Yes, it is time for the center-left to pass the baton to those further left for the next lap in the race for equitable growth. But what does that mean, concretely, for policies. Paul Krugman gives his opinion: Paul Krugman: "A few thoughts inspired by @delong's 'I am no longer a neoliberal' piece. Brad is really saying two things: [1] there is no center-right, so centrists must deal with the left; and [2] market-oriented policies don't work as well as thought. I've been there on both fronts for a while (although I have been fairly left of center for many years). But I think it's useful to ask what it means for policy proposals in different areas...

...The big issue right now is environmental policy/Green New Deal. Here both aspects of the neoliberal rethink matter. Carbon pricing probably works less well than Econ 101 suggests-it works, for sure, but needs public investment in infrastructure and research too. Beyond that, however, there will be no help from conservatives. They may talk about Pigouvian taxes, but when push comes to shove they will find reasons why any carbon pricing plan is an evil socialist plot. So the deal must be with the left. And if that means tying climate policy to a broader agenda, much of it stuff we all want but maybe a few flaky ideas too—OK! We want this to be a Christmas tree with lots of stuff for different interests, because that's what it will take to get it done.

Health care is a different story. I don't think people like Brad or me were ever opposed in principle to single-payer; I'd go for it in a minute. Nor did I ever imagine that any Rs would sign on. The problem is how to deal with the ~160 million people with employer coverage. Telling them that they have to give that up, but don't worry, our plan will be better still looks unrealistic. It's not left v right, and it's not about being naive about the GOP. It's about loss aversion: hard to convince people to fix something they don't see as broken.

Next up: fiscal policy. Both politics and good economics say to be relaxed about the deficit. Fiscal restraint by Ds is hard to justify when you know Rs will blow it next time they are in power; low interest rates and secular stagnation say deficit spending w/in limits OK. Again, I've been there for a while; these days even Larry Summers, Jason Furman, and Olivier Blanchard are pretty much there. Only fools, knaves, and Howard Schultz think deficits should be a prime concern these days.

Last point: wages. Here's where research has convinced me and others that wages are much less determined by supply and demand, much more determined by market power, than we used to believe. This implies a much bigger role for "predistribution" policies like minimum wage hikes, pro-union policies, and more than we used to think. "Let the market do its thing, but spend more on education/training and a bigger EITC" no longer sounds like wisdom.

The point is that the DeLong concession, if that's what we want to call it, doesn't mean that policies preferred by AOC or whatever are always right, economically or politically; it means that they need to be taken seriously, and never mind what the center-right thinks...


#noted

Comments