Krugman’s blog, 10/30/15

There were two posts yesterday.  The first was “An Unteachable Moment:”

It is, as Antonio Fatas notes, almost seven years since the Fed cut rates to zero. The era of lowflation-plus-liquidity-trap now rivals in length the 70s era of stagflation, and has been associated with much worse real economic performance. So where, asks Fatas, is the rethinking of economic theory and policy?

I asked the same question a couple of years ago. I’d add, as I did in that earlier piece, that some of us anticipated much though not all of what has gone wrong. Fatas says,

But my guess is that even those who agreed with this reading of the Japanese economy would have never thought that we would see the same thing happening in other advanced economies. Most thought that this was just a unique example of incompetence among Japanese policy makers.

Actually, though, I did write a 1999 book titled The Return of Depression Economics, basically warning that Japan might be a harbinger for the rest of us. True, I never expected policy to be so bad that Japan ends up looking like a role model.

Anyway, the point is that by now we should have expected at least as major a rethink as happened in the 70s; in fact, we’ve seen almost no rethinking. Economists who wrote that “inflation is looming” in 2009 continued to warn about looming inflation five years later.

And that’s the professional economists. As Josh Barro notes, conservatives who imagine themselves intellectuals have increasingly turned to Austrian economics, which explicitly denies that empirical data need to be taken into account; although of course they would have claimed vindication if the inflation they were predicting had actually materialized.

Back to Fatas: how long will it take before the long stagnation has the kind of intellectual impact that stagflation did? Indeed, how long will it be before people stop holding up the 1970s as the ultimate cautionary tale, even as we live in the midst of a continuing disaster that makes the 70s look mild?

I don’t know the answer, but it’s clear that we have to understand this phenomenon in terms of politics and sociology, not logic.

Yesterday’s second post (which Bobo will never read) was “Policy and Character:”

David Brooks writes a pro-Marco-Rubio column, and in passing says this:

At this stage it’s probably not sensible to get too worked up about the details of any candidate’s plans. They are all wildly unaffordable. What matters is how a candidate signals priorities.

It won’t surprise you to learn that I disagree deeply. My experience is that the best way to figure out a candidate’s true priorities — and his or her character — is to look hard at policy proposals.

My view here is strongly influenced by the story of George W. Bush. Younger readers may not know or remember how it was back in 2000, but back then the universal view of the commentariat was that W was a moderate, amiable, bluff and honest guy. I was pretty much alone taking his economic proposals — on taxes and Social Security — seriously. And what I saw was a level of dishonesty and irresponsibility, plus radicalism, that was unprecedented in a major-party presidential candidate. So I was out there warning that Bush was a bad, dangerous guy no matter how amiable he seemed.

How did that work out?

So now we have candidates proposing “wildly unaffordable” tax cuts. Can we start by noting that this isn’t a bipartisan phenomenon, that it’s not true that everyone does it? Hillary Clinton isn’t proposing wildly unaffordable stuff; Bernie Sanders hasn’t offered details about how he’d pay for single-payer, but you can be sure that he would propose something. And proposing wildly unaffordable stuff is itself a declaration of priorities: Rubio is saying that keeping the Hair Club for Growth happy is more important to him than even a pretense of fiscal responsibility. Or if you like, what we’ve seen is a willingness to pander without constraint or embarrassment.

Also, his insistence that the magic of supply-side economics would somehow pay for the cuts is a further demonstration of priorities: allegiance to voodoo trumps all.

At a more general level, I’d argue that it’s a really bad mistake to wave away policy silliness with a boys-will-be-boys attitude. Policy proposals tell us a lot about character — and the history of the past 15 years says that journalists who imagine that they can judge character from the way people come across on TV or in personal interviews are kidding themselves, and misleading everyone else.

Bobo is an unredeemable putz.


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