Krugman’s blog, 1/4//16

There were two posts yesterday.  The first was “Academics and Politics:”

Via Noah Smith, an interesting back-and-forth about the political leanings of professors. Conservatives are outraged at what they see as a sharp leftward movement in the academy:

But what’s really happening here? Did professors move left, or did the meaning of conservatism in America change in a way that drove scholars away? You can guess what I think. But here’s some evidence. First, using the DW-nominate measure — which uses roll-call votes over time to identify a left-right spectrum, and doesn’t impose any constraint of symmetry between the parties — what we’ve seen over the past generation is a sharp rightward (up in the figure) move by Republicans, with no comparable move by Democrats, especially in the North:

So self-identifying as a Republican now means associating yourself with a party that has moved sharply to the right since 1995. If you like, being a Republican used to mean supporting a party that nominated George H.W. Bush, but now it means supporting a party where a majority of primary voters support Donald Trump or Ted Cruz. Being a Democrat used to mean supporting a party that nominated Bill Clinton; it now means supporting a party likely to nominate, um, Hillary Clinton. And views of conservatism/liberalism have probably moved with that change in the parties.

Furthermore, if your image is one of colleges being taken over by Marxist literary theorists, you should know that the political leanings of hard scientists are if anything more pronounced than those of academics in general. From Pew:

Why is this? Well, climate denial and hostility to the theory of evolution are pretty good starting points.

Overall, the evidence looks a lot more consistent with a story that has academics rejecting a conservative party that has moved sharply right than it does with a story in which academics have moved left.

Now, you might argue that academics should reflect the political spectrum in the nation — that we need affirmative action for conservative professors, even in science. But do you really want to go there?

Yesterday’s second post was “Confidence Games:”

OK, one more round in this models versus instincts go-round. AsRobert Waldmann points out over at Brad’s place, there’s a bit of bait-and-switch going on at this point; my Mundell-Fleming claim — that countries in a liquidity trap borrowing in their own currencies shouldn’t fear Greek-style confidence crises — is being transmuted into the claim that confidence never matters, and the Blanchard result that is being cited has little bearing on that assertion.

Maybe it will help to make this specific. In the original memo on stimulus sent to Obama by his economic advisers we find this caution:

So, was it reasonable to worry about an excessive package spooking markets, and was it essential to combine stimulus with measures to produce “medium term fiscal credibility”?

My answer was and is no – that such concerns didn’t reflect a level of insight deeper than the models, but rather a gut feeling insufficiently disciplined by models.

The story as people were telling it then, and still are telling it, is that fears about US fiscal soundness would lead to capital flight; that this would drive up interest rates; and that this would be contractionary. That is, after all, what happened in Greece. But Greece doesn’t have its own currency, and as I pointed out in myMundell-Fleming lecture, the effect of the Greek confidence crisis was a sharp fall in the monetary base, which wouldn’t happen here.

Instead, I argued, doubts about U.S. finances would be reflected in higher inflation expectations and a weaker dollar – both of which would be expansionary, not contractionary. That was, after all, what happened in the only historical case I was able to find that looked anything like the scenario being described, the attack on the French franc in the 1920s.

So let’s focus on this specific question: Were people worrying about a loss in confidence from excessive stimulus in 2009 right to be so worried? Or were they simply not thinking it through?



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