The parent trap

Bobo six months ago on German austerity:

The early returns suggest the Germans were. The American stimulus package was supposed to create a “summer of recovery,” according to Obama administration officials. Job growth was supposed to be surging at up to 500,000 a month. Instead, the U.S. economy is scuffling along.


The economy can’t be played like a piano — press a fiscal key here and the right job creation notes come out over there. Instead, economic management is more like parenting. If you instill good values and create a secure climate then, through some mysterious process you will never understand, things will probably end well.

An actual economics reporter (Dave Leonhardt) today:

With its modest stimulus winding down, Germany’s growth slowed sharply late last year, and its economic output still has not recovered to its prerecession peak. Output in the United States — where the stimulus program has been bigger and longer lasting — has recovered. This country would now need to suffer through a double-dip recession for its gross domestic product to be in the same condition as Germany’s.


“It’s really quite striking how well the U.S. is performing relative to the U.K., which is tightening aggressively,” says Ian Shepherdson, a Britain-based economist for the research firm High Frequency Economics, “and relative to Germany, which is tightening more modestly.” Mr. Shepherdson adds that he generally opposes stimulus programs for a normal recession but that they are crucial after a crisis.

It’s pretty much a guarantee that any argument involving the idea of government as parent will be a faulty argument.

No one could have predicted that Paul Krugman would be right about austerity.

65 replies
  1. 1
    kdaug says:

    Riech and others, too. Whocoddanode that when government is the spender of last resort, it probably ought to spend.

  2. 2
    Belafon (formerly anonevent) says:

    But you see, we’re exceptional. Those Germans and Brits can’t do austerity as well as we can. If we’d just not spent any money, we would have done it so well we’d be paying no taxes and earning an infinite amount of money right now. Spending just slowed down our dividing by zero.

  3. 3
    Pooh says:

    I mean this is like second week of Macro 101 stuff.

  4. 4
    MarkJ says:

    More words of wisdom from the daddy party.

  5. 5
    Batocchio says:

    Good catch. Why, it’s almost as if Bobo doesn’t read the other op-eds in his own paper!

    K-Thug has pointed out on numerous occasions that the stimulus helped, but was too small, and the Keynesian approach was never really tried. He’s hardly been the only one. David “Viva the Aristocracy!” Brooks must know all this, but he’ll pimp laissez-faire and supply-side nonetheless. Wanker.

  6. 6
    RSR says:

    Parenting as a “mysterious process” aggravates me. It’s not always easy, it’s not cheap, mistakes will be made, and it sometimes requires leaps of faith, but I don’t find parenting to be a mystery.

    I wonder if Iraq was some big mysterious, glorious adventure, too?

    But I guess Bobo admits economics is just a mystery to him. The first step is the hardest, right?

  7. 7
    MikeBoyScout says:

    Nobody could have predicted!
    And Krugman does not count as anybody just because he won a Nobel in his field.
    GW Bush never got a Nobel for bringing Democracy to Iraq, so something also too. Everybody has got to hurt.

  8. 8
    geg6 says:

    I am not an economist, but everything about government spending in these crises situations was pretty well covered in a freshman Econ101 class that I took over 30 years ago. Did none of these people take Econ in college or perhaps read a Krugman column? Ever?

  9. 9
    dan says:

    I just got push-polled about how Mediscare is destroying the economy. Would you agree somewhat or strongly?

  10. 10
    PurpleGirl says:

    @MikeBoyScout: Krugman is the Shrill One. Not a very serious person, a shrill person.

  11. 11

    I’d bet somebody correctly predicted that the plutocrats would do well out of this recession…

    11/15/08 I had something to say about it:

    Here’s the deal, things are going to get worse and a lot of people who shouldn’t be at risk are going to find themselves going under. They’ll have worked real hard and gotten a little ahead and be sunk because some wealthy assholes couldn’t get richer fast enough that they could pay attention to what they were doing. Years ago financial planners were warning that derivatives were real risky not understood by more than a handful of people, so between them and swaps built on them they ran up ten times the value of the assets and exploded it in our faces. Not theirs. Ours. The ones walking away will be wealthy and the ones staying are gaming the Fed to get wealthier. I suppose you think you ought to have recourse? Maybe political or criminal? Make me laugh. There’s recourse alright, but it’s frowned upon and illegal because they don’t issue ratbastard tags…there’d be a hell of line if they did. That’s flatly the damn truth and you can get along with it or you can go howl at the moon because either will do as much to fix it.

    The post is quite a bit longer and not quite germaine.

  12. 12
    Brian S says:

    Parenting as a “mysterious process” aggravates me. It’s not always easy, it’s not cheap, mistakes will be made, and it sometimes requires leaps of faith, but I don’t find parenting to be a mystery.

    It’s only mysterious in the sense that you can’t ever really plan for the future beyond the most basic things, because something is guaranteed to change on you. But you can say that about every facet of life–parenting is just another part of it. I consider myself lucky that my kid wound up reasonably well-adjusted despite the fact that I’m a poet and I named her Brittany Spears.

  13. 13
    JPL says:

    OT..It appears that Rahm will avoid a runoff. With 81% of the vote he has 54%.

  14. 14
    Turgidson says:

    Stop being so shrill.

  15. 15
    srv says:

    It is frustrating you don’t see that Krugman is always right for the wrong reasons.

    Moral hazard, bond vigilantes, and mysterious processes y’all will never understand.

  16. 16
    Bex says:

    OT, but check out Bowers on Kos re government shutdown. He says, “something similiar to Wisconsin may be coming to the whole country, and soon.” And why not?

  17. 17
    Turgidson says:


    Yep, even my pretty-right-wing macroecon prof who spent way too much time trying to justify the Laffer Curve and how supply side mumbojumbo was valid taught us that much.

  18. 18
    Pooh says:

    This “parenting” nonsense is just that. Nonsense. The economy is not a living organism. It has no memory or learned behaviors. It’s the aggregate of individual behaviors, nothing more, nothing less. If the problem is insufficient aggregate demand, reducing demand further with “tough love” is inimical to recovery.

    Fucking aggregates, how do they work?

  19. 19
    matoko_chan says:

    its more liek nonlinear system collapse.
    there are no breakpoints, propping banks doesnt fix job creation, and its as slow and as deadly as glaciation.

  20. 20
    MikeJ says:

    @JPL: W00t!

    Not that I care that much, I don’t live in Chicago. But I do enjoy flagellating hippies.

  21. 21
    Loneoak says:


    Parenting as a “mysterious process” aggravates me. It’s not always easy, it’s not cheap, mistakes will be made, and it sometimes requires leaps of faith, but I don’t find parenting to be a mystery.

    We might note that Bobo has no children, unless you count pop-social science turds in Cheltenham typeface as children.

  22. 22
    HyperIon says:

    I think the same BS could be found in his writing about Ireland. The guy is clueless.

  23. 23
    RSR says:

    Haha, my wife just said if parenting is a mystery it’s probably because your wife is doing it for you.

  24. 24


    The guy is clueless

    I make a lot less…

  25. 25
    srv says:

    You know what’s really mysterious?

    Anyone could go through Bobo’s op-eds for the last couple of decades and they would make this one look like the most prescient quote ever, but there are a million teatards who have a Krugman quote from 2003 in their clipboard where he ‘advocates’ a housing bubble because, well, he predicts Greenspan is going to create a housing bubble!

    Fuck. K-Thug could accurately predict the lotto numbers each week and Bobo would emote about what a moral hazard that was.

  26. 26
    frosty says:

    If you instill good values and create a secure climate then, through some mysterious process you will never understand, things will probably end well.

    La-de-da. Isn’t it pretty to think so?

    Or through some quirk of DNA or birth order or some damn thing one of your children will be an A student and the other will be in trouble with the law. Did you parent them differently? No. Did you love one more than the other? No. Will everything end well if you “instill good values and create a secure climate?” Probably not.

    Also too. People drop dead, suddenly, for no reason. Good people. Despite their good values and secure climate. Bad shit happens.

    To quote Paul Fussell “Life is short and it almost always ends messily.”

    Fuck that rich, insulated sonofabitch and everyone like him.

  27. 27
    Dennis SGMM says:

    My lovely wife and I have been raising our autistic son for twenty-five years now. I’d say that parenting is only a mystery if you don’t pay attention and you don’t learn from past mistakes. Sort of like Bobo and every last thing about which he pontificates.

  28. 28
    frosty says:

    @matoko_chan: Not to hijack the thread, but how is slow and deadly non-linear? The essential thing I took out of “Chaos” was that non-linear systems flip from the slightest of influences. The classic description being “The flap of a butterfly’s wings in Brazil can cause a tornado in Texas.”

  29. 29
    frosty says:

    @Dennis SGMM: Good for you. My dyslexic son is now in college majoring in History. Parenting is a lot of observing reality and reacting to it. Like you said, it’s paying attention to your kids and seeing the real them and not you or your parents or your ancestors.

    Every real kid is a mystery. Good parenting is the process of teasing out the mystery and trying to eliminate the obstacles so the kid can succeed.

  30. 30
    jl says:

    Brooks writes in the column:

    “This divergence created a natural experiment. Who was right?”

    Well, OK, then, when you wait long enough to let the experiment play out, looks like Krugman, Stiglitz, Galbraith, Baker, Blinder, and the computer runs of Romer (that Summers suppressed) were right, and Brooks was wrong.

    And the timing of the weak recovery and stall strongly suggests that deficient aggregate demand for current goods and services was the problem.

    However, not sure how big a deal it is. Both countries had a misguided aggregate fiscal policy, so the comparison is between two countries who will have a weak recovery followed by a stall, one sooner and one later.

    One way Germany has done much better than the US is in the unemployment rate, regardless of its GDP performance. Most analysts think this is due to job sharing policy of extended leaves and vacations and hours reductions rather than layoffs.

    Hey, that is an innovative idea that Brooks might consider for a ‘new social contract’. It seems more relevant to debates on social contracts than discretionary fiscal policy, which in terms of GDP growth doesn’t have a lot to do with social contract at all, strictly speaking.

    Brooks should like the idea of job sharing, it is not a bad Frenchie s * s h * * l * s t commie, or totalitarian Nordic thing, it is a Old Europe Christian Democratic thing, which should ring Burkean bells for Brooks.

  31. 31
    Doug Hill says:


    Well, OK, then, when you wait long enough to let the experiment play out, looks like Krugman, Stiglitz, Galbraith, Baker, Blinder, and the computer runs of Romer (that Summers suppressed) were right, and Brooks was wrong.

    I’m not a Summers lover, but it’s not quite right to imply he’s anything like Bobo. Summers went for too small a stimulus, Bobo wanted an even smaller one or none at all.

  32. 32
    jl says:

    @Doug Hill:

    I did not mean to suggest that Summers is comparable to Brooks. I wanted to add Romer to the list of numerate competent economists who can do competent and careful analysis and make a good forecast, but wanted to defend against the criticism that Romer was part of the administration, so did not have it right.

    That was my rationale for including the parenthetical re Summers.

  33. 33
    MikeJ says:

    @Doug Hill: Summers is just a comedian. You can’t hold him responsible for anything he says.

  34. 34
    jl says:

    But, Wobbly DougJ, you R doing it rong.

    Did you not see my brilliant comment earlier today?

    Which was to:

    BJ finds one undeniable factual error in the nexus of corporate hackhood, including Brooks, Will, McArdel, Lane, etc. List them on the front page of the blog, and suggest that for each undeniable factual error they refund 500 dollars of their Bush II tax cut for the rich.

    They got the tax cut that was supposed to increase productivity, but they are not Galting better.

    I figure one undeniable factual error per column or post, and they will have to send back 25 or 50K a year.

    You post is just about Brooks being a dingbat. But, thanks, this Brooks incident was interesting and should be recorded for his humiliation in the face of history.

    Edit: Now see, MikeJ was mean. Why is Wobbly DougJ always picking on me? Boohoohooo.

  35. 35
    Doug Hill says:


    Good, I wasn’t sure you were, I just like to emphasize that even the Rubinites are not awful in anything like the way Bobo is. They make mostly sane (if sometimes wrong) decisions that too often favor Wall Street. If Bobo were put in charge, we’d be looking at something close to the apocalypse.

  36. 36
    daveNYC says:

    So Brooks thinks that the economy works on the Underpants Gnome system. Awesomesauce.

  37. 37
    Elia says:

    1 point and 1 question:

    I don’t think Bobo actually has any real beliefs/positions (this is in response to saying he wanted a smaller stimulus or none at all). I think he just takes into account the GOP talking points of the day, then figures how to present them and himself in the most “reasonable” manner possible. I guess he might have a firm conviction that we should invade countries in the Middle East, but other than that…

    Quesiton: Why do you guys think Geithner recently came out in support of the UK’s austerity measures? (Besides BECAUSE HE’S A CLOSET LIBERTARIAN.) His explanation of how their situation was different from ours seemed a little…well, I was unconvinced.

  38. 38
    jl says:

    @Elia: Why take Geithner seriously? He is shifty. You try to pin him down, and he squirms away with some excuse. When it serves his purpose he is a regulator and a civil servant, or a macroeconomist, or a financial economist, or an Obama functionary.

    I’ve heard him, out of his own mouth, pull this dodge in interviews and tesimony.

    He could be comedian in school of the late Andy Kaufman.

  39. 39
    Pooh says:

    @Doug Hill: Right – at least Rubin/Summers et al are speaking the correct language. Bobo’s thought processes are akin to having an MD repair your car engine. There are, at a sufficient level of abstraction, similarities between the two things, but that doesn’t really provide any useful guidelines for how to best proceed.

  40. 40
    The Raven says:

    Time to stop calling it austerity and start calling it “miserliness.” If one is going to be a bit rough-and-tumble, one could call it “cheapness.”


  41. 41
    ppcli says:

    @The Raven:
    How about “Dickensianism”?

  42. 42
    jl says:

    @The Raven:

    I think it is best to call austerity, in this economic climate, a mistaken policy recommendation based on a failed research program in macroeconomics.

    Lacks punch, and bad political messaging (I will let the relevant experts work on that angle), but that is the truth, and it has staying power. You won’t have to change your story 180 degrees from week to week, and go into analytical and conceptual fugue states.

  43. 43
    Ronzoni says:

    My Econ 101 & 102 texts were by a feller named Paul Samuelson. I hated these courses as I hated HS Geometry. Why? Because everything was strictly a logical exercise. It stands to reason that if you manufacture a product, you need customers. Customers, in order to buy your product, need money. Take away the customers’ money, and your sales drop. Unions ensured customers had money. Take away unions and your customers have no money, and you have no sales.

    Jeebus H. Xmas! Even Henry Ford recognized that he had to pay his employees 5 bux a day so they could become his best customers.

    Current efforts to destroy unions are also destroying that customer base. No matter where the product is manufactured, someone has to buy it.

    What is so friggin’ hard to understand here?

  44. 44
    El Cid says:

    @Elia: Geithner as IMF rep coordinated IMF “austerity” plan for Indonesia during Asian financial crisis. The crisis had nothing to do with government overspending.

    The resultant IMF-designed economic plan accepted by US-installed dictator Suharto led to rioting as fuel prices shot up and food subsidies were drastically cut, only being brought up and changed in a more targeted fashion after the reaction was seen.

    It’s not that Geithner designed such an approach. It was completely standard for the IMF & World Bank to attack 3rd world countries who borrowed from them and force ‘austerity’ and radical supply-side economics on them, whitewashed by IMF / WB pushes to clean out huge levels of existing corruption and so forth.

    In this case it was IMF directing Asian Development Bank as funded by Japan and Australia, but they didn’t plan that the disorder would end up overthrowing the genocidal tyrant in power for 30 years.

    If they could only have claimed it was intentional, the IMF could have been greeted as liberators.

    The IMF finally admitted that after decades of slamming 3rd world countries with “austerity” and “structural adjustment,” they didn’t have a single strong success story they could use to demonstrate the correctness of this US/Western advice.

    The question is which of our ‘experts’ learned the same? Did Geithner? I don’t know. He was out before the IMF (and all the other similar US-dominated ‘lenders’) had its ass handed to it by 3rd world nations unwilling to put up with this bullshit economic ‘advice’ which screwed them over.

    What’s worse, the Asian financial crisis was one triggered by currency speculation with greatly overindebted private investors. Sound familiar? Not by Indonesian (etc) government profligacy. It was the predations of the private sector.

    This is not some retrospectively applied analysis having to do with opinions on current and recent US politics. It was completely, utterly obvious during the crisis itself, though I wouldn’t have paid any attention to the name Geithner at the time. People had watched this US/Western-forced economic restructuring of many nations and the awful results for a decade and a half by that point.

    Jeffrey Sachs talks a good game now, for example, but you wouldn’t have known so from his ‘expertise’ in helping Russia go from Soviet stagnation to Russian utter crony theft while destroying necessary social support programs.

    Back then he jauntily called it “shock therapy”, because, you know, our economists are such experts at correctly refashioning other nations’ economies that it’s like psychiatrists curing mental illness with electroshock. (‘But they didn’t do everything I told them to!’)

    If you want to listen to someone who not only knows what he’s talking about, who not only is a major international figure, but who knew it and was screaming about the wrongness of this IMF austerity / restructuring plans in Asia at the time, just listen to Joseph Stiglitz.

    He was the World Bank’s Chief Economist and he was yelling all over the place how wrong this approach was.

    The mistake Stiglitz made was in thinking that when US & Western ‘experts’ impose economic reforms on nations, it’s not about the economics of fixing the situation: it’s about power and getting what those institutions’ backers desire — and you can’t really effectively do that unless you’ve got people in there who truly believe in economic ‘reforms’ overwhelmingly designed to benefit the wealthiest investor classes and who truly believe that they really are specially qualified to do so.

  45. 45
    jwb says:

    @Doug Hill: But he’d reassure us that the apocalypse was the morally right decision, so it’s ok.

  46. 46
    Elia says:

    Oh I had totally forgot he was IMF head honcho during that debacle!

    I guess I figured that the Democratic wing of the neoliberal enterprise had learned their lesson, though. But it’s true that Geithner is an obfuscater. Having read Too Big to Fail (which was quite sympathetic to him, to say the least) you still can see that he’s just as aware of his image as you’d imagine anyone whose reached those heights to be.

    Also — knew about Sachs, but was under the impression that Stiglitz was a neoliberal for a bit before turning against it. Ditto Krugman.

    I mean, basically anyone who has had success at the elite level was a neoliberal due to the idea’s hegemony for much of the past 30 years, right?

  47. 47
    jwb says:

    @Elia: Worse, I think Brooks has beliefs, knows the side he is supporting is morally repugnant, and takes the positions he does anyway, because he knows he’s much more likely to wind up personally better off if he is on the side of overlords. He is the ultimate cynic.

  48. 48
    El Cid says:

    By the way, Malaysia’s leader Mahatthir Mohammed (no angel he) said ‘fuck you’ to the IMF & WB (and related local int’l lenders), said keep your loans and your extorted ‘conditions,’ and launched moves to end currency speculation, capital outflow, invest rapidly in many sectors of the economy.

    Of course, our ‘experts’ in policy positions and in academia and in think tanks and in the business press howled at how Malaysia was going to destroy itself, and that arrogant crazy backward anti-freemarket Mohammed was missing the lesson of South Korea et al, who took the loans and followed advice.

    Malaysia grew out of the crisis the fastest and its poor suffered nowhere near the amount by which they were hit in the nations following ‘belt-tightening’.

    Not to mention that the IMF and the rest almost immediately had to rescind or drastically soften many of its brilliantly imposed economic transformations, as the economies being improved were being severely damaged and the populations had no tolerance for bullshit about how ‘we all have to hurt’.

    So those looking back and showing that those nations who followed IMF prescriptions did just fine ignore the vast retreats by the experts not long into it.

    We are now in our own ‘Asian Financial Crisis,’ and the ‘experts’ are now playing the IMF, they are ignoring the screams of today’s Stiglitz’s, and they are assuming that we’ll be complacent with dealing with hurting together.

    Funny enough, though, the US Treasury was one of the main forces telling the Asian nations to follow this expert advice, and do so bluntly and harshly. With us it seems to be more like the experts in the AFC after their maximalist programs weren’t doing all that well.

    The US you are living in is now playing the role of the 3rd world nations having ‘shock therapy’ and ‘structural adjustment’ and ‘austerity’ programs administered to them.

    When such programs were at their height, the leaders of those nations mostly believed in the expertise of their benefactors, even though they had already paid back the original loans by multiple amounts, and now were imposing ‘austerity’ and neo-liberal super-supply-side economics just to get more loans to pay off the interest on the original loans they paid off.

    At the time, the US and the West of course didn’t follow the advice they were imposing on the 3rd world, because they all understood that these would be disasters for the big rich countries.

    And presumably the political leadership wouldn’t go along with it, much less would the people bear it.

    Now they got their chance.

    Our experts are conditioning our own economy for austerity-focused ‘shock therapy’, our political leadership is indeed divided on this but more and more of the political establishment is buying in, accompanied by an entire intellectual and propaganda infrastructure.

    It won’t work here any more than it did earlier and elsewhere.

    Then and there, though, the IMF et al didn’t actually run the nations undergoing the shock; they didn’t have direct representatives in different levels of government, sometimes in the majority, who could set up rapid, unstoppable, naked plunder, rather than merely setting up all the rules to favor investors.

    South America left those austerity / shock therapy plans far behind and have grown faster and with better improvements to their domestic economies and social development than ever before.

    We look set to learn how to live in 1980s disaster South America, rather than the current one.

    Our choice to make.

  49. 49
    Dr. Squid says:

    Instead, economic management is more like parenting.

    Because when you blister your kid’s ass with a switch, you always get the desired result.

    What. A. Dumbass.

  50. 50
    Elia says:

    The idea that they’re trying to do it here is a bit problematic for a “neoliberalism as neoimperialism” narrative.

    Unless, I suppose, you argue that the perpetrators don’t care about any nation-states and are a global economic elite…

  51. 51
    El Cid says:

    @Elia: For a long while there wasn’t much prominent dissent from neoliberal / supply-side / radical ‘market-oriented’ reform theory.

    If you did, you were obviously some backward crazy internationalist leftist ideologue who didn’t recognize the harm that too much government could do and you didn’t understand how your foolish anti-modernism was going to harm the people you supposedly most wanted to help.

    (It was a lot of fun trying to convince people that you opposed NAFTA because of the harmful effects it would have on Mexicans. Oh, you luddites romanticizing the lives of Mexican workers! Why won’t you let them have the opportunities you enjoy?)

    At least some, though, could look back at the wreckage and say, hey, you know, maybe the kind of thinking which led to that was wrong. Some faster than others.

    It took Bill Clinton until recently to admit that our LOUDLY OPPOSED BY GRASSROOTS ACTIVISTS AND AREA EXPERTS program to overwhelm Haitian rice production with our exported & subsidized big agribusiness rice, and our plan to destroy the local, Haiti-adapted pigs and bring in our fat, rich-fed and delicate and ravenous pigs were really bad ideas. Because rice production plummeted and starvation was rampant because former farmers had no money to buy expensive subsidized US grain and because none of the peasants happened to own vast quantities of food they themselves didn’t have to feed gigantic resource hogs.

    This was the mid-1990s. This wasn’t the 1960s when you had so few people in Haiti with knowledge of the local environment. The only reason to ignore the screams of dissent and impose these idiot programs was because our elites knew that our ‘free market’ abstraction-based blathering was correct, and anyone dissenting hated Haitians and didn’t want them to be modern and happy like us and all of them were hatefully paranoid about big US corporations like US agribusiness.

    Clinton was basically a good guy, but no one should buy for one tiny second crap about ‘hoocoodanode’ when by this point we had enormous quantities of scholarly literature in every field about the past 30 years worth of programs by the West to improve poor nations’ economies with their expertise.

    Personally, I would warn anyone listening to any supposed expert on any topic of national direction who talks about how it’s necessary for the population to hurt in order to impose programs which are supposedly necessary, but strangely enough, don’t actually hurt the most wealthy.

    These aren’t doctors, we aren’t patients, and that sure as hell ain’t medicine.

    Then again, 1997 was like, a million years ago, an entire continent just a bit South has nothing at all to tell us, we can’t quite remember who was President before Barack Obama, no one has ever gone through financial collapses stemming from the rampages of supergiant businesses, no one knows anything but the sorts of people who are always preferred as experts, and the rest of you can keep whining if you like but we need to listen to people who are serious.

    After all, they know what they’re doing.

  52. 52
    jl says:

    IMHO, Krugman and Stiglitz have been pretty consistent in their analysis. I think Stiglitz was somewhat more neoliberal wrt to finance and macro in the early nineties, and I have heard people say he was building a history of making arrogant neoliberal retorts to skeptics during that time.

    I think Stiglitz’ conversion away from an orthodox neoliberal macroeconomics, international economics and finance grew out of his research. You can do a search ‘Joseph Stiglitz’ and go to his home page, and nose around old papers.

    He started applying his version of asymmetric information economics to financial intermediation in the early nineties, and the first papers with analysis, predictions and critiques of financial deregulation date from 1992 and 1993, before the Asian financial crisis.

    People like Stiglitz and Krugman may be right or wrong on various issues, but I think they see themselves as social scientists going wherever theory and evidence leads, at least in terms of their economic policy advice.

    They do seem to have some empathy, which many lack, there is that difference between them and many economists.

  53. 53
    tobie says:

    What’s truly annoying about Bobo’s column is that he neglects to say the reason why Germany’s GDP rose 6 months ago and has now sunk. It would have required him to acknowledge the success of China’s massive stimulus package which increased demand not only in China but also abroad. Now that China’s cutting back, and Germany has instituted austerity measures, the economy is contracting. Yet another example of the wisdom of Keynes, which the Brooks and Gergen’s of the world willfully ignore.

  54. 54
    Roy G says:

    What’s great about being a wingnut is that you instantly become an expert on everything; today, economics and unions, tomorrow, women’s reproductive systems, Thursday, democracy, and so forth.

  55. 55
    El Cid says:

    @Elia: It’s not problematic at all. It’s the sort of thing so many of them have long wanted to do.

    They are the nation-state. We are the 3rd world nation with rich resources and sources of wealth to plunder

    If Reagan had had the sort of political power Bush Jr. did and a Democratic Party far more purged of labor and liberal Democrats and the completed takeover of the South by Republicans and an even more compliant media and entire broadcast networks shoving ultra-right propaganda 24/7 on TV and every bit of the AM spectrum and no opposing force like the USSR, he wouldn’t have gone on the ultra-plunder Bush Jr. and the hit-n-run gang did?

    You think banking deregulation under Reagan would have been limited to savings & loans and our hundred-billion dollar cost from that rampage of gambling & theft? No, it would have been pedal to the medal and Phil Gramm would have been lapped at the time he was being thrown out of the Democratic Party. The end of trade tariffs and regulations would have been made an unalterable treaty so fast that Carlos Salinas would still have been a minor bureaucrat and no one would have ever needed him to write NAFTA with Bush Sr.

    Don’t ever believe these reified concepts from poli-sci like ‘realpolitik’ are more than symbolic and occasionally handy guides to insiders’ lingo.

    There’s no conflict between a powerful nation’s political & economic establishment (they are never separate, US foreign policy overwhelmingly lines up with actual — not theoretical — economic interests) exerting what degrees of imperialism it can on the world, and imposing on its own population whatever elite-focused plunder it can.

    Did McKinley’s open (give him credit for that) imperialism stop his support for robber barons and King Cotton types in their pillage of our starving, shot-down people whose cities ran with sewage?

  56. 56
    jl says:

    To be less idealistic, Stiglitz may have been massively ticked off that he was told to shut up, in various ways, when his advice became inconvenient. That is very difficult to take when you are clearly the heir to Paul Samuelson in carrying the torch of rigorous economic analysis. Why a grudge against simple minded people who are not nearly as sharp as you are, but shut you down, why that grudge may just last the rest of a lifetime, maybe.

    It is hard to keep perspective on the Kthug Stiglitz, Baker nexus of economic ideology because it is not that they are so liberal in any way at all, it is that US economic thought that is deemed respectable in any circle of power in the US has become so reactionary, and such an empty and failed empirical enterprise.

    They only seem like liberals when compared to the many prominent reactionary sophists that surround them in the macroeconomic and financial policy world, and of course in the finance industry and government.

  57. 57
    El Cid says:


    People like Stiglitz and Krugman may be right or wrong on various issues, but I think they see themselves as social scientists going wherever theory and evidence leads, at least in terms of their economic policy advice.

    I don’t disagree. That’s why such types of people aren’t beloved by those highest up who mostly want people like Krugman and Stiglitz to aid them in doing what they want, not slow things down by following honest curiosity and intellectual principles to the degree they can. If they can do both, more power to them, makes it look better.

  58. 58
    El Cid says:

    @jl: Quite a few people I’ve known who are not from the US (from Europe, Latin America, Asia, Africa) have remarked to me without any prodding how surprised they are to learn that people who would be considered on the conservative side in their nation’s politics are considered left-liberals here. It matters less that this isn’t some studied analysis than it does the sense of confusion so many experience at our conventions.

    (In our political discourse, someone like Bernie Sanders is seen by the establishment class as some sort of alien artifact of leftism in the form of a cherished, folksy, quirky Vermont tradition.)

  59. 59
    jl says:

    @El Cid: I had the same experience. In grad school, many foreign students thought their US econ professors were mad, simply mad, in the way they applied economic theory. One guy told me, where he came from economics was taught as an empirical science, not as an erzatz, tin pot religion.

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    PeakVT says:

    As I wrote here, what’s happening in the UK is just about as close to a single-variable experiment we will ever see in the field of macroeconomics. I expect it will prove that post-recession austerity to be entirely stupid. I also expect nobody beyond shrill economists and few pesky bloggers will learn the appropriate lesson.

  62. 62
    Suffern ACE says:

    @PeakVT: Yeah. I wonder if the Germans are looking at those austerity measures in England and that is why Merkel’s CDU has been showing so poorly in State elections. Sure, maybe its nationalism – no German aid to the profligate PIIGS. Or maybe its “quit bailing out the banks who lent them the money and telling us to live like our grandparents.” Never know. I only read the papers, and don’t often hear opinions from German voters.

    I know, I know, its Bloomberg, but how hard can it be to find a voter living in Hamburg who’ll offer an opinion or two. When you interview only bankers, they all tend to believe that the election is about banking interests.

  63. 63
    Nylund says:

    Can someone forward this to Sully 5000 times? His ceaseless call for austerity is annoying the crap out of me (as an economist and as an American).

  64. 64
    Alex Lanni says:

    Parenting is not an easy job.

  65. 65
    The Raven says:

    @jl: “I think it is best to call austerity, in this economic climate, a mistaken policy recommendation based on a failed research program in macroeconomics. […] that is the truth, and it has staying power.”

    Not just a failure–a half-truth at best. The economic errors became popular and have been taken up as policy in many places–no, were made popular–because they rationalize miserly behavior and because wealth can buy a lot of truthiness.

    The research program was dead by 1990. Plenty of people could see Reaganomics was a failure. Even Alan Greenspan acknowledged it, in his famous “not nature, but culture” speech. But the zombie policy kept shambling on, and has eaten the collective brains of our policy-makers, including Obama, who seems to be an otherwise sane person.

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