No, You Should Not Take What John Cogan and John Taylor Write in the Wall Street Journal Seriously Until They Even Try to Explain What They Got Wrong in 2009. Why Do You Ask?
They are highly likely to be wrong for three reasons:
- It is in the Wall Street Journal, hence presumptively wrong.
- They were wrong in 2009, and hence likely to be wrong now.
- They have made no effort to figure out why they were wrong in 2009, hence they are very likely to be making the same mistakes still.
Paul Krugman collects the intellectual trash:
Economics and Politics by Paul Krugman: Ugh. And I say that advisedly. John Cogan and John Taylor have a piece in the WSJ (where else) arguing that the latest Ryan budget would actually be expansionary, because confidence! It’s as if all the experience of recent years, in which the confidence fairy has yet to make an appearance, hasn’t happened….
Cogan and Taylor [also] make a basically dishonest claim about the state of research. Reading them, you’d think that anyone who believes that contractionary policy is contractionary is just a simpleton who doesn’t know about expectations:
Our assessment is based on a modern macroeconomic model (developed with Volker Wieland of the University of Frankfurt and Maik Wolters of the University of Kiel) whose features include a recognition that the resources to finance government expenditures aren’t free—they withdraw resources from the private economy….
[But i]n a depressed economy the resources to finance government expenditures are free, because they would otherwise be unemployed…. [T]he notion that Keynesians don’t believe that expectations of future conditions affect decisions today is … strange. Both old Keynesian and new Keynesian models — like Mike Woodford, whom they appear never to have read — are very much about expectations.
In fact, the only interesting question here is why their results are so different from Woodford’s. My guess is that they have slipped in some assumption that won’t stand scrutiny, like the notion that the Fed will raise rates even with the economy deeply below capacity. (They’ve done that before).
Anyway, sad stuff to see, and a disservice to readers.
