Fama's Fallacy: Hoisted from Ten Years Ago

Fairly Recently: Must- and Should-Reads, and Writings... (December 17, 2018)

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  1. Fama's Fallacy: Hoisted from Ten Years Ago: The economists who cheerled for the Trump-McConnell-Ryan tax cut and claimed it would rapidly and permanently boost annual investment in America by 800 billion had arguments—bad arguments. The economists who condemned Benanke's quantitative easing and claimed it would soon lead to high inflation and a debased dollar had arguments—bad arguments. I do not think any of them made those bad arguments in good faith: the failure of those in either group to acknowledge that they got a big one wrong and to engage in Bayeisan updating is interesting: that silence speaks volumes. But Fama and the others who claimed a decade ago that, while private decision to spend more boosted employment and production, public decisions to spend more—fiscal stimulus—not only would not, but could not possibly ever boost employment and production... they had no argument at all...

  2. Some Disconnected Thoughts Over the Years About Legal Realism and the Man Whom Judge Posner Calls "Disreputable": Chief Justice John Roberts: The dirty little secret is that serious legal arguments are those that lawyers pretend to take seriously. If enough Republican hacks decide to pretend that Judge Reed O'Connor is serious, he becomes serious. My forecast? The Fifth Circuit narrowly upholds O'Connor, and then it goes down 8-1 in the Supreme Court—unless one of the Democratic justices dies or retires before the decision is announced, it which case O'Connor is upheld 5-3...

  3. DeLong's Principles Of Neoliberalism: Thanks to Miniver Cheevy for Formatting: Hoisted from the Archives from 1999: The "neoliberalism" I was talking about then is a relatively distant cousin (but was a cousin) of what people are calling "neoliberalism" today...

  4. Weekend Reading: Paul Krugman (2011): Mr Keynes and the Moderns: Paul Krugman's distinction between Chapter 12er and Book 13 Keynesians is, I think, dead on...


  1. Abe “Bastard Keith” Goldfarb: "Phase One: 'Mexico will pay for the wall!'!
    Phase Two: 'Mexico will eventually pay through tariffs for the wall!'
    Phase Three: 'The US will pay for the wall!'
    Phase Four: 'We will shut down the government if American taxpayers don’t pay for the wall!'

  2. Lawrence Christon: Rita Rudner Is Svelte, Pretty, Original American Princess

  3. David Brooks remembers the Weekly Standard—how fun it was to convince people Saddam Hussein and Osama bin Laden were close allies, and so trigger the Iraq War! They have their separate lives now, but they will always have Baghdad...: David Brooks: "This was the most concentrated collection of talent I’ve been around. And the most fun. Read the whole list... #orangehairedbaboons #journamalism

  4. Economic History Association: Prizes and Awards

  5. Aleksandar Hemon: Fascism is Not an Idea to Be Debated, It's a Set of Actions to Fight: "It is frightening to think we could be entering the civil war mode, wherein none of the differences and disagreements can be hashed out in discussion. It is quite possible that there is no resolution to the present situation until one side is thoroughly destroyed as an ideological power and political entity. If that is the case, the inescapable struggle requires that anti-fascist forces clearly identify the enemy and commit to defeating them, whoever they are, whatever it takes. The time of conversations with fascists is over, even if they might be your best friend from high school... #neofascism #orangehairedbaboons

  6. The dirty little secret is that serious legal arguments are those that lawyers pretend to take seriously. If enough Republican hacks decide to pretend that Judge Reed O'Connor is serious, he becomes serious. My forecast? The Fifth Circuit narrowly upholds O'Connor, and then it goes down 8-1 in the Supreme Court—unless one of the Democratic justices dies or retires before the decision is announced, it which case O'Connor is upheld 5-3. Jack Balkin wants to maintain two positions at once: 1. "The lesson of Sebelius is that if you give enough very smart lawyers enough time to work on a legal problem, they can come up with creditable arguments for many (but not all) legal positions, even if, when the task started, the position seemed hopeless..." 2. "I am most certainly not saying that legal argument and legal craft are mere disguises for political ideology or that they have no independent significance. I have been trained as a lawyer and I express opinions about the quality of legal arguments all the time. It is my job to do so. Thus, whether lawyers are willing to support a given claim depends on their perception of the quality of the legal reasoning and the quality of the legal arguments that can be advanced for it..."
     
    But the second means almost nothing if "creditable" arguments can be constructed for nearly everything, and the task of law professors is then to retrospectively justify whatever the judges pick. The first means little if the legal community does have strong standards for what is a strong argument. How to resolve this? By noting that whatever gets five votes on the Supreme Court is retrospectively turned into the strongest arguments. And Supreme Court justices are very good at convincing themselves that what upholds their ideology and partisan position is in fact the best-argued and best-crafted. Jack Balkin: Texas v. U.S: Off the Wall and On the Wall in the Age of Trump: "The judge's arguments are not even close to being persuasive given existing legal precedents. Does that mean that the position is 'off-the-wall'?... Asking whether a legal claim is 'off-the-wall' is a question of whether it is a reasonable claim, or at least one on which reasonable minds can differ.... But the perceived quality of legal reasoning and legal arguments are not exogenous from social influence...#orangehairedbaboons #judicialreview

  7. Sam Bagenstos: "My view on this is closer to Jesse's than to (my learned and valued colleague!) Nick's. The Fifth Circuit could reverse this ruling, but I don't have the confidence in them Nick does. I do think Roberts doesn't want to strike down the ACA 5-4 on this farkakte theory, though. But let's imagine one of the Dem appointees to the Court slips on a banana peel before the issue gets to SCOTUS. Then we really do have a direct threat to the ACA. So let's not breathe so easy...

  8. As I see it, Bernanke is right: the housing bubble and housing construction (maroon line) had FRED Graph FRED St Louis Fed collapsed—with its effects on household wealth and thus on consumption—before the recession began, and very few thought as of late 2007 that we were doomed to have a deep recession. So I do not see how Krugman and Baker could be correct. Then our slow recovery looks to me due in large part to two factors. The first is fiscal austerity (purple line), for which blame Republicans, economists who do not understand IS-LM but who insist on opening their mouths, and an Obama listening to Geithner, Orszag, and company and thinking that his job is to reach a grand entitlement bargain with Republicans. The second is the failure of housing to recover to normal—for which I blame Obama listening to Geithner and not making the revival of housing finance a priority: Paul Krugman: The Credit Crunch and the Great Recession: "Ben Bernanke argues that it was mainly about finance. I have (friendly) questions.... There’s an economic dispute underway about the causes of the Great Recession — but that’s not what’s weird. What’s so strange in these days and times is that it is being carried out among well-informed people who actually look at data and argue in good faith. Hey, guys, don’t you know that sort of thing went out a couple of decades ago?...

  9. The assumption driving the argument here is that the natural rate of interest varies one-for-one with productivity growth. That is probably right, but not certainly right. If it is right, the Federal Reserve's 2% inflation rate target is a huge mistake generating huge risks: Thomas Laubach and John C. Williams* (2001): Measuring the Natural Rate of Interest: “A key variable for the conduct of monetary policy is the natural rate of interest–the real interest rate consistent with output equaling potential and stable inflation. Economic theory implies that the natural rate of interest varies over time...

  10. Ed Luce: The Double Life of Trumpian Nationalism: "Mr Pompeo did the world a favour... crystallised the dissonance that runs through the Trump administration. Mr Trump’s aim is to contain China’s global rise. He also wants to remove the tools with which to blunt China’s rise. He offers with one hand what he removes with the other. Mr Pompeo called for a new global liberal order of 'noble nations'. In the same breath, he called on them to pursue their go-it-alone destinies. Nowhere in his speech did the words 'west' or 'western' occur. Countries that abandon mutual endeavours do not naturally see eye to eye...

  11. Joseph E. Gagnon (PIIE) and Takeshi Tashiro: Abenomics Is Working, Don't Stop Now: "Japan is on track for its longest postwar economic expansion, with female labor force participation and corporate profits at record highs and unemployment at a 25-year low.... [Is] the goal of raising inflation to 2 percent is really necessary?...

  12. Friedrich Engels (1843): Outlines of a Critique of Political Economy: "In the struggle of capital and land against labour, the first two elements enjoy yet another special advantage over labour–the assistance of science; for in present conditions science, too, is directed against labour. Almost all mechanical inventions, for instance, have been occasioned by the lack of labour-power; in particular Hargreaves’, Crompton’s and Arkwright’s cotton-spinning machines...

  13. Ramesh Ponnuru: Recession Is a Far Larger Threat Than Inflation: "We should use this moment of relative monetary calm to consider deeper questions, such as whether that target is the right one.... The real failing of the current monetary regime is not that it generates too much inflation. We haven’t had ruinous levels of inflation since the early 1980s (something for which Volcker’s own chairmanship deserves great credit)...

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