Home > The Economics Profession > What utter self-serving drivel, Brad Delong!

What utter self-serving drivel, Brad Delong!

from Steve Keen

I can scarcely believe what Brad Delong has dared to publish on Project Syndicate:

We economists who are steeped in economic and financial history – and aware of the history of economic thought concerning financial crises and their effects – have reason to be proud of our analyses over the past five years. We understood where we were heading, because we knew where we had been.

In particular, we understood that the rapid run-up of house prices, coupled with the extension of leverage, posed macroeconomic dangers. We recognized that large bubble-driven losses in assets held by leveraged financial institutions would cause a panicked flight to safety, and that preventing a deep depression required active official intervention as a lender of last resort….

So the big lesson is simple: trust those who work in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger. That means trusting economists like Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right.

What utter hubris and drivel!

Where to begin? For starters, . . . “the last five years” includes June 2007–just before the commencement of the financial crisis. But this time, people like Wynne Godley, Ann Pettifors, Randall Wray, Nouriel Roubini, Dean Baker, Peter Schiff and I had spent years warning that a huge crisis was coming, and had a variety of debt-based explanations as to why it was inevitable. By then, Godley, Wray and I and many other Post Keynesian economists had spent decades imbibing and developing the work of Hyman Minsky.

To my knowledge, of Delong’s motley crew, only Raghuram Rajan was in print with any warnings of an imminent crisis before it began. Blanchard deserves to win an award for one of the world’s worst-timed papers when in August 12, 2008–one year after the crisis began–he published a working paper which crowed that “the state of macro is good“. Krugman, who Delong crowns as first amongst equals in those working “in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger” first read Minsky in May 2009–and noted that he didn’t really see what all the fuss was about:

So I’m actually reading Hyman Minsky’s magnum opus, here in Seoul. … I have to say that the Platonic ideal of Minsky is a lot better than the reality.

There’s a deep insight in there; both the concept of financial fragility and his insight, way ahead of anyone else, that as the memory of the Depression faded the system was in fact becoming more fragile. But that insight takes up part of Chapter 9. The rest is a long slog through turgid writing, Kaleckian income distribution theory (which I don’t think has anything to do with the fundamental point), and more.

To be fair, it took me several decades before I learned to appreciate Keynes in the original. Maybe a reread will make me see the depths of Minsky’s insight across the board. Or maybe not.

This was hardly amazing to those of us who had started to read Minsky a bit earlier than 2009–such as me for example (I first read Minsky’s real magnum opus, John Maynard Keynes, in 1987). Those of us with a bit more exposure to Minsky knew that Stabilizing an Unstable Economy was not Minsky’s best book–and I commented on Krugman’s blog that he should put it aside and read Can “It” Happen Again? when he got back from Seoul.

The only excuse for the cant Delong has spewed forth today is that, as with Krugman and others in the self-described “New Keynesian” camp, he perceives himself as being at the left end of the economic spectrum, with the only competition being from the far right represented by the purist Chicago version of Neoclassical economics. Since the Neoclassical left supports deficit spending during a Depression, while the right supports austerity, to Delong it’s game over, and the Neoclassical left is right.

The reality is that there is an entire other dimension of economists who have known for decades that both extremes of the Neoclassical economic axis were neither left nor right, but plain bloody wrong. We also knew that our criticisms of the Neoclassicals had no chance of being listened to by the public until a major crisis hit, and we also expected that this crisis would do nothing to alter their own beliefs. Delong’s delusional mutterings today confirm it.

I sometimes get accused of being harsh when I argue that economics will only progress from the delusion of Neoclassical economics into a more empirically based and realistic discipline the way that Max Planck observed that physics made the move from Maxwell to Einstein: “one funeral at a time“. I doubt that I’ll cop that criticism any more after Brad’s effort today.

  1. Brad DeLong
    July 2, 2012 at 4:29 pm

    This “Kindleberger bad! Minsky good!” rant from Keen strikes me as highly unhinged…

    • July 2, 2012 at 6:34 pm

      Where on earth did I say Kindlberger was bad Brad? Making claims about having seen coming what took you by surprise wasn’t enough for you?

      And for the record, my reaction to your blog was because as usual Neoclassicals continue to ignore Post Keynesian economists–even after a crisis that no Neoclassical model warned of, when several Post Keynesian ones did–and you compound that by trying to dress yourselves in the mantle of Minsky whom you ignored for decades.

      As a student of Minsky, can you tell me what he has to say about whether his hypothesis can be modeled within the Neoclassical framework?

      Steve Keen http://www.debtdeflation.com/blogs @ProfSteveKeen

  2. Herb Wiseman
    July 2, 2012 at 5:21 pm

    As a non-economist I have been critical of economists for many years — more than ten years go I suggested that we would be better off to read the entrails of chickens to predict outcomes in a published dispute with a local economist. He eventually agreed.

    In 1999, a group that I belong to called C.O.M.E.R. (The Committee On Monetary and Economic Reform) began a series of publications called Meltdown. Some of our writers are/were economists but many are not. The main writer (a man named William Krehm who is 97 years old, produces the 20 page monthly newsletter and has published many books including the three-part series Meltdown) was predicting catastrophe as early as 1990 if my recall is correct.

  3. Dave Raithel
    July 3, 2012 at 2:14 am

    “The essence of endogenous money hypothesis is that banks create spending power for borrowers without reducing the spending power of savers. If true, this makes banks far more than mere intermediaries, and a crucial part of a valid theory of macroeconomics. An essential pre-requisite of this theory is that bank lending is not effectively constrained by the Central Bank.”

    From Keen’s blog. It seems a clear enough statement that DeLong et al can either give their affirmation or denial.

  4. Alice
    July 3, 2012 at 11:26 am

    What a liar

  5. Alice
    July 3, 2012 at 11:28 am

    Brad de Long is. My god, now he tries to paint himself on the side of right when he was paid highly to look away before this mess happened and now wants to say he got it right?

    God there are times I hate the economics profession vecause of the total scum it produces

  6. Alice
    July 3, 2012 at 11:38 am

    Summers – as above. He is a Keynesian now camping out with Krugman? Oh spare me…
    He is nothing but a poster boy. He can change his acting role wit every screen test,

  7. Deniz Kellecioglu
    July 3, 2012 at 1:08 pm

    Age of information or Age of disinformation? Judging from this post, DeLong have little scruples, and no sense of professional ethics. One also wonders about the editorial policy of Project Syndicate.

    • Alice
      July 4, 2012 at 11:18 am

      Summers…a few years ago he was Greenspan’s darling of de-regulation every where and particularly for letting the Wall street hounds run completely free.

      I have no respect for either of them. Turncoats who now want to talk about a better way of doing and practising economics? Summers even got on his highly paid podium to say how change had to come from within the schools of economics themselves.

      But its still a dismally bad science in the schools.

      Nothing has changed yet in the schools. These guys are just riding out the storm of indignation against them – talking the talk of change now after the disaster (!!!!) but they never walked the walk when they were in power and they didnt see the crash coming and they didnt do a lot of things…oh no but we still have to listen to their “expertise.”

      Fully funded bank expertise – its only as good as your next contract.

      Career economists as Galbraith would have called them.

  8. robert r locke
    July 4, 2012 at 8:07 am

    The problem I am having with economists is that they ignore the real problem and their so-called “science” stops them from confronting it.

    The real problem: the loss of purchasing power beginning in the 1980s as reflected in the rising gap between the top 1% and the 99%. This occasioned the private debt explosion, including the housing bubble.

    So much of the economic discussion about debt, bubbes, pump priming, etc. are about symptoms of the underlyinng problem of improvishment. What do ecoommists say as economists about solving that — not much. They run away from redistribution of wealth discussions at the speed of fright.

    • July 4, 2012 at 11:25 am

      The cost of housing, a basic human need, is part of the problem. Average rents represent 31% of average wages and mortgage payments for many represent a far higher proportion. This is a land issue, which could be solved quite easily by collecting all land rent for public benefit. It would fundamentally change the balance between residential and commercial land. Residential is lightly taxed (and totally regressive) with no automatic funding stream whilst commercial is quite highly taxed and does have a funding stream.

      • July 9, 2012 at 9:19 am

        Hear hear! I would also add that we would have HAD no crisis is we had been collecting Land Rent all along, since the crisis, for those who remember its origins, was and is a “mortgage crisis” (Read: Speculation-in-Land crisis). Collect the Land Rent, while leaving banks free to lend for actual houses, and the mortgage industry shrinks and begins to look like the car-loan industry. When was the last time anyone worried about a car-loan crisis? Never. Because capital, like cars, or like actual buildings, can be produced, or restricted, to meet demand fairly quickly by industry. Not so with Land (falsely conflated with Capital since neo-classical economics displaced classical economics at the turn of the last century, spurred on by self-serving professors in the land-grant universities). Land is finite, appreciates in value (usually), is made by nature, etc. Capital is just the opposite: made by Man, infinite (within labor’s capacity and the material capacity of the Earth), and depreciates over time and through obsolescence.
        Until we solve this basic misunderstanding of Natural Law, economics will remain a non-science. A true science can make predictions. Economics, as a whole, cannot. It is at best an art, and not a very consistent one at that.

  9. Alice
    July 4, 2012 at 11:28 am

    The majority of economists do Robert, run away from redistribution of wealth or income discussions at the speed of light…instead you get discussions like this “ah but you havent considered the 2nd and 3rd round effects and you havent considered the long term and you havent considered the lifecycle effect on wealth and you havent considered that equality is bad for man because its communist ad we dont all want to be equal etc…so they just sat back pondering all the the reasons why inequality coud be beneficial..until it grew into a big ugly monster… and dont forget all the people that got shot down in flames warning about growing inequality all along the way..after all its been growing for about 30 years and its been shot down in flames as an economic indicator for about the same time …so any decent economist investigating it got branded a leftie or a communist or a socialist or a bleeding heart or whatever other insult and got their funding cut and their staff sacked..

    Its really disgusting what has happened when I think about it. Ive been around long enough to notice. Its like the bad guys overran the whole town and people started buying what the bad guys were saying.

  10. July 5, 2012 at 3:47 am

    Why does theory that is totally banrupt and devoid of even internal coherence without having to cotinually retreat on foundational supposed axioms (neoclassical etherial fantasy) and why does it keep coming back like “wack-a-mole” at the arcade? Well some of it is sociological, some psychological, some pure political economy. One reason is when one has spent years as an undergraduate and graudate as a sort of combination gofer and “bitch” to some senior academic who was selected because of his or her own area of expertise to study under, no grad student will elect to write a dissertation that says his advisor’s life work is pure crap and bourgeois propaganda disguised as pseudo-science. Then after compromising so long, cognitive dissonance sets in and who will say they had been an academic whore for so many years to get the degree, then just a little more to get the assistanf professorship, then just a little more for tenure, then just a lttle more to make full and department chair, and after all that there has been so much selling out (if indeed anyone was even buying or renting) that cognitive dissonance keeps one in line (I went to the best schools,all rigorous, my advisors were great names in the field etc).

    On the sociological side of course we have the roles of institutions, class,strata and the fact that intellectuals become and define themselves as such through self-selection, self-anointment, self-definition in choosing to go to university rather than actual labor in the real world of punching a clock, etc. To get into that world and stay in it, one needs access and access is dependent, as in the media, in not threatening those who control it and can give or with draw it.; access to grants, department appointments,travel, tenure, proomotions etc. But academics are first and foremost petit-bourgeois typically in mentalities and interests. Even the left academia can be very lucrative in terms of preferred courses with light loads,travel, conferences, promotions, books, counter journalis to handle the publish or perish problems, distance teaching , speaking gigs etc. But that is only if one plays at being an academic and pointy head and not actually do anything serious other than make speeches for big bucks and five-star hotels about how “we” are making revolution ans are on the eve of destruction of capitalism…

    Then there is the fact that many neoclassicals do no really know their own stuff just as many of the “progressives” (a much safer label than radical left or Marxist or even Marxian scholar) know bits and pieces and memes but not a coherent system of theroy and praxis. Also a la the Freudian concept of penis envy, and neoclassical econ’s “physics envy” we get the envy of the “progressives” and “heterodox” (another safe term) for journals to add notches to the old cv, academic appointments, tenure, travel to exotic locales and conferences, titles, and the whole shot just as with “mainstream” academia only the neoclassicals make no pretense of caring about or even knowing about any victims or real people as objects and commodities of their cv-notching “reasearch” and “praxis”.

    • Alice
      July 5, 2012 at 10:59 am

      Jim notes

      “there has been so much selling out (if indeed anyone was even buying or renting) that cognitive dissonance keeps one in line (I went to the best schools,all rigorous, my advisors”
      were great names in the field etc).

      Yes, there are a lot of brain dead economists walking around who decided to deaden their own intelligence to keep their jobs and silence their own consciences and even argue visibly against their own consciences. Maybe man is only an animal after all and doesnt come naturally equipped with a sensible higher intelligence.
      OR maybe that higher intelligence only exists in professions and sciences far more useful and practical and far less prone to systemic corruption than economics.

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