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Oct 29, 2012

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Andrew Brod

I don't know how representative the folks at the end of the story are, but the husband's remarks indicate that he wants government to solve the broader economic problems we face. He's angry at politicians and may not even vote next week.

Maybe he's mad at policies that have allowed globalization and outsourcing. But maybe he's mad at how slow this recovery is. And yet because Randolph is a solidly conservative county, the odds are that he supports politicians who are making it impossible for government to solve this problem.

jeff

They made Asheboro look like a ghosttown. They must have done the filming on Sunday around 11.

Brian

I don't know about those odds Andrew...sounds to me like the Berrys are like most Americans and want to see and end to partisanship. There does seem to be a deep seated yearning for a "Do Something" party, or at least a "Do Something" Congress. I think there is something to said - that hasn't been part of the political conversation - about the true impact the presidency can have on changing our economic fortunes. One candidate says "Government doesn't create jobs" but is certain that his policies will create jobs. The other candidate insists that his policies are what kept us from losing more jobs than we already have. I call BS on both of them. Neither party has shown me that they have cornered the market on being able to nurture and deliver a robust economy, but one party has shown considerable determination to reduce and eliminate rights rather than expand them and that is dictating my vote.

Andrew Brod

Of course you're free to call BS on them both. But one of them is right.

Brian

Right about what, exactly?

Andrew Brod

"The other candidate insists that his policies are what kept us from losing more jobs than we already have."

That's the candidate who got it right, according to non-partisan analyses.

Kim

If you want a bright future, you might have to build it yourself.

polifrog

"Folks around here believe that if there is to be a brighter tomorrow they will have to build it themselves."

Commentary from 60min above.

Government was not and is not the solution. Too much of it is the problem. Perhaps it should let people build their own tomorrow and quit promising to build it for them.

Andrew Brod

"Folks around here believe that if there is to be a brighter tomorrow they will have to build it themselves."

Precisely, because the federal government, wedded to the disproven doctrines of neoclassical economics, has effectively refused to do its job.

Spag

Andrew is right. Since Ronald Reagan came into town with all of his neoclassical economic policies, America has been an economic disaster. Too much economic growth, low inflation, and too many jobs created. It's a good thing that the Keynesian Obama came along and fixed all of that. His record on those subjects is far better than Reagan, Bush, Clinton and Bush II...

From the article: "I guess I should have expected it coming," she said, tearfully recounting what she'll miss about the place she's worked for 27 years."

So she had a job for the past 27 years of awful neoclassical economics. It's only now that she is losing her job. Must be the latent effect of supply-side economics. I'm certain that if we only raised taxes on the rich, her job would be restored.

What an epic failure the past 30 years have been. If only we could go back to the 70's.

sean coon

hm, i thought the story focused on a US factory selling to an asian company who then replaced the employees by low-cost asian workers... if memory serves me right, that seems to be a scenario our economy has been dealing with for the past twenty years.

nah, mrs. berry's story is the only one, i'm sure.

worst  person on the internet

"the federal government, wedded to the disproven doctrines of neoclassical economics, has effectively refused to do its job."

And what job would that be, and where can that job description for which it has shirked its duty be found?

OBTW, @ Mrs Jenny and your pickes? You didn't build that!

Andrew Brod

I should have been clearer (not that it would have mattered, I realize). Neoclassical economics (the focus of my graduate training) is my primary tool for understanding microeconomic issues, and it works well for many macroeconomic circumstances. But not the current situation. As a tool for digging an economy out of a depression, neoclassical economics has now been disproven twice by the data, in the 1930s and then again since 2008. Invoking what Reagan or anyone else did outside of a depression is irrelevant.

Brian

Of course Andy, the Obama campaign would have us believe that it was his policies alone that saved us from a further economic depression. And I say give him partial credit because I think, frankly as I think you have pointed out in other threads, that he could have done more. I also think it gives overdue weight to his policies in general, as if nothing else on either the micro- or macro- level helped contribute to the minor recovery we witnessed. I don't care if his statement is semantically (?) correct or if politifact or any other non-partisan group said the statement is correct, because he can be correct and while still being less than effective. He still gets my vote, but not because of some masterful job he has done with the economy.

Andrew Brod

Fair enough. More should have been done.

Whether more could have been done is an open question, in my view. More stimulus? Probably not. More assistance to underwater homeowners? Probably so.

Spag

How can you say that neoclassical economics failed in addressing the 2008 crisis? Is Obama a believer in neoclassical economics? He has been in charge you know.

Andrew Brod

It failed because its predictions were wrong, whereas the Keynesian model's predictions were on the money. As a test of competing models, this one wasn't even close.

As for my previous comment on the inadequacy of Obama's assistance to homeowners, it turns out that he had some help: "Two Republican-leaning board members and at least one executive resisted a mass refi policy [because] they regarded it as a backdoor economic stimulus."

Yeah, we wouldn't want that.

Spag

Show us the models.

Andrew Brod

Right, like that'd do any good. Don't pretend you're persuadable. In any case, the models are described in any textbook, should you care to investigate.

For now, suffice it to say that one would have lost a good deal of money investing as though the neoclassical model's prediction of a high-interest-rate environment were true.

bubba

"Right, like that'd do any good. Don't pretend you're persuadable. In any case, the models are described in any textbook, should you care to investigate."

No, we just want to see if you're prevaricating here.

Andrew Brod

Go read a textbook and find out. You'll see that I haven't misrepresented the two models. Well, scratch that -- I'm sure your reading will tell you what you want to hear. But others will see that I haven't misrepresented the two models.

As for the models' practitioners' predictions, those were featured prominently in the news around the time the stimulus was enacted.

Spag

So you're saying that there is no actual model, just theories from economics textbooks. That's like predicting landfall of a hurricane by reading about hurricanes instead of using an actual model that factors in the existing conditions such as the jet stream, water temperature, the influence of pressure gradients, etc.

Gee, and I thought you actually ran real data through a real model.

Andrew Brod

No, that's not what I'm saying. But nice try.

There are many macroeconomic models floating around. Some are mathematical, i.e. "just theories from textbooks." Some are econometric, i.e. statistical models through which one can run "real data," as you put it. Some models are reasonably characterized as Keynesian, others as neoclassical. Often the models have different names, but they generally fall into one broader category or the other. For example, real-business-cycle models tend to be neoclassical in nature.

If you knew more about where conservative economic arguments came from, you wouldn't denigrate "theories from textbooks." Many conservative policies are based on them, without letting any "real data" get in the way. For example, take the conservative view that unemployment insurance hurts job creation because it makes it easier for people to remain unemployed. That's a theory from a textbook and it's not wrong. But guess what happens when you confront it with "real data"? You find that it's a very small effect, and one that's swamped by the huge involuntary unemployment we see now.

So be kind to "theories from textbooks," lest you undermine your own dearly held beliefs.

Andrew Brod

I mentioned real-business-cycle (RBC) models, which were invented at Minnesota and a few other schools when I was in grad school. RBC models tend to assume that markets clear and that recessions have real rather than monetary causes. As a result, they tend to generate conclusions that conservatives like.

Now, most of us understand persistent unemployment as an example of labor markets not clearing. But one of the more extreme implications of RBC models is that because markets are assumed to clear, unemployment must be voluntary. That's right, voluntary unemployment. Now, that's not entirely crazy in a full-employment economy, but it makes no sense in a depressed one. RBC models have been largely unable to explain the current depression.

Anyway, the thing about RBC models is that you can't run "real data" through them, as Spag put it. They get compared to the data, in a sense (the term of art being "calibration"). But they generally aren't estimated. Why not? Because the data repeatedly reject them. So the response of RBC modelers has been to argue that estimating models isn't important after all.

The point is that there's a class of "conservative" economic models through which one cannot run "real data."

Reality isn't tidy, is it?

Spag

I haven't denigrated textbooks. I have asked you to show me a neoclassical model run of the 2008 crisis that demonstrates that neoclassical prescriptions would have failed.

You haven't even pointed out a particular neoclassical policy to apply.

Andrew Brod

And I said, look it up. It's there for you, in any library.

The primary neoclassical policy was: don't enact the stimulus.

polifrog

Brod:

It failed because its predictions were wrong, whereas the Keynesian model's predictions were on the money. As a test of competing models, this one wasn't even close.

But

The primary neoclassical policy was: don't enact the stimulus.

is not a prediction.

Claims without references...Eyes without a face.

Andrew Brod

I didn't say it was a prediction. I said it was a policy.

The relevant prediction of the neoclassical model was that the stimulus, if enacted, would cause interest rates and inflation rates to shoot up. Those rates didn't shoot up. Not only are those rates, especially interest rates, still historically low, but predictive markets (such as interest-rate swaps) are betting that they'll stay low for years. The neoclassical model's prediction was obviously and dramatically wrong, because that model can't explain a depressed economy. In fact, it essentially assumes away a depression. According to the neoclassical model, what we're all seeing with our own eyes can't be happening.

polifrog

You were asked to produce a prediction that was later proven correct. You didn't. Unsurprising.


Brod:

The relevant prediction of the neoclassical model was that the stimulus, if enacted, would cause interest rates and inflation rates to shoot up.

Not only has stimulus so damaged the economy that it can not immediately ignite the resultant inflation that will eventually follow, but the Fed has been successful in artificially lowering interest rates further damaging the economy by shifting the cost of money toward arbitrary policy and away from more predictable market driven pricing.

If we are lucky enough to not follow the Japanese down the path of perma-recession and actually recover despite the damage caused by stimulus and the Fed's price fixing there will be a price to pay for stimulus. That price will be inflation and a growth rate lower than we would have otherwise enjoyed.

But as long as we continue the current policy of stimulus which in many ways includes QE3 the economy will continue to languish, inflation will be tame, interest rates will be low, and you will be correct.

It is the failure of the policies you support that allow you to claim the "success" you do.

Good job Brownie Brod.

Really, it is no different that claiming success for having expanded the numbers of people on federal assistance. Hell, those programs must be successful if so many people turn to them. Good job Dems...

Andrew Brod

It's hard to keep up with what I'm being asked to do. So okay, a prediction that was proven correct:

The relevant prediction of the Keynesian model was that because the 2009 stimulus was insufficient, if enacted it would leave interest rates and inflation rates at very low levels. That's what happened. Not only are those rates, especially interest rates, still historically low, but predictive markets (such as interest-rate swaps) are betting that they'll stay low for years. The Keynesian model's prediction was obviously right, and it's because it's well suited to explain a depressed economy.

To my knowledge, there is no model that fits the data (i.e. reality) and implies that the 2009 stimulus "damaged the economy." All of the arguments I've read along those lines are based on things like the crowding-out hypothesis, which isn't applicable to a depressed economy.

Roch

"Not only has stimulus so damaged the economy that it can not immediately ignite the resultant inflation" -- Polifrog

Yes! The policies that were certain to cause inflation didn't because they didn't, but if we'd stop doing the things that are certain to cause inflation, then we'll have inflation.

[What is this, really? I don't get it. A virus? Drugs? Fetal alcohol syndrome? Seriously, I've never seen anything like it.]

Worst person on the internet

Gotta admire Roch's consistency, as well as his character, sage advice and promotion of civility.

"I find polifrog a refreshing change. He has elevated the quality of dissenting opinion here. (Although we all lose points when we make it personal.)"
Posted by: Roch101 |

sean coon

as with anonymous handles, opinions also tend to shift over time...

polifrog

Roch:

"Not only has stimulus so damaged the economy that it can not immediately ignite the resultant inflation" -- Polifrog

Yes! The policies that were certain to cause inflation didn't because they didn't, but if we'd stop doing the things that are certain to cause inflation, then we'll have inflation.

The "it" you hinge your deliberate obtuseness on refers not to stimulus but to the economy that stimulus was intended to ignite. Stimulus did not ignite the economy, therefore there was no inflation. The current lack of inflation is evidence of the failure of stimulus.

As I said previously if we are fortunate enough to overcome the leaden weight of stimulus stimulus
will continue to retard growth in terms of latent stimulus induced inflation and stimulus related debt.

History is clear. Those countries less burdened with debt grow more quickly than those riddled with it.

Ed Cone

Data and models
Brod marshals facts adroitly
Into the quicksand

Andrew Brod

The stimulus is gone. Its "leaden weight" is past. Stimulus debt is short-term debt whose effects are easily dealt with, such as happened after WWII.

Countries burdened with persistent debt have problems. One can't omit that word. Countries with short-term pulses of debt, as from a stimulus package, do not have problems, or in any case their problems aren't because of the short-term debt.

If you want to argue that we have long-term debt problems, then I'm with you. Because then you're talking about healthcare costs and the Bush tax cuts.

Roch

Yes, Worst Person, I was fair minded, encouraging even, and gave polifrog a fair shake. Thank you for pointing that out.

Worst person on the internet

Your welcome, Roch, and while I have long admired your encouragement and embrace of ideas and opinions differing from your own, as well as your outspokenness against denigration of others’ intellect and other personal invectives as degrading to the quality of discussion, it was not until I read your self-stamped “fervent defender of diversity of opinion” at the Greensboro Guardian that I came to fully realize how deeply ingrained this core conviction is in defining your very being.

And it’s clearly not just a slogan for you either. You walk the walk every day on these pages in that regard, earning every bit of the warmth and admiration so many have for you. I have never seen anyone so adept at skillfully articulating his own opinions while so respectfully recognizing the validity of opposing ones. I don’t know how you do it, but you’re a breath of fresh air around here, and I for one appreciate it.

Sadly, Polifrog lost points with me too, when he started making it personal. Oh well, we tried.

polifrog

Hey! That was a compliment.

Worst Person:

Sadly, Polifrog lost points with me too, when he started making it personal. Oh well, we tried.
If I had called Roch obtuse I would have been engaging in a personal attack. I didn't.

I said "deliberately obtuse", the assumption being that Roch is not obtuse and in fact smarter than his comment implies.

I want those points back plus some...

polifrog

Brod:

The stimulus is gone. Its "leaden weight" is past.


Has the Fed reeled in all those "printed" dollars from QE2 and QE3 while I wasn't looking? My understanding is that we are now into QE 3 with no end in sight.

Andrew Brod

QE isn't fiscal stimulus and it doesn't create debt per se. It's a liquidity-enhancing monetary policy which is somewhat stimulative in nature. (QE is a second-best policy; if you can't get fiscal stimulus, you settle for QE.)

Yes, I suppose those QE dollars are still out there. Of course that's not a problem because, as you admitted upthread, there's no appreciable inflation happening now. The huge degree of slack in the economy effectively soaked up those dollars.

polifrog

You're right.

I should divorce QE from traditional forms of stimulus at this point. Except for that stimulus slowed by the grinding gears of governance traditional stimulus has been absorbed by the economy and is done lengthening our recession into a depression. It will not return as inflation at a later date. Its only weight on the future will be its cost.

QE will return as inflation.

Andrew Brod

Except that it won't: As I said, "the huge degree of slack in the economy effectively soaked up those dollars." You can't characterize the current economy as though the usual rules apply... unless you want to keep being wrong.

Investors don't agree with you: the 10-year TIPS spread is about 2.5% (its average during the last two expansions). YOY core inflation is 2%. The Cleveland Fed's index of inflation expectations, which factors in market prices as well as survey data, is 1.5%.

Believe what you want about inflation, but there are no actual data to support your view.

Andrew Brod

By the way, the Cleveland Fed index applies to the next 10 years. So that 1.5% is expected average annual inflation over the next decade.

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