Mike Konczal: What Would the "Financial Instability" Argument Look Like For Any Other Industry?: "It’s becoming a surprisingly influential argument given that it hasn’t been well presented or argued, much less vetted and challenged. What is it? The argument that we should raise interest rates or otherwise contract monetary policy in order to preserve 'financial stability'…. Let’s be clear on the terms: should we risk another immediate recession ('lower employment and prices') to preserve a thing called 'financial stability'?… Now if I told you we should keep the economy in a permanent recession because senior managers at insurance companies aren’t good at their basic job of monitoring mid-level portfolio managers you’d probably think I was crazy. And I would be…. If we need to make the financial system less complex and prone to abusive practices, requiring parties of a derivatives contract to hold a stake in the underlying asset would do a lot. Are we worried about contagion? In that case, force banks to hold more capital as well as convertible instruments. About bad debts holding back the economy? Then reform the bankruptcy code, dropping the 2005 'reforms'. Some people are demanding more jail sentences, not only for the benefit of the public but for boards and shareholders who can’t keep their workers in line…. It’s hard not to read the financial stability arguments as saying 'look, we can’t trust the financial sector to accomplish its most basic goals'. If true, that’s a very significant problem that should cause everyone a lot of concern. It should make us ask why we even have a financial system if we can’t expect it to function, or function only by putting the entire economy at risk."
Matthew C. Klein: In the Long Run, Niall Ferguson, Keynes Was Right: "It's intellectually immature to critique an idea by going after the person who came up with it, rather than the logic of the idea itself. That didn't stop Niall Ferguson, a distinguished Harvard historian, from implying that Keynesian economics could be explained by Keynes's homosexuality and lack of children…. Regrettably, Ferguson isn't the only person to suggest that Keynes's analysis should be discounted because of his personal qualities. In 2008, N. Gregory Mankiw, the chairman of the Harvard economics department (and a senior adviser to President George W. Bush and Mitt Romney), wrote that 'passing a larger national debt to the next generation may look attractive to those without children' before going on to note that 'Keynes himself was childless'. First off, it's important to note that both Mankiw and Ferguson misrepresent what Keynes actually meant when he said that 'in the long run we are all dead'…"
John Sides: Why the “Permission Structure” Makes Obama Smart (and Too Many Pundits Dumb) | Austin Frakt: Limitations: The Achilles Heel of Single Study Relevance | Tim Duy: Rising Structural Unemployment? | John Maynard Keynes: A treatise on money, v.1 1930 A treatise on money, v.2 1930 |
Joe Weisenthal: Niall Ferguson's Bad Track Record On Economics: "Ferguson was trying to cleverly equate Keynes' famous line 'in the long run we're all dead' to a mentality which doesn't care about the future, due to lack of offspring. Of course, that Keynes line is taken out of context… Keynes clearly thought about the long term… it's just straight up offensive to say that being gay is incompatible with long-term thinking…. Ferguson has self-immolated a number of times trying to fight an anti-Keynesian battle…. His most spectacularly incorrect call came in in the Summer of 2009, when he took a victory lap, proclaiming that since interest rates were rising, he was correct that the bond vigilantes were rebelling against the large stimulus and historic deficits…. Then in May 2011 he wrote for The Daily Beast about 'The Great Inflation Of The 2010s'. He actually said in the piece: 'Yes, folks, double-digit inflation is back. Pretty soon you’ll be able to figure out the real inflation rate just by moving the decimal point in the core CPI one place to the right'…. In February 2010 he predicted a Greek crisis was coming to America…. And in June 2009, he predicted a painful conflict (imminently) between monetary and fiscal policy…. Meanwhile in more timely silliness, here's a video (via Mike Konczal) in which Niall Ferguson calls it a 'law of finance' that when debt passed 90% of GDP, growth slows precipitously…. The crisis and post-crisis period has been characterized by him railing against the Keynesian establishment, and impaling himself at every turn."
Paul Krugman: There's Something About Maynard: "The remarkable way in which the Great Recession, by bringing us back into a world of persistent inadequate demand, has unleashed a sort of reign of error among anti-Keynesian economists and pundits… people with serious reputations…. Oh, and by 'error' I don’t mean 'views I disagree with'; I mean raw conceptual or empirical banana-peel episodes, the kind of thing that defenders of these men (who have a lot of defenders) try to justify not by claiming that they were right, but by claiming that they didn’t say what they did, in fact, say…. 1. Robert Barro pointing to the decline in private spending during World War II as evidence that multipliers are small, somehow forgetting rationing and all that. 2. John Cochrane and Eugene Fama confusing accounting identities with causal relationships, and reinventing the Say’s Law fallacy. 3. Robert Lucas misunderstanding Ricardian equivalence. 4. Robert Samuelson and Olli Rehn asserting that Keynes wouldn’t have been a Keynesian given current debt levels, without checking actual British debt in the 1930s (which was much higher than debt now). 5. John Taylor equating Fed policy to hold down interest rates with a price ceiling on, say, apartment rents. And I’m sure I’m missing others. So, if I were Ferguson I guess I’d have to seek some kind of psychosexual explanation here. I would note that none of these guys has a beard. Masculinity issues? Anyway, it’s quite remarkable."