Tuesday, February 24, 2009
Samuelson vs. Krugman
In one corner, we have Paul "No Axe to Grind" Krugman, Nobel Laureate and Chief Economist for the firm of Mao, Marx, and Lenin.....and in the other we have Robert Samuelson, also an opinion columnist (because after all, that's what Krugman is) who takes his non-partisanship so seriously that he doesn't vote. Now Samuelson of course lacks the imprimatur of the Nobel family, but his writing on matters economic here in the US has no shortage of admirers on both sides of the aisle. Krugman pushed hard for the stimulus (actually, that's not entirely true--he thought it wasn't big enough! But he sure did rip Republicans for questioning it); Samuelson represents the view that most Republicans had--that the stimulus was necessary, but that this version had too little stimulative impact in the critical 2009-2010 timeframe.
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5 comments:
Cited, again!
...but you left out the context. I'm still waiting on someone to explain to me why noted economists like Krugman, Roubini, Simon Johnson, or Yves Smith are out to destroy the reputation of a man who is no longer a regular player in public life.
And as far as the socialism thing, what is YOUR answer to our current crisis?
I note you don't have any economics sites listed as frequent reads. Is that just an oversight? What sources of information are you using to form your opinions?
SK--I hope you'll tune in on TWITTER tonight, your voice would be great to have in the mix.
As to context with Krugman....here is what you wrote:
"I was thinking about this more, and I have one last point before I let the topic drop. Here's the state of play as I see it:
-On one hand, we have Fightin' Phil, VP of a bank that has far-reaching interests in the issues under discussion, and widely cited as one of the people who assisted in driving the world economy into shoal water.
-On the other, we have many renowned economists (both academic and practicing), including at least one Nobel Laureate (Krugman) who don't have any obvious axes to grind.
I like to play the "what's more likely" game in situations like this. Is it more likely that an individual would seek to revise history such that he's not culpable in global financial collapse... or that there's some kind of conspiracy among a widely disparate group of experts to show that some politician that most Americans forgot about 15 minutes after his term ended (if they knew he existed at all) was involved heavily in the worst decisions leading up to this crisis?"
Context is a tricky concept, sorta left open to interpretation. I will open myself to the charge of misinterpreting your words in order to answer your charge of context.
I read the above as basically saying on the one hand, we have a guy who is trying to cover his ass (Gramm) and on the other, we have a bunch of economists who do....something. What I'm getting at is that I don't see the "context" for the Krugman comment. It is sort of left dangling. If what you're saying is that Krugman has no axe to grind but that he affixes blame to Gramm, then I'd say that I am unfamiliar with anything Krugman has written on Phil Gramm. If you're saying that on one hand there's Phil Gramm trying to cover his butt, and the group of respected economists who blame the current state of play on the investment banking community, then I'd say Krugman does have an axe to grind, as he has very specifically criticized the investment banking community, i would say to a degree that does not appropriately affix blame elsewhere. Am I spelling axe correctly? I digress.
I am honestly unable to discern proper context for your Krugman statements.
As for my answer, I hope it has been obvious from the writing here. Across the board marginal tax rate reductions, a reduction in the corporate income tax, and targeted, stimulative infrastructure investment. Same basic formula as the President (some revenue, some spending), just different ways of going about it.
Finally, though I would hesitate to claim that my frequent reads on this blog comprise my daily reading, was it too hard to click each URL to see that Greg Mankiw's site is...well...basically only economics?
Really finally, this is the kind of exchange that has me thinking of changing the comment policy. It reads like an extended email trail between two people...
Ugh. (That's self-directed). You're right on several points. Notably:
I overlooked Mankiw. I've come across occasional posts by him, but will now follow his feed. (What other economics blogs? I'd love to see a more complete list.)
My point(s), now that I've reread, aren't as clear as I'd like. What I'm trying to say: There are lots of people in a position to know who, to various extents, point to Phil Gramm as one of fathers of this particular failure. They do so with numbers and dates that are public and not really open to interpretation. On the other side is Gramm, defending his actions with shoddy numbers and an unbelievable timeline. I understand why Gramm is doing what he's doing, but I don't understand why Krugman and others would go out of their way to slander someone who is otherwise innocent (and in no danger of re-entering public life, seems to me).
It seems more likely to me that, if a conspiracy was afoot, they'd find someone less able to fight back and/or just keep it more general (investment banks, fraudulent brokers, etc).
I think it's important to note that no one I've read says that ANYONE, including Gramm, is primarily responsible -- just that there many causes, he is one of them, and the GSEs are relatively innocent when compared to other actors.
I detest sharing this link, but...
http://thinkprogress.org/2008/09/16/krugman-on-gramm/
I offer it only as evidence that Krugman said what I asserted. (For the record, google found this. I don't read Think Progress and I HATE Olbermann on anything other than SportsCenter.)
Krugman has been VERY critical of the current and previous administrations. His columns are mediocre at best. I would encourage you to read his blog if you don't do so already; it's highly informative.
I agree... this is more of an email exchange than anything else. Hrm.
Some economics blogs I'm following:
baselinescenario.com
marginalrevolution.com
npr.org/money
nakedcapitalism.com
calculatedrisk.com
Ok--I will respond, and then I will give you the last word.
Here's what I did. I went and looked at the link you sent on Think Progress. What I take from this is that Krugman's objections to Gramm flow largely from the latter's term as Chairman of the Senate Finance Committee, during which two pieces of legislation were signed...Gramm-Leach-Bliley and the Commodity Futures Modernization Act. THIS CHARGE I am familiar with, and you are right, lots of respected economists and others have pointed to these two laws as very much a part of the mess we are in.
So--as a respected Economist, Krugman objects to those pieces of legislation. As a political columnist, he pretty seriously attacked Gramm's credentials for possible office in a McCain administration. None of this is surprising. But there is a difference (in degree) between objections to a perception of lax regulation brought on by legislation he sponsored, and a pretty serious political attack on someone's worthiness for office. Phil Gramm's got a PhD in Economics also, though no Nobel. This is where I PERCEIVE Krugman to have an axe to grind. But I will grant you that he is far from alone in his interpretation that these pieces of legislation were contributors to our present mess.
But what if you are Phil Gramm, and you know 1) that you are smart 2) you feel that the legislation you presented then was right and good and remains so today. Well, you take to the editorial pages to explain your side. I include a large portion of his defense from that article:
"The principal alternative to the politicization of mortgage lending and bad monetary policy as causes of the financial crisis (which is what Gramm believes) is deregulation. How deregulation caused the crisis has never been specifically explained. Nevertheless, two laws are most often blamed: the Gramm-Leach-Bliley (GLB) Act of 1999 and the Commodity Futures Modernization Act of 2000.
GLB repealed part of the Great Depression era Glass-Steagall Act, and allowed banks, securities companies and insurance companies to affiliate under a Financial Services Holding Company. It seems clear that if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.
Moreover, GLB didn't deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies. All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB.
When no evidence was ever presented to link GLB to the financial crisis -- and when former President Bill Clinton gave a spirited defense of this law, which he signed -- proponents of the deregulation thesis turned to the Commodity Futures Modernization Act (CFMA), and specifically to credit default swaps.
Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis. That market has never lost liquidity and the default rate has been low, given the general state of the underlying assets. In any case, the CFMA did not deregulate credit default swaps. All swaps were given legal certainty by clarifying that swaps were not futures, but remained subject to regulation just as before based on who issued the swap and the nature of the underlying contracts.
In reality the financial "deregulation" of the last two decades has been greatly exaggerated. As the housing crisis mounted, financial regulators had more power, larger budgets and more personnel than ever. And yet, with the notable exception of Mr. Greenspan's warning about the risk posed by the massive mortgage holdings of Fannie and Freddie, regulators seemed unalarmed as the crisis grew. There is absolutely no evidence that if financial regulators had had more resources or more authority that anything would have been different."
Now, I'm not enough of an expert to know how persuasive a case Gramm made there (in characterizing and criticizing his critics arguments), but what I don't see are shoddy numbers and unbelievable time-lines. Gramm may be full of crap for all I know, but his defense of those acts did not raise any flags with me.
Finally, I do not visit any other websites specifically devoted to economics. I read the New York Times and Washington Post most every day. I read the Economist probably twice a month. I read countless blogs and media sources every day--hours worth, to be honest. These are heavily weighted toward conservative thinkers. I would suggest that in the past six months, my interest in and consumption of economic news has been unusually high, but my interests are varied and my reading habits are too.
I have enjoyed this bit of repartee, and I look forward to your closing remarks. But in the words of Austin Powers, "I'm spent."
I'm out!
Thank you for your views, ably and intelligently shared.
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There's a reason I stay away from places like Think Progress, even though I suspect I agree with them in many ways. Groupthink doesn't appeal to me much... I'd much rather have my views and opinions challenged.
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