Krugman’s blog, 9/23/13

There were three posts yesterday.  The first was “Where Are The Austerian Economists?”:

I’ve been part of a discussion over the direction of economic policy debate — as opposed to the direction of actual economic policy — in which an interesting question has been raised: which prominent economists are now making the best case for fiscal austerity? It’s a tough question to answer, because at this point it’s hard to find any prominent economists making that case.

By “prominent”, by the way, I’m trying not to make a personal judgment. I may think that [redacted] is actually not too bright, and doesn’t deserve his reputation, while I may think that [redacted] is actually a far better economist than many others with bigger professional reputations, but that’s not the question here; the question is which economists with big reputations and large citation indexes are making the austerian case.

And the answer is, it’s hard to think of any. Alberto Alesina, once the guru of expansionary austerity, is still defending his earlier research, but not playing a major role in current policy debate. Reinhart and Rogoff, whose 90-percent cliff was once gospel, are defending their professional reputations while trying to move on, but aren’t lending their voices to calls for continuing austerity. Who’s left?

Yes, you can find economists at right-wing think tanks and some international organizations making the austerian case, but again, I’m talking about economists with big independent reputations, justified or not. And I can’t think of any. That wing of austerianism has simply dissolved.

And as far as we can tell, it makes no difference. Have Paul Ryan, George Osborne, Olli Rehn, Wolfgang Schäuble changed their tune even a bit? No, they’re busy claiming one quarter of positive growth as vindication.

For those who like to think that serious economic debates matter, it has been a humbling experience.

The second post of the day was “Modern Applied Macro:”

I’ve mentioned David Romer’s nice formulation of modern applied macro — the way people actually think, as opposed to the intertemporal maximization with whipped cream that’s respectable. David now informs me that he has a set of publicly available class notes (pdf) that have been regularly updated, covering that ground even better — with an extensive section on the liquidity trap.

Romer’s notes still imply that a protracted liquidity trap should lead to accelerating deflation, which doesn’t seem to happen; I think most of us have turned to downward nominal wage rigidity as an explanation. In any case, this is more or less the state of the practical art, and I’m delighted to learn that he’s put it together.

The last post of the day was “Attack of the Killer Hipsters:”

Jonathan Chait has an excellent survey of the current state of the battle for health reform. Among other things, it drives home the extent to which — despite all the glitches likely in the first few months — this is now being fought on favorable terrain for the reformers.

Never mind the polls showing approval of Obamacare moving one way or the other; they are all being taken in an environment where people are amazingly ignorant about the law, with a large minority believing that it has been repealed. What matters is how the thing works — and that, in turn, depends crucially on sufficient numbers of young, currently uninsured people signing up for the exchanges. Advocates will try to get those people signed up; Republicans will try to convince them not to. So how are the two sides’ chances.

Well, let’s think about who we’re talking about: Young. Currently uninsured, which generally means not very affluent, and also tends to mean nonwhite more than average.

In other words, basically the opposite of the profile of Tea Party backers. Also, by the way, more or less the opposite of midterm voters.

Chait stresses the youth aspect:

Fortunately for Obama, this field of battle favors his side. To pass the law, he needed to win over skeptical senators. To defend it in court, he needed conservative jurists. But identifying and persuading young people is a battle Obama does not expect to lose to Republicans, and in place of the federal outreach funds, the administration is deploying a campaignlike array of weapons: microtargeting, including door-to-door outreach, and all forms of media. (A few weeks ago, Katy Perry tweeted out a link informing her 42 million followers that health care was available beginning October 1.)

Yep, when it comes to reaching hipsters, or young people in general — I know, Katy Perry — Dems have big advantages; all that coastal cultural elite hatred suddenly turns into a big disadvantage for the right.

But that’s not all: there are also channels of influence the party of Fox News simply cannot reach: Spanish-language radio and TV, black churches (which played a big role in 2012), and more.

I don’t know whether anyone thought this out in advance, but the battle of the exchanges is indeed being fought on remarkably favorable ground for the reformers. And I, for one, find the thought of conservatives humiliated by an army of tweeting hipsters remarkably cheering.


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