Open letter to Brad DeLong


I tried to put a comment on your blog but have been repeatedly blocked. I´ve also noticed that at least one comment that suggested you were not being reasonable about this affair “sneaked through” but was later deleted (funny that the comment started with “I know you will not publish this”). So I´ll go public with this open letter.

First you link to my post:

A man for any season: Before it was about “expansionary austerity”. Now it´s convenient to call for “self-financing fiscal stimulus”: In a “Man for all seasons”, we get the story of Thomas More  who stood up to King Henry VIII when the King rejected the Roman Catholic Church to obtain a divorce and remarriage. Now we have a duo – Larry Summers and Brad Delong – that “adapt” to the season at hand. In their just released paper – Fiscal Policy in a Depressed Economy – they say that in the “liquity trap” situation America is in today temporary stimulus “may actually be self-financing”. Interestingly, when he was number two to Rubin (and later top Treasury honcho) during the Clinton Presidency (1993 – 2000), Larry Summers peddled “stimulative austerity”, the idea that to cut deficits would lower interest rates by enough to produce stronger growth…

And then write:

Now this really isn’t fair to Larry.

So I wrote, asking whether Nunes had actually read the paper.

It certainly did not sound like it.

I asked if I(!) understood that we had explicitly argued in our paper that back in 1993 (when Alan Greenspan was very worried about long-term fiscal stability, and promised to make monetary policy easier in order to hold aggregate demand harmless if the Clinton administration undertook deficit reduction) the benefit-cost calculation was very different from what it is today (when Ben Bernanke is saying that he really would like some help from other branches from government).

What the benefit-cost calculation is depends on what the monetary-policy reaction function is, and different monetary-policy reaction functions lead to different appropriate fiscal policies.

Apparently the answer is no. Here’s what I got back, via email:

Mr “DeLong”

Given the quality of your comment I have to assume YOU are the bullshit artist impersonating someone else.

You have been excluded.

Brad, you know that´s not how it went down. You are misrepresenting what happened.

The fact is that I answered your comment in a normal and civil manner. Another commenter – Benjamin Cole – also discussed your comment. But then you came back “swinging the bat” with an answer to my comment, accusing me of implying that Larry Summers was a “bullshit artist” and that I “owed Larry an apology”.

I found the tone and content of the comment very strange and began to have doubts about the real identity of the “Brad DeLong” that was writing. This led me to write the e-mail you mention to the address every commenter is required to supply when posting a comment. I opened the e-mail with “Mr. Brad DeLong”, clearly implying that I didn´t believe the writer was the “real thing”.

As to the substance of your “complaint”, I don´t think I “misrepresented” Larry´s views.

Here´s the Economist of March 24th:

WHEN he was at the Treasury nearly 20 years ago Larry Summers would counsel President Bill Clinton on the merits of “stimulative austerity”: cut deficits, and interest rates will fall by enough to produce stronger economic growth. Now Mr Summers is making the opposite case: stimulate growth through a bigger deficit, and the long-term debt may shrink.

Scott Sumner did a post on your paper with Summers. Being an academic, he knows much better than me how to “roam around the room”, much as diplomats deal with one another. This is a good example of “diplomatic trashing”:

PS. Just to reiterate, this post is not a comment on the core of D&S. I´m not qualified to judge their model, but it looks fine to me. I just don´t buy the assumption that motivates the entire exercise.

Great way to make the other guy feel good – i.e. not get him to charge you with misrepresentation and demand an apology – while subtly implying that what he did was pretty useless.

Scott even did something rare, doing a post on comments. And starts off with: “My commenters are much tougher on Larry Summers than I am”.  A couple of quotes from commenter Jim Glass:

If the Fed was and is unwilling to provide enough stimulus during this recession, the #1 largest identifiable reason is: Larry Summers.

Now he writes:” We presume the central bank is unwilling to provide additional stimulus”. Please. Shame on Larry Summers.

FN: [1] Except write a planning memo to Obama saying there was only $ 300 billion of quality fiscal stimulus available “we do not believe it is feasible to design proposals along these lines that go beyond this total size”, with necessary amounts beyond that amount “not as effective as stimulus”. Now he is writing that deficits as large as one may desire are self-financing?

Anyway, the crux of my argument on the post I wrote is captured in this short paragraph, which even contains a plea for “union”:

You may think Summers got it right by advocating “stimulative austerity”. But his indicator variable – interest rates – moved in the “wrong” direction. Yes, you guessed, monetary policy did it! And it´s monetary policy that can turn things around today. So that´s where the advocates of fiscal stimulus should band together and stop wasting precious time.

One question: Why do you often “swing the bat” on others in defense of “higher-ups”? You certainly do plenty of that in “defense” of Krugman. In any case I don´t think it´s up to you to say that I “owe Larry an apology”. He´s big enough to demand one himself.

11 thoughts on “Open letter to Brad DeLong

  1. I hope Market Monetarism can appeal to the Larry Summers, Brad DeLongs and Paul Krugmans of the world.

    I say this not as a liberal or conservative, but because I think MM will work. MM will regardless of whether federal outlays are 22 percent or 18 percent of GDP. MM will work whether most of that federal outlay is military waste or social welfare waste.

    I contend MM will work as long as the general population has a reasonable work ethic, and government is reasonably open and not corrupt.

    My personal appeal to Brad DeLong: Look maybe you are right, the best way is to go a huge federal deficits, ala Richard Koo. But that fact is the GOP won’t go along with huge deficits.

    Ergo, we have to go t PLan B: Monetary POlicy.

    Right now, the MM’ers are calling for aggressive monetary stimulus, at the Fed, the ECB and Japan. They are not gold nuts; they are not fixated on inflation rates.

    At this point, we have to go to MM.

    • One thing I don’t get about market monetarists is why they are under this impression that DeLong, Krugman, etc. are standing in the way on monetary policy. What exactly do you think you are “appealing to”? Do you think they oppose this?

      What they’ve consistently said – as far as I can tell from following them for years now – is that in current circumstances monetary policy can be made more effective by fiscal policy. This is the Krugman argument going at least as far back as 1998.

      Why do market monetarists have it in their head that Keynesians are resisting them on monetary policy? There is a disagreement about one mechanism for monetary policy – the interest rate mechanism. Keynesians say “we usually care about that mechanism, but it’s less useful now”, while market monetarists say “we never care about that mechanism in the first place”. OK, so there’s a disagreement there. But nobody is insisting that the Fed tighten up and that we only go for fiscal policy.

      • Dan – It´s a “strategic” thing: By concentrating on FP (appealing to “liquidity traps”) Krugman et al are “deviding” efforts and making success harder to obtain

  2. Pingback: Lee Kelly attracts some attention « The Market Monetarist

  3. Might I agree with Marcus here, and add for myself:
    Professor Krugman, DeLong and company are being disingenuous. That’s what it is about. We know they want a bigger state, and we know that because of Higg’s “ratchet effect” that temporary government programs end up lingering for years or decades. We also know, that they know, that there is *no limit* to the AD boost which monetary policy can yield. So, Krugman/DeLong are pushing for bigger government in a passive aggressive way. Better to be an honest progressive like Yglesias and sell folks on your vision of the welfare state, than to sneak it past the public as a second best AD boost.

  4. Another point: Japan has raised national debt to 200 percent of GDP through stimulus efforts of the last 20 years, and still is dragging along in perma-recessionary deflation.

    Meanwhile, MM and QE monetizes national debt, thus cutting national debt to GDP and freeing future generations from onerous debt loads. Additionally, moderate inflation will deleverage the whole economy and help real estate (into which loans have been made in nominal dollars).

    After a national real estate bust deep recession, you have to print a lot of money.

    If fiscal deficits work, explain Japan.

  5. Krugman adressed the question of Japan’s “burgeoning debt” (as a consequence of fiscal expansion) and the resulting limits for fiscal stimulus here, for example (also note what he actually is suggests):

    Do with it what you will. Krugman, of course, is one of the most prominent advocats of fiscal stimulus and has been writing about Japan since even before his paper about Japan and the “liquidity trap”, over and over again. There is the unofficial Krugman archive, containing or linking to each and every line he’s ever written, so it shouldn’t be difficult to get an answer to no-brainer questions like why fiscal expansion in Japan has not worked in Japan, according to fiscal stimulus advocates – as if that would have completely escaped them. Note that I do not say that this explanation is good, but I do think that it’s a rather pointless exercise to repeat the ever-same criticisms instead of taking the answers that have already been given as a starting point.

    Also, Krugman has written favorably e.g. about the French welfare state (and more generally about European welfare states), one can easily look that up in his blog. Moreover, he links slides pertaining to lessons about the “Economics of the welfare state” (class 6 by now) he’s currently doing, together with further reading on the topic – all this gives insight in what he’s thinking about the welfare state and how he’s approaching the topic. He does not frame fiscal stimulus as a welfare state issue. Given the literature about lasting effects of fiscal expansion one can identify this as a caveat, formulate a comprehensive criticism based on this conception and urge Krugman to answer. Or, of course, one can call him “disingenuous” and be praised with an “Exactly!” by Mr Nunes, while surely never, ever getting anything like an answer. Given that this “Exactly!” refers to the whole post, it also includes the assumption that Krugman doesn’t endorse the idea of a welfare state – which is demonstrably wrong (he just doesn’t frame fiscal stimulus as a welfare state issue). Should I, therefore, play along with the silly ad-hominem competition and ask if Mr Nunes is disingenuous or just too lazy to look up what Krugman has to say about the issue, when saying “Exactly!” (for the record: this means I do NOT believe that Mr Nunes is disingenuous or lazy)? Or may I ask Mr Nunes to do a comprehensive criticism to further the discussion instead of participating, if indirectly by consent, in the permanent bashing that so much defines the economics blogosphere nowadays (and yes, Krugman plays along, as well…) – labelling each other as disingenuous and insinuating bad intents and character to others rather than simply pointing out caveats, as if such caveats wouldn’t be possible without being “disingenuous”.

    Which also reminds me that Mr Nunes still has not come up with a direct answer to Delong’s charge that he failed to consider a crucial point in his paper (not in a summary, and not answered by something somebody else has said on a related topic) – rather preferring to treat the whole thing as a personal issue, furthering the general perception that economists are basically a bunch of children…

  6. Martin – Why do Krugman et al bring forth a “distorted” concept of Liquidity Trap to argue that MP is innefective, so all we really got to work with is FP?
    I´m in a country where government has been and is everywhere, having gotten us nowhere. I wish that in the last 40 years we had done half as much as Korea. During the 60´s, when government in the US felt omnipotent, you got the Great Inflation.
    And DeLong just proved to me he´s really a “hatchet man”. He´s the one to have gone “personal”. Above all he was offensive, so much so that I thought I had an “impersonator” commenting. When I was alerted it was really him I was very, but really very surprised.

    • Well, I don’t know what you mean with “distorted”, and I’ll not guess. But it fits to the “disingenuous” you approved of above. That is, apparently you frame the whole debate about Krugman as him being a fraud. Period. For some reason, he doesn’t merit the favor the be thought of as an economist who draws conclusions from a model that he genuinely thinks is right (and it doesn’t vindicate you or anyone to say that Krugman himself isn’t better). The difference between Delong calling you a “bullshit artist” and your approving of a comment calling Krugman “disingenuous” and thinking of him as someone “distorting” a model is all pragmatics – the semantics is the same.

      And seriously, simplifying someone’s views to a point where it becomes a falshood is a bad manner. To say that Krugman argues that MP is ineffective is such a falsehood. He’s advocating MP, he just doesn’t think it’s easy and believes it’s only the second-best option, when FP is not possible (because debt is already too high, as he argued in the Japan case, or because the political environment doesn’t allow for fiscal expansion, as he argues now for the US). He pointed out in much detail what MP would have to look like, in his opinion, to be effective – and he certainly argues that conventional (!) MP is not effective. That’s that. But to impute to him the position that MP is ineffective (given his version of the liquidity trap) is demonstrably – and very easily so – wrong. I have no idea why you keep repeating that over and over again. If you look for a distortion: here it is.

      I’m on your side in this Delong story. I am just surprised that you were surprised. Is there anybody who has not been called a “bullshit artist” by Delong, save Krugman, but probably including Delong himself? Also the blocking you from commenting is not new: Chris Bertram from crookedtimber has had the same problem: being mocked and blocked. I’d just think that not giving in to this sort of discourse, not even a picometer, but giving apurely factual response (about the economics issue at hand) instead is a more powerful counter – but then it was not me who was publicly attacked this way, so probably that’s an easy thing for me to ask… Anyway, say what you will about his style, Delong also has a history of acknowledging and seriously dicussing “Delong smackdowns”, so perhaps something productive will result at the end of the day…

  7. > WHEN he was at the Treasury nearly 20 years ago Larry Summers would counsel President Bill Clinton on the merits of “stimulative austerity”: cut deficits, and interest rates will fall by enough to produce stronger economic growth. Now Mr Summers is making the opposite case: stimulate growth through a bigger deficit, and the long-term debt may shrink.

    So what? Why is an economic policy recommendation given at a time of rising employment relevant to an to an economy in a liquidity trap, a vastly different situation from that of the Clinton years? There is no reason at all why a policy that does one thing (austerity improving growth in an already growing economy) cannot do exactly the opposite in another unrelated situation (austerity driving the economy into a deeper hole in a liquidity trap).

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