James Hanley in reply to greginak says:

@greginak

Economists of all stripes actually agree on somethings. But there are also disagreements that come from basic ideological differences

Not so much as the popular mind believes. Read the Wolfers link above, or the Gordan & Dahl link, for which the abstract says,
Based on our analysis, we find a broad consensus on these many different economic issues, particularly when the past economic literature on the question is large. Any differences are unrelated to observable characteristics of the Panel members, other than men being slightly more likely to express an opinion. These differences are idiosyncratic, with no support for liberal vs. conservative camps.

You mention Krugman, but the odd thing about Krugman is how much his newspaper columns seem to disagree with his academic writings. One of the little cottage industries of the economics profession today is comparing Krugman to himself–anyone who only reads his newspaper columns is not going to understand that academic Krugman, a liberal, is surprisingly in agreement with conservative academic economists and they surprisingly in agreement with him. Hell, I learned a lot of my economics from reading Krugman’s work, and while I often shake my head at his NYT columns, I still encourage people to read his popular books or get the Econ text he co-authored with Robin Wells, all of which still sit on my shelves and which I still frequently use as reference materials. Krugman taught me how to think about economics, and Buchanan, Tullock, Ostrom and others taught me how to apply that thinking to government as well as markets.

What is really the case is that there are a few issues of notable public import–nearly always tough or edge cases–about which there is disagreement, and this gets played up by the media for all the usual reasons. For example, we all know Krugman is the era’s Great Keynesian, but what few people realize is that Krugman is very much a monetarist, who thinks monetary policy works wonderfully in nearly all cases, which is a very standard position in the discipline. But there is disagreement about what happens in the very special case of the zero-lower bound on interest rates–and the media, whose practitioners generally know next to nothing about anything, blow that up into a great foundational disagreement, which it is not.

Again, think physicists working at the boundaries of their discipline–the difference is that we don’t hear about their disagreements about string theory. Which, by the way, cannot be studied with test tubes.

Or consider the case of minimum wages. There is effectively no disagreement within the discipline that the law of demand holds for minimum wages, and that minimum wage increases must have un/underemployment effects. What they actually disagree on is the size of the effect at different marginal rates, and the extent to which small observed effects are real or apparent (that is, is the real effect larger, but beyond current observational techniques).

The media and the public focus on these differences. So those who do not know the field, but think they know it because they read the paper, talk confidently about the great disagreements in the field, but are blithely unaware of small a portion of the field those disagreements encompass.

there are also disagreements that come from basic ideological differences. What some people do, not you but you know those “other” people, is assume econ completely supports their ideology.

But that’s not really about economics, is it? It’s about non-economists. It’s like objecting to physics as a discipline because some idiot thinks the theory of relativity proves that even the physical world is a social construct. We have to distinguish between practitioners, between those who have given serious study to a subject, and those who have only a superficial knowledge of it. The latter can be justly criticized without ever really touching on the former, or on the discipline’s body of knowledge.

In any case econ can’t really be a rigorous real science, they don’t’ have test tubes and beakers full of colored liquids or white coats

Again, the problem here is that you don’t know what you don’t know. Macroeconomics is hard to study in the laboratory, sure, but occasionally economists are offered natural experiments, or at least natural quasi-experiments. And micro-economics offers vast opportunities for rigorous laboratory studies, which are today helping us refine our understanding of how human behave economically.

I’m sorry, but when I hear comments like Schilling’s and yours, the big gaps in your knowledge are apparent. And the contrast with the confidence with which you speak is striking. Particularly in his case, Darwin’s famous comment about ignorance begetting confidence more frequently than knowledge does seems entirely appropriate.Report

James Hanley in reply to greginak says:

Mr. Pearce,

So can we predict people’s responses to incentives or not? First you suggest that trying to do so is akin to the woo of the magic 8 ball, then you suggest that we can in fact create policies based on predicting people’s responses to incentives.

As to “omnipotent,” I regret that I’ve yet to meet an economist who thought s/he could bring the dead back to life, turn water into wine, or even leap over tall buildings with a single bound. Perhaps you meant “omniscient”? (But that would be a strawman, so I’m sure you didn’t mean that.)Report

James Hanley in reply to greginak says:

Greg,

I don’t think we’re disagreeing anymore. Certainly you’re not making the kind of critique that either Schilling or Pearce make.

Pearce,
You won’t impress me by repeating that “People respond to incentives.” You will impress me, however, if you can tell me exactly how. But you can’t.

You can only guess.

Then probability theory must be inapplicable to human beings.

Because if people’s responses to incentives are non-random, then they are probabilistic, and ultimately predictable, with some significant, albeit imperfect, degree of accuracy.

If, however, responses to incentives are random, then we can’t even make lucky guesses. There might be a short-term response that corresponds well to our guess, but because of the randomness, over time behavior will inevitably deviate from our guess.

If you are correct, all social sciences fail. Not simply economics, but political science, law, sociology, psychology, and business. The market project of persuading people to buy fails as surely as the government project of persuading people to change their behavior from the status quo ante.

I want to note, though, for all the other liberals reading this, that in no way do I interpret Pearce’s exposition of this position as representative of liberals in general.Report

James Hanley in reply to greginak says:

Michael,

A small group of out of the mainstream economists, eh? Let’s keep in mind that Krugman won his Nobel prize for his work in his area of research specialization, trade theory. Here’s John Cochrane, who unlike Krugman actually does specialize in research in macroeconomics, responding to Krugman.

Imagine this weren’t economics for a moment. Imagine this were a respected scientist turned popular writer, who says, most basically, that everything everyone has done in his field since the mid 1960s is a complete waste of time. Everything that fills its academic journals, is taught in its PhD programs, presented at its conferences, summarized in its graduate textbooks, and rewarded with the accolades a profession can bestow, including multiple Nobel prizes, is totally wrong. Instead, he calls for a return to the eternal verities of a rather convoluted book written in the 1930s, as taught to our author in his undergraduate introductory courses. If a scientist, he might be an AIDS-HIV disbeliever, a creationist, a stalwart that maybe continents don’t move after all.

Perhaps the Nobel prize committee makes a habit of giving multiple prizes to a small set of out of the mainstream economists, but it doesn’t seem likely. Perhaps the work that makes it into the textbooks is out of the mainstream, but the norm is for ideas to work their way into textbooks slowly, long after they’ve become part of the mainstream.

This is a very serious point. Krugman is claiming the mainstream is the ideas of a half century ago, not the ideas that have mostly replaced them in the discipline since. He’s claiming the mainstream is old Keynesianism, not new Keynesianism.

He also misrepresents the ideas he’s critiquing. Here’s Cochrane again.

It’s fun to say we didn’t see the crisis coming, but the central empirical prediction of the efficient markets hypothesis is precisely that nobody can tell where markets are going – neither benevolent government bureaucrats, nor crafty hedge-fund managers, nor ivory-tower academics. This is probably the best-tested proposition in all the social sciences. Krugman knows this, so all he can do is huff and puff about his dislike for a theory whose central prediction is that nobody can be a reliable soothsayer. And of course it makes no sense whatsoever to try to discredit efficient-markets finance because its followers didn’t see the crash coming.

How has Krugman contradicted himself? Since we’ve started with Cochrane, let’s stick with him for a moment.

Third, and most surprising, is Krugman’s Luddite attack on mathematics; “economists as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” Models are “gussied up with fancy equations.” I’m old enough to remember when Krugman was young, working out the interactions of game theory and increasing returns in international trade for which he won the Nobel Prize, and the old guard tut-tutted “nice recreational mathematics, but not real-world at all.” He once wrote eloquently about how only math keeps your ideas straight in economics.

Here’s Krugman himself contradicting what’s in his own textbook.

We do know that demand curves generally slope down; it’s a lot harder to give good examples of supply curves that slope up (as a textbook author, believe me, I’ve looked);

In this one Krugman also contradicts his own textbook on macroeconomics. Critiquing Senator John Kyl’s claim that “continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Krugman said, ” “To me, that’s a bizarre point of view–but then, I don’t live in Mr. Kyl’s universe.” But his own textbook reads

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job.

He also contradicts himself in his columns (I think it’s particularly hard to avoid doing so, given how much he has to write, but that should be a warning sign in relying on what he writes). In 2007 he wrote,

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are… But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

And this is what he wrote 6 years previously, only a couple of years after he began writing columns for the NYT.

“[A] decade from now the population served by those programs [Social Security and Medicare] will explode. . . . Because of those facts, merely balancing the federal budget would be a deeply irresponsible policy — because that would leave us unprepared for the demographic deluge, with no alternative once it arrives except to raise taxes and slash benefits.”

Here he is contradicting himself within two weeks on whether unemployment differences between the states are a meaningful measure.

Coyote Blog notes that it took Krugman only 3 days to contradict himself on the effect of means-tested government support on the labor supply.

Relatedly, Here’s David Henderson noting Krugman contradicting himself on the effects of high marginal tax rates on work effort.

And here’s a good list of some of his contradictory statements. Skip the essay up top and go down to the paired quotations. (I’m not sure all are fair, but plenty of them are.)

I want to make it clear that I’m not criticizing Krugman as an economist. The problem, as I see it, is that Krugman has come to put his partisanship above his commitment to the economics academy.

I would also note that by no means is every claim of a Krugman self-contradiction true. The claim that he recommended a housing bubble back in ’02 is a bad misrepresentation of what he said, as his honest critics agree. Unfortunately, by becoming such a partisan he’s made himself such a target that it gets harder and harder to separate the true criticisms from the fictions.Report

James Hanley in reply to greginak says:

Troublesome Frog,

I noted that Krugman’s made himself such a lightning rod that more get attributed to him than are accurate, and that it takes some work to sort through them.

You’ve pointed to a couple that may be problematic (I don’t buy your defense of his small state comments at all, and I think your perspective on marginal tax rates is convenient), but you leave untouched such claims as downward sloping supply curves being more easier to find than upward sloping ones, his reversal on Social Security (which would be ok if he simply changed his mind in response to evidence, and didn’t feel the need to bash others for believing what he had asserted just a few years before), and Cochrane’s rebuttal of his claims about a small group of non-mainstream economists having outsized influence, as well as Krugman’s dishonest comments about the efficient markets hypothesis, and his turnabout on the value of math in economics.

Correct a couple of inaccurate data points and you’re still left with a trend.

And all I’m really saying is, don’t take Krugman’s columns with confidence; have confidence in his more considered work instead.Report

James Hanley in reply to greginak says:

There’s also the Estonia issue. I don’t really know whether or not he’s got the better argument on the austerity issue, but I do know when someone’s playing games with graphs.Report

James Hanley in reply to greginak says:

Ah, Schilling, you seem not to even understand where these principles come from. They’re still driving forces because over and over we find they’re supported by evidence. Sure, Brandon was speaking a bit casually, perhaps, but who hasn’t done so based on principles they understand?

As to insults, Mike, have you noticed I don’t insult your math, your comments about IT, your taste in music, or any of a dozen other things you talk about? I’m quite willing to respect you when you give me reason to. I’ve no interest in respecting you when you give me good reason not to.

I remain curious why you seem to think that you understand something you’ve obviously never put your quite capable mind to. Is it a case of Dunning-Kruger? Or is your emphasis on the ideological uses of economics just a case of psychological projection? Why, the curious mind wonders, does a guy as smart as you not just bother to learn something you’re so interested in talking about?Report