Krugman’s blog, 4/4/16

There were two posts yesterday.  The first was “Shadows of Smears Past:”

The Times has a sort of pre-mortem in which people associated with the Sanders campaign wonder if they might have pulled it off if they’d made personal attacks on Hillary Clinton earlier. I’d say, probably not.

As I see it, the Sanders phenomenon always depended on leaving the personal attacks implicit. Sanders supporters have, to a much greater extent than generally acknowledged, been motivated by the perception that Clinton is dishonest, which comes — whether they know it or not — not from her actual behavior but from decades of right-wing smears; but Sanders himself got to play the issue-oriented purist, in effect taking a free ride on other peoples’ character defamation. There was plenty of nastiness from Sanders supporters, but the candidate himself seemed to stay above the fray.

But it wasn’t enough, largely because of nonwhite voters. Why have these voters been so pro-Clinton? One reason I haven’t seen laid out, but which I suspect is important, is that they are more sensitized than most whites to how the disinformation machine works, to how fake scandals get promoted and become part of what “everyone knows.” Not least, they’ve seen the torrent of lies directed at our first African-American president, and have a sense that not everything you hear should be believed.

So now, in a last desperate attempt to beat the arithmetic, the Sanders campaign is turning the implicit character attack explicit, and doing so on the weakest possible ground. Clinton, who has said that coal is on its way out, is a tool of the fossil-fuel industry because some people who work in that industry gave her money? Wow.

Still, maybe it can work — although you need to remember that Sanders needs landslide victories in what’s left of the primary. The problem is that if it doesn’t work, Sanders will have spent a couple of months validating Republican attacks on the Democratic nominee (or, if he somehow pulls off an incredible upset, deeply alienating lots of progressives he’s going to need himself.)

But what an ugly way to end a campaign that was supposed to be positive and idealistic.

The second post yesterday was “Aggregate Supply and Depression Economics (Wonkish):”

Robert Waldmann follows up on the question of who got what wrong in the late 1990s analysis of Japan’s liquidity trap. As he says, the extremely stripped-down nature of the model I used may have led some readers — like, surprisingly, Brad DeLong — to suppose that I had forgotten about the supply side. Actually, though, I still don’t really understand the confusion — I explicitly began with a flexible-price model, then considered the effects of temporarily fixed prices, so how could that have been unclear?

Be that as it may, it’s quite ironic given recent events that some critics of the old paper warned that higher expected inflation might get built into wage and price setting — because that’s what you *want* to happen. It’s a feature, not a bug.

Indeed, the biggest problem with Abenomics — which is the closest thing we’ve seen yet to an attempt to bootstrap an economy out of the liquidity trap by promising higher inflation — is precisely that so far inflation expectations, while they have moved asset markets, haven’t translated into sufficiently higher inflation in the real economy. The idea that inflation promises might go directly into prices is a hope, not a worry.

So why did smart people get so confused by all this (and some still are)? Partly, I think, because liquidity trap economics — depression economics — is deeply counterintuitive to many people, including economists. I tried to make it more intuitive with an extremely simple model, but evidently that didn’t work for everyone.

Beyond that, in the late 1990s, and even now to some extent, we were suffering from the tyranny of the 1970s, with too many people seeing stagflation around every corner. In fact, it’s still happening now, despite the reality that the post-2008 crisis was far worse for the world’s major economies than the stagflation of the 1970s ever was.

Again, I tried to break through that obsession, with some modeling that I’m still very proud of, and with a book that I think looks very good in retrospect. But sometimes you can’t change preconceptions, no matter how clearly and simply you write. Sad!



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