“My name is Brad DeLong.”
A post went up yesterday on The Berkely Blog consisting of the transcript of a presentation, “What have we unlearned from our Great Recession?”, that Brad DeLong gave Jan 07, 2011 at the American Economic Association Meetings. It begins:
My role here is the role of the person who starts the Alcoholics Anonymous meetings.
My name is Brad DeLong.
I am a Rubinite, a Greenspanist, a neoliberal, a neoclassical economist.
I stand here repentant.
I take my task to be a serious person and to set out all the things I believed in three or four years ago that now appear to be wrong. I find this distressing, for I had thought that I had known what my personal analytical nadir was and I thought that it was long ago behind me.
The whole presentation may be read here. It includes bits like the following.
I think about lack of trust in a split economics profession–where there are, I think, an extraordinarily large number of people engaging in open-mouth operations who have simply not done their homework. And at this point I think it important to call out Robert Lucas, Richard Posner, and Eugene Fama, and ask them in the future to please do at least some of their homework before they talk nonsense.
Last night I was sitting at my hotel room desk trying to come up with the “lessons” slide.
The best I could come up with is to suggest that perhaps our problem is that we have been teaching people macroeconomics.
Perhaps macroeconomics should be banned.
Perhaps it should only be taught through economic history and the history of economic thought courses–courses that start in 1800 back when all issues of what the business cycle was or what it might become were open, and that then trace the developing debates: Say versus Mathis, Say versus Mill, Bagehot versus Fisher, Fisher versus Wicksell, Hayek versus Keynes versus Friedman, and so forth on up to James Tobin. I really don’t know who we should teach after James Tobin: I haven’t been impressed with any analyses of our current situation that have not been firmly rooted in Tobin, Minsky, and those even further in the past.
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Real-World Economics Review Blog 
Warm thanks to the Editor for finding, selecting and posting this item!
Personal analytical nadir!!!! That’s killer!!!
But really, no need to glance at Marx (some of the stuff in Volume III?), a skim of Schumpeter? (Or do we get that through his student, Minsky?) It’s not like putting down the bottle is the same as getting right with God…
Might add, List vs Ricardo, Marx vs. the classics and Sraffa vs. neoclassics.
There ya go, but I’m an autodidact from another field entirely. I got around to reading the whole essay, and it is a very good read: “..keep us from having Nobel Prize-caliber economists blathering that the NIPA identity guarantees that expansionary fiscal policy must immediately and obviously and always crowd-out private spending dollar-for-dollar because the government has to obtain the cash it spends from somebody else. Think about that a moment: there is nothing special about the government. If the argument is true for the government, it is true for all groups–no decision to increase spending by anyone can ever have any effect on nominal GDP because whoever spends has to get the cash from somewhere, and that applies to Apple Computer just as much as to the government.
And that has to be wrong.”
The point about this NIPA (national income and product accounts) stuff is ‘so simpel that it repels the mind’ to misquote ‘Galbraith the older’:
Prodcution +Imp = Cons + Inv + Gov
If ‘Gov’ (government spending) goes up, this does not necessarily mean that either Consumption or Investment goes down (the right side of the equation), it might also mean that Imports or Production go up. That’s not Keynes, that’s indeed basic accounting, as Friedman and Samuelson still knew – but as people like Lucas, Mankiw and Fama seem to have forgotten. To figure this out, just read the latest press release on USA IVth quarter GDP, which as it wants to show real world events is entirely framed in this accounting identity.
If you don’t like to embrace Keynesian ideas, you should attack or change Keynesian ideas like Friedman did with his ‘permanent consumption’ idea, which indeed changed the naief (Samuelsonian) Keynesian consumption function and not accounting identities. You might well attack national accounting identities on their weaknesses (purchasing an item is not the same as consuming that item, GDP is not a measure of welfare (but no national accountant ever stated that) – those kinds of items. And you might state that when consumers buy more stocks instead of goods and services, this does not show up in more production but only in higher prices and that these purchases, though by definition not included in the NIPA identities, do crowd out ‘real’ consumption. But it is indeed strange when Fama and Lucas make mistakes that should be preserved for people who never took economics 101 (I do not write: passed). Or isn’t it?
One of the innovations of Keynes, based in national accounting by the way, was that he rediscovered the circular flow of money. A market economy where people, governments or companies hoard or dishoard works different than the non-monetary general equilibrium economy which is at the root of the world of Lucas and Fama (the 2 trillion mountain of cash of USA companies, which I read about all the time (about 27.000,– per family of four)?). Some people seem to have to re-rediscover this.
By the way – these NIPA’s are fun. When you look at the Roosevelt years before the war, it turns out that he had, in total, a net government surplus (1933-1941) if I read it right (income – expenditure). Compare this with Reagan and the second Bush.
I think the biggest bubble that the orthodox economists were unable to detect was that of their own error. The “Efficient Ego Hypothesis” clearly prevented them from seeing what they say is best described as vacuous. Nonetheless I applaud its internal consistency, its terrific logic, and its excellent math.
Meanwhile: I agree, economics is best taught as a series of debates each concerning a vital topic of the period in which it occurred. That way we can recapture the immediacy of the ideas and the way in which the subject has had to develop in order to provide solutions to contemporary issues. In fact I think economics textbooks should be constructed around such a series of issues and debates.
Who is writing that book?
Peter, please consider the “textbook industry” as a major stakeholder in post-secondary education.
In fact, I would like to see a discussion here about the nature of “Economics textbooks”…how their content can be apprised/evaluated for anything other than what has been sanitized for the undergraduates who MUST purchase them in connection with any REQUIRED course.
Perhaps we should teach Keynes — and not Samuelson’a Keynesianism. In my 2009 book THE KEYNES SOLUTION, I quote Samuelson having stated that he found the General Theory “unpalatable” and incomprehensible — and therefore merely assumed it was a Walrasian system with fixed wages and administered prices — even though Keynes in ChAPTER19 , Page 257 Keynes specifically denies his theory requires a regidity in wages.
Also I got Hicks to admit the ISLM systemm had nothing to do with Keynes — as he wrote in an article entitled “ISLM an Explanation ” published in the JPKE.
Perhaps a good place to start mcroeconomics is with my two books (1) In Palgrave’s “great thinkers in economics” series my book is entitled JOHN MAYNARD KEYNES. My other book is POST KEYNESIAN MACROECONOMICS — the second edition will be available in may-June 2011 and will show how Keynes’s liquidity theory explains the financial crash that led to the Great Recession
Sorry, folks, no sale. What you and Brad describe fits all of social science, not just economics. Bruno Latour is correct, “Tarde always complained that Durkheim had abandoned the task of explaining society by confusing cause and effect, replacing the understanding of the social link with a political project aimed at social engineering. Against his younger challenger, he vigorously maintained that the social was not a special domain of reality, but a principle of connections; that there was no reason to separate ‘the social’ from other associations like biological organisms or even atoms; that no break with philosophy, and especially metaphysics, was necessary in order to become a social science; that sociology was in effect a kind of inter-psychology; [13] that the study of innovation and especially science and technology was the growth area of social theory; that economics had to be remade from top to bottom instead of being used as a vague metaphor to describe the calculation of interests. Above all, he considered the social as a circulating fluid that should be followed by new methods and not a specific type of organism.” In easier to grasp, non-Latourian terms – economics and the other social sciences never seriously took up the mission of describing and understanding the social but rather went directly to engineering and re-engineering every aspect of the associations they found in place. Economics gets most of pubilicity of late about its engineering work. But psychology, political science, and sociology have done worse and continue to do so.
This is the Bureau of Economic Analyses news release of USA GDP in the fouth quarter. Every line of every tabel and almost every line of the text states how grave the Fama/Lucas/Posner mistake in fact is: they are not able to read and understand the BEA press releases on the growth and changes of nominal and real GDP.
They are not able to read and understand the BEA pres releases….
Click to access gdp4q10_2nd.pdf
NIPA it’s OK, but not forget another identity (the late Goodley never did)
Public deficit+Private deficit+Current Account =0
The repentant says “perhaps macroeconomics should be banned”. Or “Perhaps it should only be taught through economic history and the history of economic thought courses”
That is how macroeconomics was taught in times gone by before microeconomics was deemed more important and the history of economic thought and economic history was decimated…and now experts like Harry S Dent have more street credibility than the economics profession precisely because at least they have not forgotten economic history…
Perhaps they should have banned the teaching of microeconomics before they chose to ban the teaching of economic history and the history of economic thought.