Noted for Your Morning Procrastination on February 6, 2014
Noted for Your Evening Procrastination for February 6, 2014

Chris House: All Opinions of Shape of Earth Are Nutty: Does This Qualify as Thursday Idiocy?: Yes, I Conclude That It Does...

The University of Michigan's Chris House appears to suffer from the searching-for-false-balance disease.

It's not a big deal.

But it is a neat, clean, and comprehensible example of the damage done by the opinions-of-shape-of-earth-differ disease that Chris House and many others have: the net effect is to excuse the bad faith, ideological partisanship, and failure to do their homework on the part of those working to degrade the quality of our public sphere--and to aid in the drip-drip-drip eroding-away at the influence of those working hard to improve it. Not good. Not good...

Chris House: The Wisdom of Laureates: "Ed Prescott... [has the] most people talking...

is quoted as saying:

It is an established scientific fact that monetary policy has had virtually no effect on output and employment in the U.S. since the formation of the Fed....

Prescott is wrong.  It is NOT an established fact the monetary policy has no effect on economic activity.  The balance of the evidence suggests the opposite.  Monetary policy seems to have clear measurable effects on the economy....

Should we grant Ed Prescott, or Paul Krugman, or Robert Lucas, or Peter Diamond much more credence than other smart observers?... Nobel Prize winners have typically devoted their entire careers to a rather narrow study of a particular area.... They are also often radical thinkers.... Academics are rewarded... for having path-breaking ideas.... An academic who has one or two... might well be viewed as... worthy of a Nobel, even if most of their ideas are crazy.... The price we pay for having unusual insights might be that we often have unorthodox approaches.... Prescott didn’t win the Nobel Prize for having a balanced assessment.... This isn’t limited to Prescott. Even Paul Krugman has been known to say some rather nutty things at times.

OK.

The biggest bit that is idiocy is the claim that Nobel Prize winners in general are prone to say "rather nutty things" because saying such is closely linked to what makes them Nobel Prize-caliber. Prescott says nutty things--very nutty things, hugely nutty things, completely nutty things--about what is supposed to be the core area of his expert knowledge on a regular basis. But Krugman? Diamond? Lucas might come within two orders of magnitude of Prescott, but not one (or, if every one, only very rarely). And I see whatever wrong things Krugman and Diamond says as at least three orders of magnitude less than Prescott on the nuttiness scale.

So I (and others) asked Chris House where his ideas were coming from: what evidence made him generalize from Prescott; to the quartet of Prescott, Lucas, Krugman, and Diamond; and then to the quartet of Nobel Prize winners in general?

The conversation did not go terribly well. Samples:

richardhserlin: “Even Paul Krugman has been known to say some rather nutty things at times.” Like what?... Even though there are some things I don’t totally agree with, or am not totally convinced of. Krugman’s logic and evidence are typically very strong.... If you think otherwise, you would definitely be doing a service to articulate why clearly....

Brad DeLong: What nutty thing that Paul Krugman said are you thinking of here?...

Chris House: Do you really need an example of this?

Kevin Donoghue: Is it really too much to ask? If nothing else, it would give your readers some idea of your criteria for nuttiness. For example, maybe you think that calling Paul Ryan a flim-flam man is Prescott-level lunacy. I wouldn’t agree but at least your response tells us something....

Brad DeLong: Well, yes. I have been racking my brain trying to think of anything Paul Krugman has said that comes within two orders of magnitude of Prescott’s nuttiness. I am coming up blank. But you must be thinking of something, or you wouldn’t equate the two as nutty Nobel Laureates and say: “when we listen to people like Prescott and Krugman we have to remember that we are drawing on the opinions of a very unusual group.” What are you thinking of?

Fred Schwed: Here’s why you’re getting such pushback on this. You make a good point about how Nobel Prize winners are not universal experts about everything. Ed Prescott is a great example of this. But then, in a reflexive effort to equally denigrate both the right and the left, you call Paul Krugman nutty as well. It’s just one more example of false equivalence, in which “balanced” commentators pretend that both sides are the same, when it’s clear to anyone paying attention that the right has more nutcases, in higher positions, with broader support from their side, than the left....

PZ: Krugmans constant calls for (more) quantitative easing are nuttiness. In fact, Einsteins said that doing the same thing over and over again while expecting different results are craziness. QE has been tried for two decades now, starting from Japan, but it hasn’t worked. QE1. QE2. QE3, big QE, “big bazooka”. And still, they are planning to do more (ECB). Why, may I ask? Meanwhile, in his last published book about economic frauds (The Economics of Innocent Fraud: Truth For Our Time) , revered John Kenneth Galbraith named belief that monetary policy can affect millions of private spending decisions our MOST cherished form of self-deception. So in his book about economic frauds this was the most profound of them all. So in this issue prescott and galbraith agree and I think there are many others. Maybe it is not that cracy after all?

Chris House: I’m not sure I want to rank statements in order of nuttiness. Perhaps Prescott is on the more extreme end and more prone to making really outlandish statements, I’m not sure. In fact, I’m sure there are some Nobel winners who are quite reserved (Sims and Sargent strike me as very understated for instance). The main point of the post is to raise awareness that Nobel winners are a very special selection from the set of potential experts. See the comment below on the “God Complex” as well.…

Brad DeLong: So now you are saying that your major point is that Peter Diamond is more likely to say nutty statements than other potential economic experts? I can’t say you are getting any clearer…

John Soriano: As I only have a BA and am starting graduate school next year, I’m probably not qualified to unequivocally call these nutty statements by Krugman, but here are two candidates: http://mobile.nytimes.com/blogs/krugman/2013/06/26/aggregate-supply-aggregate-demand-and-coal/ An accomplished microeconomist who has done research on energy told me PK’s assertion that raising energy costs could possibly have positive effects on production and employment was “very sad”. http://www.themoneyillusion.com/?p=22875 Sumner (his Bentley faculty page says that in addition to monetary policy, he specializes in history of economic thought) said his assertion that decades from now Milton Friedman will be regarded by economic thought historians as “little more than extended footnote,” was the silliest thing he’d ever heard Krugman say. Both these examples, if they are truly stupid, would seem to be driven by his ideological priors....

My reading of Chris is that we tend to assign a higher intellectual authority to Nobel Laureates.... Since they obviously have world-class intelligence, their “wrong arguments” are likely to be better formed than those of others.... They are likely to be independent thinkers who are supremely confident in their opinions and are unafraid to delve into areas were they do not have the very highest level of expertise and challenge the conventional thinking there as well, which could sometimes lead to them to making a bad argument. What Chris is saying is that Paul’s otherworldly expertise in trade theory doesn’t necessarily make his opinion on, say, the minimum wage more well thought out on someone who hasn’t won a Nobel, but also has someone who is also extremely intelligent and accomplished like Alan Krueger. I don’t think Krugman needs to have made many arguments as bad Prescott’s (or a conspiracy theorist chess master) in order for Chris’s thesis to be true. Of course, another factor could be that since Krugman’s arguments are more visible and scrutinized and therefore when he makes a bad one it is noticed more....

Chris House: John Soriano @ 1:46 — very nice assessment....

rena stone: Ummmm, you still have pointed to a single thing Krugman has said that is “nutty.”....

Chris House: This isn’t really what I mean. Brilliance is no guarantee against being dead wrong. If Nobelist A says something that’s wrong then you shouldn’t believe the statement (even thought it came from a Nobel Prize winner). It doesn’t mean that other things Nobelist A says are wrong though.

Anthony van Dalen: This seems to be one of the most unnecessary points ever made and is perhaps why people are mostly ignoring it to talk about Krugman. In the internet age where all it takes is a computer to start making public pronouncements (hey, no cracks!) does anybody believe anything just because of who says it? Far more common is the reverse, where someone begs to be taken more seriously because of their credentials or take their opponents less seriously because they are lacking. House does do a bit of a reverse flip here where one is not only supposed believe everything a Nobelist tells you, but to discount it as less valuable than normal. I think he misses what is going on here. Kugman gets a lot of followers not because the the letters after his name or accolades but because he articulates a point of view many people already believed but was under-expressed. If somebody is too quick to believe something Krugman or some other smart guy says it is because it is something they want to believe. I think it plausible that anti-credentialism, where people give no credit to any level of expertise, is more of a problem than credentialism, or Nobelism....

Brad DeLong: But wouldn’t that be a different post? There’s a post that says: “Prescott says nutty things. But you would expect Nobel Prize winners to say nutty things.” Instead we have a column that says “Prescott, Krugman, Lucas, and Diamond are all prone to say nutty things.” But where do Krugman, Lucas, and Diamond come from?...

Steve Williamson: I don’t see anyone suggesting we should ask Ed about how to do monetary policy. I certainly wouldn’t. Just engage your Ed filter, listen to what he says, and you can learn something.

Noah Smith: How many NYT readers have an “Ed filter”? When you make your remarks to the popular press, the game changes....

Steve Williamson: Thought I was done, but here’s #3. It’s clear that there are some academics who should not be let out of the nuthouse. Confining attention to Nobel laureates, it’s fair to say, as you do, that we shouldn’t let Ed or Paul run anything, and I think they both understand that, fortunately. In a more contentious case, I think that Peter Diamond would not have been an effective Fed Governor. Stan Fischer will be. I’ve seen Lucas in a room talking about policy, and he’s very down to earth and sensible. It really depends. I think some of us drift into this line of work because we’re not fit for anything else....

richardhserlin: Another important point: I think what we’re seeing here, in part, is the tremendous incentive to state false equivalence. There’s just, unfortunately, so much incentive to not be fully truth based and instead have “Balance” and be “in the middle”. There’s just such a strong incentive to profess false equivalence – both sides do it – even though one side does it 100 times as badly. This is obviously a profoundly harmful phenomenon in traditional journalism. With the internet, there’s been an amazing revolution, with a great move toward truth-based, non-misleading, intelligent expert journalism, which I think over the long run will make our country much better. But, still, we have to try hard to resist the temptation to sacrifice truth and non-misleading to look more “Balanced”, and to have false equivalence. Sorry to be so critical. I do, overall, really like your blog so far. And we really do need more accomplished mainstream macroeconomists blogging, to hear that view and explanation....

Andrew Burton: First: Paul Krugman has already posted a response which essentially agrees with Chris House’s main argument: arguing from authority isn’t much of an argument. See http://krugman.blogs.nytimes.com/2014/01/31/i-am-not-a-wise-man/ But I’m disappointed that Chris didn’t man up in comments in response to Brad DeLong’s and Richard Serlin’s requests – which observations of Krugman’s were you thinking of at the time you wrote “Even Paul Krugman has been known to say some rather nutty things at times.” If Chris didn’t have some clear examples in mind, a graceful apology and retreat might be in order....

Anonne: Krugman being supposedly nutty is something ‘everyone knows’ if you watch Fox News or read the WSJ, people whos livelihood depend on obfuscating honest reasoning. The things that some people might consider nutty (e.g. the platinum coin, as I think might be one example, or the alien invasion) are not really nutty if you strip away the outrage and look at the logic behind it. There is a basis in law for the platinum coin, however controversial that basis is. And the alien invasion statements demonstrate a point that some people would still disagree with (the broken window metaphor). I still think it is false equivalence to say that Krugman says anything that is truly nutty....

Rosemary: I’m still waiting for a real response to Brad DeLong’s question about evidence that demonstrates Paul Krugman says “nutty things” sometimes. I’ve been reading Krugman since before he was at the Times, and I’ve never read anything nutty. I might not agree with every point he makes, but that doesn’t constitute “nutty”. Obviously, there is no proof and Mr. House just spouted out a false equivalence. Too bad; makes him just like others who wanted to be “balanced”....

Antiderivative: It seems like Brad Delong likes this blog. He will go down in history by being a blowhard, a neoliberal, and then someone who sucks off Krugman....

Noah Smith: I think you’ll find that almost anyone, when (s)he writes a blog or articles in the popular press, occasionally says some nutty things. It’s the nature of the beast – you write stuff while you’re tired or grumpy, you aim at one audience and your post gets read the wrong way by another, you just don’t realize how something sounds the first time you write it, etc. etc....

Sasha Cooke: It’s clear that Chris House isn’t going to risk offering a example of a “nutty” Krugman idea. He had a simple thesis- that men acknowledged expert in one area might be accorded too much respect in others, but tried to wholesale the idea to all political stripes with a false equivalence. Krugman may be strongest on trade, but I’ve yet to see an argument of his for which he fails to offer clear empirical and logical evidence. That’s not to say he’s invariably right, but if House is going to call him “nutty” he should show how at least one or two of Krugman’s argumets can be easily refuted on empirical or logical grounds. Otherwise it’s clear that House is taking sides while pretending to be even-handed. Still, the fact remains that he’s onto a phenomenon that does exist. James Watson was a co-discoverer of DNA, and is on record saying hilariously goofy things about inherited intelligence. There are plenty of people of racist bent who listen to him and say,”He’s got a Nobel in the genetics field, so he must know something about heredity.”...

AlanDownunder: Chris. Just apologise for the false equivalence, say ‘lesson learned’, and mean it. You are not old media with commercial imperatives to be all things to all people, hence advertisers. Your Internet imperative is to gain a reputation for avoiding false equivalence. I might have bookmarked you if you weren’t pathetically pretending to be ‘balanced’. My No.1 Internet filter is honesty and you don’t honestly think that Krugman has ever descended into nuttiness. ps You had a point. Pity you obscured it....

Sasha Cooke: Chris, The reason so many people are impassioned about “a single sentence” is not their worship of Krugman. Conservatives and the Republican party these days have become violently anti-science and anti-empirical. Their constant use of false equivalences or outright nonsense is, from the point of view of non-conservatives, the means they use to cover up the weaknesses in their position. Thus evolution is a “theory”, there’s a “debate” in the scientific community about global warming, Ted Cruz and Al Franken are similarly silly. The argument that Obama is an anti-colonial socialist influenced by the Mau Mau (never mind that his father was Luo, and had nothing to do with the Mau Mau, an almost entirely Kikuyu and in no way socialist movement, and his grandfather was fairly collaborationist) suggests that Democrats are somehow as extreme as Republicans. Your single sentence seems to fit right into this pattern- never mind the rest of your position. “Prescott can be nutty but so can Krugman” is a faults-on-both-sides argument that doesn’t hold water. You know it, but you’re upset about the violence of some of the attacks. Several people have admitted and even endorsed your greater point (I’m one), but the single sentence cannot be taken out of the context of the current political situation. THAT’s what the brouhaha is about. Cheers, Sasha....

AlanDownunder: Unsurprisingly, Krugman puts it better at http://krugman.blogs.nytimes.com/2014/02/04/moderate-me-me-me-blogging/ “So where does the notion that I’m way out there come from? Politics, of course. But if you look at the examples people give of me supposedly saying something wild about economics, you’ll almost always find that they’re doing one or both of two things: citing an example where I was wrong (which is by no means the same as being nutty — it happens to everyone), and/or quoting something where I was being playful to get readers’ attention for a larger point. Space aliens? Hello? In fact, in a way the impression that I’m some kind of far-out thinker largely comes from my willingness to go with what mainstream macroeconomics actually says, rather than shading my views and language to appease the Very Serious People.“...

AlanDownunder: Here’s Krugman unpardonanably, unapologetically straying outside his field of expertise. Pedro Schwartz sure nailed him! http://www.zerohedge.com/news/ultimate-krugman-take-down

Anthony van Dalen: Wow, you and the pack of lunatics commenting at the bottom really do live in sad times if the embarrassing ramblings of an old guy off his meds counts as a “nailing”. From this expose I learned that the proper response to someone invited to give a talk is to start out arguing he is not qualified to be there (then bark like a dog when called on it), that “saving is good” (always! Well argued!) and that when you dare to say that helping the unemployed at the expense of “robbing” bond holders 3% pa sounds like a good trade the “nailing” response is to change the subject and pretend you were being attacked for hating the poor. Thanks for the link. Krug was intelligent, informed, and far more gracious than he needed to be....

AlanDownunder: I’m trying to work out what the difference is between Chris House and Pedro Schwartz. Enlightenment would be welcome. Both esteemed and well-credentialled economists, but at least Pedro didn’t accuse Paul of nuttiness. I guess that’s a start....

Brad DeLong: Still looking for an example of anything Paul Krugman has said–or Peter Diamond, or even Robert Lucas–that is within two orders of magnitude as nutty as Ed Prescott.Come on, Chris House. You must have had something in mind. You believe that Nobel Prize winners are prone to say nutty things, and when you went for examples of Nobel Prize winners who said nutty things, the first names that came to your mind were Prescott, Krugman, Diamond, and Lucas.Or did you not have anything in mind at all? Did you think: “I can’t just say Prescott says nutty things–conservatives will get mad. So I have to say ‘Prescott and Krugman’. But I don’t want to appear to be judging Prescott and Krugman, so I have to add Peter Diamond. But then I shouldn’t give more liberal examples than conservative one, so I have to add Lucas on.” Your unwillingness to give examples makes me think that, in retrospect, you don’t mean what you wrote, and that the [strike] tag is called for. It’s very useful…

Chris House: Didn’t Paul recently say that he thought Friedman would be relegated to an extended footnote in the history of economic thought? I think that some people would think of that as being a little nutty. Actually, when I wrote the blog post I didn’t have something specific in mind. I was just aware that when I read him, every now he would write something that seemed a bit weird (over the top, exaggerated, excessively facetious, excessively certain, etc.). Sometimes Krugman will say something that sounds crazy just to get people’s attention--that’s fine but how do you know that Prescott isn’t doing the same thing? The fact that Prescott says offbeat things sometimes (often?) doesn’t really tell us that much. We are the ones who determine how to value and interpret Prescott’s work. Even if he believes in some completely crazy idea, his Nobel Prize is awarded for the work he did that we value. We simply ignore the ideas that we don’t value.And I didn’t say that Nobel Prize winners are prone to say nutty things. I said they were people who think unusual thoughts and we should keep this in mind when we ask for their opinions (particularly on areas outside of their expertise).

Brad DeLong: Ah, so we are finally getting somewhere Chris House: “Didn’t Paul recently say that he thought Friedman would be relegated to an extended footnote in the history of economic thought? I think that some people would think of that as being a little nutty.” So do you–not “some people” but you–think that http://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/ is, in your words, a “rather nutty thing”? If so, why? I thought the column was insightful and informative. What in it do you think is wrong? What place in the history of economic thought do you think Friedman will have in 50 years? What relevance do you think Friedman has in the current policy scene? If not, why is this the example you set forward when asked what things Krugman says that are “rather nutty”?

AlanDownunder: I think I get it, Chris. It’s not a matter of the rhetorical devices--unparticularised accusations of nuttiness and temptation to credentialism--but rather the tone with which they are deployed. I’m sure Krugman values your professional courtesy, as he does Schwartz’. Nothing you’ve written could possibly give those gentlemen over at Zero Hedge or the Wall Street Journal the wrong idea.

Anthony van Dalen: The Friedman line is from here http://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/. As it appears at the end of a long argument, part of which is to blame conservatives for not having a place for him because of [Friedman's] insufficient unreasonableness, I am curious where Krug goes off the rails. I am not sure who has to be warned off from this apparent nuttiness, as most people do not know or care who Friedman is and those who do will have their own oppinions. Anyway, I am ready to back off (I know, yippie), as “nutty” has been degraded to “over the top, exaggerated, excessively facetious, excessively certain, etc.” I hate it when people say, “I don’t care what you meant, this is what you said!” Again, the last line is not that interesting. We listen to these unusual people not be be deluded but in the hopes that they will say something interesting/provocative. I think the more important point is to be on guard for looking in the words of the credentialled comments that support our biases rather than worry about creating new ones.

And that is where things stand now...

I at least find this instructive and depressing.


A few more remarks:

(1) A piece of genuine nuttiness in Chris House's post is his claim that "Nobel Prize winners have typically devoted their entire careers to a rather narrow study of a particular area".

Look at Krugman: imperfect competition and international trade, exchange-rate dynamics, increasing returns and regional economics, the New Keynesian theory of the liquidity trap, plus a host of other things: that's supposed to be a "rather narrow study of a particular area"?

And Diamond--it is false of Krugman, and it would be even more false of Diamond if that were possible. It applies to Prescott and, perhaps, to Lucas. But if you are going to make broad generalizations that are profoundly false about half your examples, you need to resort to the <strike> tag.

(2) Calls for more QE on Krugman's part are nut "nuttiness", contra to what PZ thinks...

(3) Contra John Seriano, I think the argument that supply shocks have perverse short-run effects in a liquidity trap is probably wrong, but not "nutty": people are writing dissertations testing whether the idea's theoretical foundations are sound and whether, if so, it has practical relevance. They are getting good jobs and their work is being highly praised. Cf. Johannes Wieland.

(4) Steve Williamson's point that he knows that everything Prescott says is crazy, and so can apply his Ed filter to disregard, and focus on the one in a hundred things Ed says that is not just crazy but brilliant is true, but even more true is Noah Smith's point that New York Times readers do not have an Ed filter to use, and thus that New York Times reporters who quote Prescott as an authority are committing journalistic malpractice.

(5) Steve Williamson's claim that he has "seen Lucas in a room talking about policy, and he’s very down to earth and sensible" seems to me to be totally wrong. It does not fit my experience at all. Let me run over to the archives:

This Is Brad DeLong's Grasping Reality...: Why Oh Why Can't We Have Better Nobel Laureates in Economics (Robert Lucas Suddenly BFF with Ben Bernanke Edition): "August 5, 2009

Today in the Economist Robert Lucas is an enthusiastic supporter of the economics of Ben Bernanke. He sets the stage as the world economy stood late last September:

After Lehman failed and the potential for crisis had became a reality, the situation was completely altered. The interest on Treasury bills was close to zero, and those who viewed interest-rate reductions as the only stimulus available to the Fed thought that monetary policy was now exhausted...

And then Bernanke swung into action:

Bernanke immediately switched gears, began pumping cash into the banking system, and convinced the Treasury to do the same. Commercial-bank reserves grew from $50 billion at the time of the Lehman failure to something like $800 billion by the end of the year. The injection of Troubled Asset Relief Programme (TARP) funds added more money to the financial system.... The recession is now under control and no responsible forecasters see anything remotely like the 1929-1933 contraction in America on the horizon. This outcome did not have to happen, but it did...

There follows Lucas’s praise of Bernanke (and his Federal Reserve colleague Ric Mishkin) and his excoriation of the critics of economics:

Mr Bernanke and Mr Mishkin are in the mainstream of what critics cited in The Economist’s briefing call a “Dark Age of Macroeconomics.” They are exponents and creative builders of dynamic models and have taught these “spectacularly useless” tools, directly and through textbooks that have become industry standards, to generations of students. Over the past two years they (and many other accomplished macroeconomists) have been centrally involved in responding to the most difficult American economic crisis since the 1930s.... They have drawn on the ideas and research of Keynes from the 1930s, of Friedman and Schwartz in the 1960s, and of many others. I simply see no connection between the reality of the macroeconomics that these people represent and the caricature provided by the critics whose views dominated The Economist’s briefing...

I approve of Robert Lucas’s praise of Ben Bernanke.

I agree with it.

I am and have long been an enthusiastic fan of and supporter of Bernanke (and Mishkin too). I think he is one of the very best we have, and I do not see any better candidates (I do see some as-good candidates however) for the seat he occupies.

If Lucas now says that Ben Bernanke and company know what they are doing—as I think that they do—and that their judgments are to be respected (which include judgments that banking-sector recapitalizations, loan guarantees, and other credit-channel policies on the one hand and expansionary short-run fiscal policy on the other have their proper place in dealing with the recession), then we can all agree and go home.

But I would like everybody to note that Robert Lucas thought very differently, or at least appeared to think very differently, only four months ago.

Ben Bernanke’s principal theoretical contribution to economics has been his investigation of the “credit channel”–how, independent of the supply of money, the health of the banking system and the configuration of interest rates affect the level of spending. Ben Bernanke’s principal empirical contribution to economics has been documenting that the “credit channel” has in fact mattered. And Bernanke’s chief policy innovation has been to expand the Federal Reserve’s role from standard expansionary monetary policy open-market operations into a host of innovative financial policies aimed at this “credit channel.”

Last March at the Council on Foreign Relations Lucas commented on Bernanke’s “credit channel” policies—bank bailouts, etc. Lucas said he “didn’t really get it”:

I avoided this bank bailout issue in my 15 minutes and there's a reason for it. I don't really get it. Some of the problems you're talking about about deciding who gets paid and who doesn't, that's the whole function of bankruptcy law is to deal with that in an effective way. Now, it may be that the kind of neighborhood effects of the bankrupt banks are sufficiently different from the neighborhood effects of a bankrupt auto company—that they need some kind of special treatment. But then it seems like the right public policy is something that— maybe some kind of accelerated bankruptcy proceedings. Just to say make them well on all the money they've lost over this thing, I just—I do not get it...

And last March Lucas had nothing but contempt for judgments like Bernanke's that a fiscal stimulus program—temporary increases in government spending and a temporary tax cut—would boost spending. Bernanke endorses the Congressional Budget Office and its:

estimates of the effects of the stimulus package on real GDP and employment that appropriately reflect... uncertainties.... [B]y the end of 2010, the stimulus package could boost the level of real GDP between about 1 percent and a little more than 3 percent and the level of employment by between roughly 1 million and 3-1/2 million jobs...

But Lucas says--or rather said last March:

[W]ould a fiscal stimulus somehow get us out of this bind, or add another weapon that would help in this problem?... I just don't see this at all.... [T]he only part of the stimulus package that's stimulating is the monetary part.... But, if we do build the bridge by taking tax money away from somebody else, and using that to pay the bridge builder... then it's just a wash... there's nothing to apply a multiplier to. (Laughs.)... And then [running a budget deficit now and] taxing them later isn't going to help, we know that...

Lucas went on to explain why he thought Bernanke and ihs colleagues like Christina Romer were testifying before Congress that he believed the stimulus would be effective:

Christina Romer... here's what I think happened. It's her first day on the job and somebody says, you've got to come up with a solution to this— in defense of this fiscal stimulus, which no one told her what it was going to be, and have it by Monday morning. So she scrambled and came up with these multipliers and now they're kind of—I don't know. So I don't think anyone really believes. These models have never been discussed or debated in a way.... These are kind of schlock economics. Maybe there is some multiplier out there that we could measure well but that's not what that paper does. I think it's a very naked rationalization for policies that were already, you know, decided on for other reasons...

Needless to say, Lucas hadn't done his homework on policy issues and was wrong: wrong on the theory of fiscal policy in a liquidity trap, wrong on the theory of the credit channel, not up-to-speed on the empirical evidence for the credit channel, not up-to-speed on the empirical evidence on fiscal policy, completely wrong about what Christie Romer believed, completely wrong about what Obama administration policymaking procedures were.

I would take Peter Diamond over 1000 Robert Lucases, and Paul Krugman over 100 Robert Lucases, in giving policy advice. (You can't make the Prescott calculation: it blows up.) Diamond and Krugman are not just smart, they also think really hard--they are not lazy--and, most important, they try very hard to mark their beliefs to market.

So let me give the last word to Paul:

Paul Krugman: Moderate Me Me Me Blogging: "So Noah Smith has a piece about how moderate yours truly really is. It’s almost completely right....

On macroeconomics, there’s not a lot of air between my views and those of, say, staff economists at the Fed Board of Governors, the New York Fed, the IMF, and even (say it quietly) the ECB. They’re very much at odds both with freshwater macro and with austerian views; but no more so than those of many other economists--and austerian notions, like that of expansionary austerity, are far more radical than holding to old-fashioned concepts like the multiplier. It’s not even true that I’m a hard-line opponent of modern Keynesian macro.... My original zero-lower-bound analysis was a New Keynesian thingie.... My work with Eggertsson (pdf) on deleveraging is similarly New Keynesian in style. It’s true that I say openly what a lot of New Keynesians think — that the new models aren’t necessarily better than ad hoc approaches, that in many cases they’re best thought of as tests of logical consistency rather than a good way to think about policy. But as I’ve just suggested, that’s actually a very widespread view....

So where does the notion that I’m way out there come from? Politics, of course.... [And]the impression that I’m some kind of far-out thinker largely comes from my willingness to go with what mainstream macroeconomics actually says, rather than shading my views and language to appease the Very Serious People. Mainstream macro said that once you’re in a liquidity trap, deficits don’t drive up interest rates; money-printing doesn’t cause inflation; contractionary fiscal policy is very contractionary. I said that, without hedging, and ridiculed the fashionable case for austerity....

I know some people think that all of Keynesian economics is crazy, or maybe just the idea that things change at the zero lower bound [is crazy]. But saying such things doesn’t set me apart from a lot of economists.

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