was not a bloodletting by any means, but it was a bit disappointing. On paper, in print, on the screen, one can say that there is reason to worry about the decline in housing demand and the possibility that it might trigger a recession. On paper, in print, on the screen one can say that reasons (4), (5), and (6) pushing up measured household net worth are reasons to discount that statistic as misleading because they do not reflect any true increase in appropriately-defined wealth, that any increase in household net worth caused by (7) is a transitory phenomenon that tells us little about permanent saving and accumulation patterns, that (1) and (2) affect the level but not the trends of saving, and do not speak to Solow's worry about the savings-investment rate's decline, and thus that only reason (3)--the effects of the now decade-long computer-and-communications real investment boom on our total wealth--provides a reason to even begin to think about whether Bob Solow's worries about declining savings as measured by the NIPA are at all overblown.

But there are ninety minutes for a panel with nine people on it. To the audience it looks like two cocksure economists who disagree for incomprehensible reasons. And my ten minute share will come too late to try to referee Solow-Kudlow in any fair, balanced, and effective way.

It's an un-discourse situation: Kudlow doesn't acknowledge--may not know--the flaws in his chosen statistic. And I can't help wonder what Kudlow would be saying if a Democrat were president.

It's an intellectual Gresham's Law in action...

What can I do? I can blog about it.

Comments

[Robert Waldmann]

Brilliant list there. With the benefit of your list, I think the 10 minute demolition of Kudlow must focus on point 6, government bonds are not net wealth and yet are counted in household net worth.

You don't have to argue whether they cause a decline in national savings and no change in household net worth or whether they have no effect on national savings (since everyone but Kudlow understands that they are not net wealth) but cause household net worth to increase.

That is, you can point out that Solow is talking aobut national savings, Kudlow is talking about household wealth and to compare with Solow he has to include public wealth, that is minus the national debt. Then note that more bonds don't make us richer so the increase is US household's holdings of Treasury securities is not reassuring.

Now this is not the biggest issue (the increase in the value of stock and what are we to make of it is bigger). It does however show that Kudlow is totally ignorant of the first weeks lectures of any macroeconomics course.

Odd that you seem to think that Solow might not have considered the possibility of improved technology which people can use without paying for it. I think that used to be called disembodied technological progress, but most people I know call it Solow's residual (I don't but don't let me waste any of your 10 minutes running down that Hall).

[Joe S.]

"What can I do? I can blog about it."

If you Solow, Shapiro, Schwartz, Rohatyn, Kerry, Kosterlitz, and Hormats did not show up for a panel with Larry Kudlow on it, this kind of crap would be a lot less likely to happen.

In the law business, I see it all the time. The Federalists put on a panel with one lefty, a few centrists, a few conservatives, and a raving nutbag. Who wins the debate? Who cares? The nutbag is always legitimated by being there. And that's the point of the debate.

[jerry]

I used to go to hour long panels, in which 20 minutes were devoted to the speakers, and 40 minutes were devoted to Q&A.

Now it seems most panels are 55 minutes devoted to the speaker, with time for one question.

This exacerbates the problem.

And, while I know ahead of time the various speakers points of view, the value of the panel is not having them pontificate with each other, the value is in having people more knowledgeable than I asking them good questions and seeing their on the spot answers.

If you had ten minutes out of ninety on a nine member panel, than the panel's value was lost before it even began.

Did you really have something to say in ten minutes that could not have been said in five?

If Q&A on your panel had not been 0 minutes, but had been 45 minutes, what would have happened to Kudlow's position?

[Bruce Bartlett]

When you saw that the organizers had stupidly put too many people on the panel, you should have refused to participate. You should have also asked who else was invited. When you saw that they had invited some whom you view as having insufficient stature to particpate, you should have refused to participate. If more scholars did this, conference organizers and talk show producers might improve the quality of such events.

[Bernard Yomtov]

"If more scholars did this, conference organizers and talk show producers might improve the quality of such events."

Well, conference organizers anyway.

[Brad DeLong]

And leave Solow without a wingman? Admittedly Bob Shapiro played that role rather well...

Brad

[Matt]

The libertarian "Social Philosophy and Policy Center" at Bowling Green state university does something similar, inviting a diversity of top scholars to interesting, well-financed conferences twice a year. The procedings are then (twice- once in journal, once in book) form published by Oxford university press. The real purpose, though, is to provide nice looking publication space for their libertarian friends who otherwise wouldn't get the garbage they write published anywhere so nice.

[BillS]

Apparently you forgot a most important rule: Never argue with a crazy person. Outsiders may not be able to tell who's who.

[KAZ]

What an anti-intellectual culture...anyone who complains about /who/ is on a panel, that some perspective should have been shunned, et cetera, instead of expecting that truth will win out over fallacy in any fair fight, has some kind of problem with his own philosophy, or perhaps the stances he finds indefensible when in the company he wishes shunned.

[Did you read what I wrote? In fair argument, Solow wins. He's that good and that self-critical.]

[Randolph Fritz]

"What can I do? I can blog about it."

Sigh. My sympathies. & here I thought...I suppose I didn't think; it's the classic net.argument failure at the academic level. The only real solution is fair moderation.

[Alex]

Couldn't these panels and events have rebuttal times, so that the panelists may challange assertons made by others on the panel, which they think are inaccurate or wrong?

[Brenda Rosser]

"All of us free-ride on technological research and development, reaping where we do not sow and profiting where we do not save and invest."

How can so-called professional economists get away with this simplistic one-sided balance sheet accounting?

Technological development has given us uranium -based weapons and other forms of radioactive waste dispersion, percholate contamination of ground water in 25 US states, widespread global pesticide contamination of waterways, rising CO2 and global warming, huge ocean dead zones, over-fishing, climate change, the threat of nuclear Armageddon...

Talk about statistics that mislead "because they do not reflect any true increase in appropriately-defined wealth." Hah!

[Mike]

"What is one to do?"

Here's a simple answer: Get the names of the panelists before showing up and stop agreeing to appear on panels with Kudlow on it . . .

[James Killus]

Sigh. The truly unfortunate thing about that list is that Kudlow is probably the big draw, because he's on television.

I wonder what would happen if everybody simply started telling the truth. "Hey, Kudlow! Everybody on this panel knows that you're an ignorant raving nutbag, but we're usually too polite to mention it."

I know, then you're rude. Still, I've been feeling kinda rude lately.

[RonK, Seattle]

In my (repeatedly interrupted) look at the exchange, it did not appear that Kudlow understood the distinction between real capital and financial (token) capital.

And without that 101 concept in hand, one should not go on warp-speed expeditions into the uncharted realms of cold, dark capital.

[bad Jim]

Given the general approbation greeting the Democratic candidates' decision to forego a debate sponsored by Fox News, the idea of deligitimating Kudlow by declining to join any panel including him seems reasonable, even mandatory. The star quality of the rest of the panel argues otherwise, though.

I fear that our host may not be the best choice to bat clean-up. I had to read his not entirely verbatim reiteration of this post in his comment at Political Animal before I got the point of a couple of them, and I suspect that the ones that remain murky are not actually all that obscure.

The optimal panelist in such company would not be a thoughtful analyst but a polemicist, a stentorian bombthrower with a pocketful of bumper stickers.

(FWIW, #4 is the one that feels like a kick in the head.)

[John Emerson]

I'm a raving nutbag myself, but an anti-Kudlow nutbag, so I don't get on TV.

To a substantial degree now, the conservative tradition is an oral tradition. If it sounds good it's true, if the speaker seems like a nice guy what he says is true, and anything that can't be destroyed with a zinger is true, whereas anything that can is false. It's worst on the TV talk shows, but it's pretty pervasive.

The oral tradition is a thing of the moment, and most people don't bother to check what's said today against what the same person said a year or two ago. (Atrios does that and monitors the endless production of 6-month Friedman units, but many more people read Freidman than read Atrios. DeLong tracks Kudlow, but Kudlow has many more readers than DeLong.

As always, management control of the free and cheap media is the problem. Decades ago the money people and right ideologues decided to gain control of public discussion, and they succeeded.

[Cranky Observer]

> Kudlow clearly has not thought through the
> biases and gaps in the household net worth
> number: if he had, there is no way he could
> say what he is saying.

I suspect you may be granting good faith where no good faith is due. That speaks well of you, but does lead to some other problems as you observed.

Cranky

[Rob]

I'd go on the panel, just as long as Kudlow has to sit in front of the disclaimer:

"I am not an economist but I play one on TV"

[Matt]

I know several economists on the Street who refuse to be on Kudlow's show. You and Solow should also have refused to be on any panel on which he also sits. Your presence confers a legitimacy he doesn't merit.

[bakho]

Delete the trolls
That goes double for debating.
Don't debate them. Simply state that Kudlow obviously does not know what he is talking about and everyone that know anything does not take him seriously. Praise Solow, then move on to your own points. Don't debate, delete.

If the majority of the panel would pile on Kudlow, it would send a message, "Kudlow is an idiot."

[Bruce Bartlett]

I don't know who this crackpot Julia Glifford is, and perhaps she is trying to make a sick joke. But Larry Kudlow is not Jewish. He is a card-carrying Catholic.

[Ponzi Q. Globalization]

I guess shouting your opponents down or ignoring them or heaping derision on them are some tactics that one can take. However, these are not the types of tactics one should take if one wants to promote the ideals of an open society.

I think a better way would be to engage your opponents, question their command of the data, their assumptions, etc. and, if your position is strong, you will tie your opponents up in knots for all to see.

Now I do agree that if a forum doesn't allow for the back and forth that this requires then it's better to not participate.

P.S. If you want a melancholy laugh or two, then read some of Kudlow's NRO articles that appeared prior to our 03/2003 use of state violence to increase our control over Middle Eastern oil resources. As someone said above, not enough checking is done on the accuracy of the predictions of public 'intellectuals'.

[anne]

Imagine stereotyping and mistaking people by ethnicity, and both at once.

[jerry]

Julia Glifford, in her way, points us to how one can deal with hate speech.

If you google Julia Glifford, you'll find out she has been on many forums, making anti-semitic remarks.

Now, if Brad deletes her comment, then Bruce Bartlett cannot google her name to find out that she is indeed a crackpot, and not making a sick joke.

A better solution in the case of hate speech is not to delete it, but to move her comment with her name to a "wall of shame / hate speech page" so that Google can find it.

There are ways technology can help with the troll problem, but Brad would have to convince typepad to support him. But I bet the problem is not Brad's alone.

Hate speech should be moved to a wall of shame.

Spam should be deleted and the IPs placed under consideration for a two week block list. If enough type pad users vote a certain ip for spamming, the IP should be placed blocked for two weeks.

True trolls, (those just seeking to bait others, not those that dissent) should have their posts hidden to everyone else, and visible only to themselves (via cookies.) Think what happens to a troll when her post is visible, but no one responds to the bait...

Others seem to be part of a legitimate conversation....

[jerry]

Not that it matters, but wikiality suggests that Larry Kudlow is a Roman Catholic in the same way that Robert Novak is a Roman Catholic.

And they can have him.

And that's the truth. thbbbt.

[bakho]

A forum is not an open conversation. It should be closed precisely to exclude comments that are unreasoned, irrelevant or misleading. To try to discuss everything is as pointless as discussing nothing.

Imagine a panel discussion of string theory. The panel consists of 4 physicists and a clown. The clown uses the 10 minutes to crack jokes and make up things that sound plausible but are just plain wrong.

The other physicists should:

A) Spend the entire 10 minutes trying to debunk the non-sense spewed by the clown?

B) Acknowledge that the clown is indeed a clown. State that everyone who knows anything about string theory does not take the clown seriously. Praise the other panelists who are offering reasoned veiwpoints. Then move on to the important expertise the panelist can add to the conversation for the other 9 1/2 minutes.

[andres]

bakho: Unfortunately, option (B) will, in the eyes of the uninformed, make the non-clowns sound like elitist snobs who take offense at any intrusion in their private monopoly, so option (A) is the only viable one, even if it makes the entire panel unproductive. Better a net welfare gain of zero than a net welfare loss when people like Kudlow are dignified by being given the snob treatment.

For that reason, Brad and the others should have insisted that they would not participate in the panel unless they were given additional rebuttal time. If this means the panel has to have fewer participants, so be it.

[kharris]

Ponzi,

The situation you describe is the dream many of us cherish, but we know that the study of rhetoric was included in the academy precisely to keep that dream from coming true. Think of what you have seen. When the guy with the facts gets going, the other guy starts interrupting to keep the facts from being heard. When the guy with the science starts to roll out the studies, the other guy starts saying things like "and we all know how reliable those studies are - I can round up plenty of studies that find just the opposite." To a winner-take-all debater, one study is as good as another, even if one of the studies was never actually done. Watch the bad guy dance away from his own prior statement, embracing a similar sounding statement that hasn't been dented yet.

I'd love it if the better argument had a good chance of prevailing without help, but I don't see the evidence. We need a culture that gives a good argument a fair chance. That culture would include ostracizing guys like the Kud.

[Bernard Yomtov]

Wouldn't #6 to some degree be the mirror of #5? That is, wouldn't deficit increases raise interest rates, thereby in fact reducing measured household wealth along with national savings?

[plb]

You mean Krugman *hasn't* predicted 9 of the last 0 recessions?

Sheesh, I've heard that more times than I can count from the wingnuts now. They must've all gotten it from the same memo.

But at least Kudlow has lost the long greased-back hair, bow-tie and suspender look. What an act that was back in the 80's.

[Measure for Measure]

"On paper, in print, on the screen, one can point out..."

Yes. But for some reason this reader finds your argument incomprehensible *on screen*.

If I really want to understand something, I have to study it on paper. On my computer screen, I can only skim.

(Good news for HP, I suppose).

[Hackticus]

"Imagine a panel discussion of string theory. The panel consists of 4 physicists and a clown. The clown uses the 10 minutes to crack jokes and make up things that sound plausible but are just plain wrong."

I think I've seen that panel discussion. If memory serves the clown was an assistant professor at Harvard.

[Ponzi Q. Globalization]

"Brad and the others should have insisted that they would not participate in the panel unless they were given additional rebuttal time."

This is the correct way to handle things. Kudlow brings in the people. You can't get rid of him. But given an adequate amount of rebuttal time *and* a good moderator what's a Kudlow to do? Look like a fool probably.

[Ponzi Q. Globalization]

"I'd love it if the better argument had a good chance of prevailing without help, but I don't see the evidence. We need a culture that gives a good argument a fair chance."

Two things to do that I think would help are: (1) stop treating political discussions like a sporting event where you pick a side and root root root for your team and (2) throw all overarching ideologies out the window.

Does anyone believe that treating politics like sports fosters a culture where "good argument is given a fair chance"?

On the second point. Too many intellectuals spend too much of their time trying to prop up their current ideological framework instead of trying to understand reality better. Why do simplified abstractions of reality command such devotion anyway?

[Gerard MacDonell]

Robert, the idea that government debt is not net worth is elegant but perhaps too reductionist. Rather than excluding government debt securities from net worth, I think it is better to include those as assets of the household sector but to recognize that the government debt itself is ultimately our liability. This raises two interesting questions that might be overlooked if you took the more reductionist approach.

First, who is ulimately responsible for the liability? Is it me, my kid or an immigrant? And how much should/do I care? I don't buy that the bequest motive makes this issue dissolve. Not that you imply so.

Secondly, how might the real value of these liabiities change? If our liabilities are mostly China's assets then maybe we figure out a way to make their real value lower. Or maybe we view them as collateral protecting our direct investments in China, as the BWII guys have argued. In that case, the liability raises the value of the protected asset and is properly viewed as net worth.

I don't know, but it seems that there are relevant questions and that they are overlooked if you take the purist approach and say that government debt just doesn't count.

Dr. Delong, I would add to your list that durables net consumption is typically lower than purchases of durables. I don't know how important that is, but I have heard it mentioned and I know the Flow of Funds report tries to quantify it.

I wonder if the credibility accorded guys like Kudlow is partly the fault of these brilliant academics. When discussing the low national saving rate, they have tended to make very strong claims, which perhaps extend a bit beyond what is really appropriate from cautious scientists. Compared to buffoons like Kudlow, they have been more polite, more eloquent, more rigorous and more persistently wrong about the implications for the future.

Perhaps the future has simply not arrived yet. But I cannot remember a time when we were not supposed to be worried about national savings, except maybe briefly at the height of the bubble.

If you repeatedly and confidently insist that calamity follows from 2 and 2 being 4, then the public may eventually be willing to listen to the guy who claims we are safe because the sum is 3.

[Pope Benedict XL]

If any other denomination or tradition would like to claim Kudlow or Novak we would be happy to see them go.

[roublen]

There was a great comment by Kagro X at Ezra's blog about how to tell the difference between intelligent design science and the real thing. In a 10 minute debate setting, or a 700 word oped setting, it's impossible, or very difficult, for the unitiated to tell the difference. In a lab setting, however, it becomes a little easier:

ID scientist: Wow, the arms on this octopus are soo complex. . .They could never have evolved on their own, defies explanation. . .let's have lunch.

[random]

Well, yes, one could ignore Kudlow -- but in this case he's simply echoing the ideas of David Malpass, who is the Chief Economist at Bear Stearns and frequently testifies before Congress. So these ideas can have real-world consequences...