Krugman and His Gang’s Libeling of Economist Gerald Friedman for Finding That Conventional Models Show That Sanders Plan Could Work

Yves here. I’m a bit late to weigh in on the scurrilous attacks on the Sanders budget plan, and more important, on Gerald Friedman, a UMass-Amherst economics professor who modeled it in detail and gave it favorable marks. Full disclosure: I know Friedman but only casually, having met him at speaking events and conferences. I have also cross posted some of his work from Triple Crisis.

Let us be clear about the vehemence of the salvos aimed at Friedman: this isn’t just a bad case of tribalism and intellectual dishonesty. This is purveyors of a failed orthodoxy refusing to indulge any consideration of plans that would show how badly they’ve mismanaged the economy.

The original sin of Friedman’s model of Sanders’ plan is that it projects GDP increases in excess of 5% for several years running before growth levels moderate. Mind you, Friedman did this using a completely standard model. So the real issue is about the assumptions, which Krugman and his allies refused even to look at, instead falsely accusing Friedman of being a Sanders ally who cooked up numbers. In fact, Friedman has no connection to the Sanders campaign, has donated to Hillary, and isn’t sure how he is voting this year.

We’ve embedded one of the first rebuttals to these shameful attacks, from Jamie Galbriath, as well as Friedman’s own request for an apology at the end of this post. But let’s focus first on the underlying bone of contention.

Had Krugman and his fellow enforcers deigned to make a good-faith response, the key issue would be what fiscal multipliers to assume on Sanders’ ambitious spending program.

When an economy is at less than full capacity, and our labor force participation rate shows that it clearly is, fiscal multipliers are greater than one. That means GDP will grow more than the amount of deficit spending. That means that the bugaboo of budget scaremongers, that the debt to GDP ratio will grow, isn’t operative. The denominator, GDP, grows faster than the numerator, the debt (mind you, we are being charitable and accepting the neoliberal frame rather than giving you the MMT point of view).

Moreover, no less an orthodox economist than Larry Summers has strongly advocated infrastructure spending, one of the big priorities in Sanders’ plan, as having a particularly high fiscal multiplier of 3. That’s because well targeted infrastructure has all sorts of spillovers in terms of economic productivity beyond the direct effect of getting more income to people with a high propensity to spend. But even with that in Sanders’ plan, as Galbraith stresses, Friedman’s assumptions even on the fiscal multipliers were conventional:

Professor Friedman starts with a fiscal multiplier of 1.25, and shades it down to the range of 0.8 by the mid 2020s. Is this “not credible”? If that’s your claim, it’s an indictment of the methods of (for instance) the CBO, the OMB, and the CEA.

A handwaving argument against the Friedman analysis is that with an aging population, the US can’t achieve the projected growth levels. From Ron Baiman’s rebuttal:

To the argument that changing demographics have made prior Emp/Pop ratios unobtainable, see Figure 2 below which shows that the current ratio is 3% below its demographically adjusted pre-2008 Emp/Pop ratio. Paid Family leave, child care, equal pay, youth job programs, should significantly drive up the Emp/Pop ratio, whether this is measured after adjusting for demographics or not. As Klein points out, is it really that unrealistic to hope that we can achieve things are a reality in Canada?

Moreover, with baby boomers having very little in the way of retirement savings (even if they had any, the financial market returns available in the decade immediately prior to the targeted retirement age are a huge determinant of how much you wind up with, so financial repression is killing 401(k)s), you can be sure that many will need to or will choose to continue working after 65 if they can find acceptable work. Another factor that argues for upside has been the low household formation rate among young people due to high unemployment. That means that if the job market for them improves on a sustained basis, you’d see catchup in household formation, and in turn, for demand for homes.

Additional refutations:

“Extreme” doesn’t mean what it used to, Sanders vs the CEA Matthew Klein, FT Alphaville

Can Sanders Do It? Josh Mason

On Second Thought, Maybe Bernie Sanders’ Growth Claims Aren’t As Crazy As I Thought Kevin Drum

And just below is a long-form takedown by Bill Black.

I hope you’ll not only read Friedman’s letter, embedded at the end of this post, but also contact the public editor of the New York Times and demand that Krugman correct his utterly false remarks about Friedman. Being a Nobel Prize winner does not give you a free pass on accountability or legal liability. Friedman has a strong case for libel and the Times should have the good sense to recognize that and act accordingly.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

If you depend for your news on the New York Times you have been subjected to a drumbeat of article attacking Bernie Sanders – and the conclusion of everyone “serious” that his economics are daft.  In particular, you would “know” that four prior Chairs of the President’s Council of Economic Advisers (CEA) (the Gang of 4) have signed an open letter to Bernie that delivered a death blow to his proposals.  Further, you would know that anyone who dared to disagree with these four illustrious economists was so deranged that he or she was acting like a Republican in denial of global climate change.  The open letter set its sights on a far less famous economist, Gerald Friedman, of U. Mass at Amherst.  It unleashed a personalized dismissal of his competence and integrity.  Four of the Nation’s top economists against one non-famous economists – at a school that studies heterodox economics.  That sounds like a fight that the referee should stop in the first round before Friedman is pummeled to death.  But why did Paul Krugman need to “tag in” to try to save the Gang of 4 from being routed?

Krugman proclaimed that the Gang of 4 had crushed Friedman in a TKO.  Tellingly, Krugman claimed that anyone who disagreed with the Gang of 4 must be beyond the pale (like Friedman and Bernie).  Indeed, Krugman was so eager to fend off any analysis of the Group of 4’s attacks that he competed with himself rhetorically as to what inner circle of Hell any supporter of Friedman should be consigned.  In the 10:44 a.m. variant, Krugman dismissed Bernie as “not ready for prime time” and decreed that it was illegitimate to critique the Gang of 4’s critique.

In Sanders’s case, I don’t think it’s ideology as much as being not ready for prime time — and also of not being willing to face up to the reality that the kind of drastic changes he’s proposing, no matter how desirable, would produce a lot of losers as well as winners.

And if your response to these concerns is that they’re all corrupt, all looking for jobs with Hillary, you are very much part of the problem.

The implicit message is that four famous economists had to be correct, therefore anyone who disagreed with them must be a conspiracy theorist who is “very much part of the problem.”  Paul doesn’t explain what “the problem” is, but he sure makes it sound awful.  Logically, “the problem” has to be progressives supporting Bernie.

Two hours later, Paul decided that his poisoned pen had not been toxic enough, he now denounced Sanders as a traitor to the progressives who was on his way “to making Donald Trump president.”  To point out the problems in the Gang of 4’s attack on Friedman was to treat them “as right-wing enemies.”  Why was Krugman so fervid in its efforts to smear Friedman and prevent any critique of the Gang of 4’s smear that he revised his article within two hours and amped up his rhetoric to a shrill cry of pain?  Well, the second piece admits that Gang of 4’s smear of Friedman “didn’t get into specifics” and that progressives were already rising in disgust at Paul’s arrogance and eagerness to sign onto a smear that claimed “rigor” but actually “didn’t get into specifics” while denouncing a scholar.  Paul, falsely, portrayed Friedman as a Bernie supporter.  Like Krugman, Friedman is actually a Hillary supporter.

Sanders needs to disassociate himself from this kind of fantasy economics right now. If his campaign responds instead by lashing out — well, a campaign that treats Alan Krueger, Christy Romer, and Laura Tyson as right-wing enemies is well on its way to making Donald Trump president.

If we combine both of Paul’s screeds we see that the only way to disagree with a prominent economist is to demonize them as either “corrupt” or “enemies.”  They are apparently inerrant.  Paul was eager to use “authority” raised to the second power (the Gang of 4 plus both barrels – two hours apart – The “Full Krugman”) to prevent anyone actually looking at the Gang of 4’s letter and Friedman’s study.  Indeed, as I was finishing this first article in a series on their smear I found that Krugman has tripled down on his smear of Friedman with a Sunday column.

Jamie Galbraith Scores a One-Two Punch KO on the Gang of 4 and Krugman

Alas, Krugman ran into Jamie Galbraith, who is not susceptible to Paul’s edicts of intimidation.  Jamie’s piece is wonderfully concise and should be savored in its entirety.  But here are the two key takeaways.  Jamie destroyed the Gang of 4 and Krugman.  Jamie made two simple points.  First, Friedman is a supporter of Hillary Clinton, not Bernie.  That means there is every reason to believe he did not engage in “voodoo” economics as Krugman charged in order to help Bernie.  It also means that Paul’s demand:  “Sanders needs to disassociate himself from this kind of fantasy economics right now” is bizarre.  Why would Sanders need to disassociate himself from a Hillary supporter?

Second, Friedman’s study is utterly conventional in terms of the macro models that Krugman has been praising for years in his column.  The results he calculates, that Krugman dismisses as “fantasy” and “voodoo” are in fact the normal product of the normal models Krugman and the Gang of 4 rely on.  Friedman, Jamie, and I all have many doubts about those models, but not Krugman and the Gang of 4.  Why does the standard model generate such powerful results for employment and growth?  It does so because Bernie’s plan to spur the economy is far larger than current policies or anything program to spur the economy supported by Hillary.  As Jamie phrases it:

What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders’ proposals stems from their scale and ambition. When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result. That, by the way, is the lesson of the Reagan era – like it or not. It is a lesson that, among today’s political leaders, only Senator Sanders has learned.

Give the conventionality of Friedman’s study, using a methodology that the Gang of 4 and Paul all embrace, what accounts for the mocking, dismissive tone of the Gang of 4’s letter and Krugman’s rhetorical race to the bottom with himself to demonize Friedman and Bernie?  One might assume that Friedman had made a glaring error and that the Gang of 4 had discovered the error in the course of their rigorous review of his modelling of Bernie’s proposals.

We are concerned to see the Sanders campaign citing extreme claims by Gerald Friedman about the effect of Senator Sanders’s economic plan—claims that cannot be supported by the economic evidence. Friedman asserts that your plan will have huge beneficial impacts on growth rates, income and employment that exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals.

That’s how the Gang of 4 leads, and those two sentences are an enormous “tell” in the sense that word is used in poker.  They are not attacking him for the model he used, they are not attacking him for his inputs, and they are not attacking him for a computation error.  They are attacking him because their own models predict that Bernie’s plan would produce “huge beneficial impacts.”  To state what should be obvious to any economist, much less the Gang of 4 and Krugman, that is not a logical criticism of Friedman or Bernie.  The Gang of 4 and Paul’s criticisms are historical.  When modest economic measures are taken to spur growth we observe only modest impacts on growth.  That is not a logical argument against Friedman modelling Bernie’s proposals.

Again, I’m perfectly open to a critique that says the standard models are so badly flawed that such a projection should not be relied upon, but that is not what the Gang of 4 and Krugman do.  They love the flawed models.

The Myths Economists Tell That Friedman’s Modeling of Bernie’s Plan Exposes

Orthodox economists just hate the results of Friedman’s model, for the results support Bernie, rather than Hillary.  Worse, they show that orthodox economists’ claims that the government can do little good is a myth.  They set out to kill the messenger, Friedman, even though Friedman shares their support for Hillary.  The Gang of 4 and Krugman’s reaction to Friedman’s use of their own models has an odd, disturbing parallel made famous by my colleague Randy Wray.

 [In] an interview Nobel winner Paul Samuelson gave to Mark Blaug (in his film on Keynes, “John Maynard Keynes: Life/Ideas/Legacy 1995”). Samuelson said:

“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.”

Orthodox economists are appalled by federal government deficits and stand in terror at the possibility that the public might ever understand how much the government could accomplish for the benefit of the American people if it got over the myths that a government with a sovereign currency is really just like a regular household and cannot run persistent deficits.  Friedman’s modeling of Bernie’s plan is so terrifying to the Gang of 4 and Krugman because it shows – under the orthodox economic models – that the government can be a powerful engine of producing “huge beneficial impacts.”  What is required is that our President has the nerve to junk the orthodox economic myths.  As Jamie Galbraith wrote, “When you dare to do big things, big results should be expected.”

The Gang of 4 then evince another tell.  They decry the fact that the standard models predict “huge beneficial impacts” from Bernie’s plan because the use of standard models “undermines our reputation as the party of responsible arithmetic.”  The concept of “responsible arithmetic” is wondrous.  Notice that they do not claim that Friedman’s “arithmetic” is inaccurate in the sense of making a computational or data input error.  Nor do they attack his use of the conventional models they embrace.  No, their criticism is that they hate the results of Friedman’s accurate arithmetic.  They point out no errors in Friedman’s arithmetic.  There is no indication that they ever checked out the accuracy of how he modeled the impacts of Bernie’s plans.

This means, as Jamie Galbraith observes, that the Gang of 4 and Krugman have smeared Friedman and Bernie.  Here is the Gang of 4’s claim:

We have applied the same rigor to proposals by Democrats, and worked to ensure that forecasts of the effects of proposed economic policies, from investment in infrastructure, to education and training, to health care reforms, are grounded in economic evidence.

I certainly hope that statement is a knowing lie, for otherwise they owe an enormous apology to the Republicans.  The Gang of 4 claims that they apply “the same rigor” to modeling policy proposals by Democrats as they do in their modeling of proposals by Republicans.  Their claim is that that “rigor” has exposed Friedman to be someone who is gaming the arithmetic in a shockingly dishonest manner to help Bernie.  I’ve already noted the embarrassing failure to reveal to their readers that Friedman supports Hillary, not Bernie.  But what grievous errors of arithmetic did Friedman commit that were disclosed by the Gang of 4’s “rigor[ous]” review of his modeling?   The Gang of 4, and Krugman, present no errors, and no analysis of Friedman’s study.  They present no evidence that they conducted any review, much less a “rigor[ous]” review of Friedman’s modeling that disclosed any arithmetic errors.  They literally simply hate the results of their own “standard” models because they show that Bernie’s plan produces “huge beneficial impacts.”

The Gang of 4 and Krugman Should Retract and Apologize to Friedman

Jamie Galbraith called the Gang of 4 and Paul out on their smear and their disgusting effort to substitute “authority” for logic, integrity, and intellectual honesty.  The effort to use authority to destroy Friedman’s reputation, with no identification of a single arithmetic mistake in using their own models is reprehensible.  The Gang of 4 and Krugman should retract their letter and blogs and personally apologize to Friedman.  It is despicable to abuse authority and status.

Krugman’s Smear of Laura Tyson and Ode to the (All Male) Economics “Pecking Order”

Paul is famous for his arrogance and his dismissal of the work of economists he considers to be lesser in status.  This makes his imperious demand that no one critique the Gang of 4’s smear of Friedman all the more ironic, because Laura D’Andrea Tyson is a member of the gang.  Perhaps Paul has forgotten his smear of Ms. Tyson when, in 1993, she was the first woman appointed to chair the President’s Council of Economic Advisers.

The chairman of the Council of Economic Advisers has generally overshadowed the two other members, working directly with the President while the others have stayed in the background, their names almost unknown to the public. But as a macro-economist, Mr. Blinder is likely to play a prominent role on the council, since he is considered more suited than Ms. Tyson to performing a crucial task of the council: assessing the impact of proposed policies.

“I will be vastly reassured if Alan Blinder is named to the Council of Economic Advisers,” said Paul R. Krugman, a macroeconomist at the Massachusetts Institute of Technology who had himself been a candidate for the chairmanship. “He would provide the necessary analytical skills that Laura Tyson lacks.”

Mr. Krugman and many other macroeconomists, particularly those in academia, have come to consider the three-member Council of Economic Advisers as their “embassy” in Washington. Because they view the council as their chief means of influencing Administration policy, they urged Mr. Clinton to appoint a top macroeconomist who would properly practice their skills and represent their views.

Her appointment also raised the issue of rankings within the profession. Mr. Krugman and other economists argued that after 12 years of Republican Administrations, the chairmanship of the council should go to one of the Democrats among the ranks of the top macroeconomists.

“Despite what people say about economists always disagreeing with each other, there is agreement on rankings within the profession,” Mr. Krugman said.

“There is a pecking order,” he continued, citing Nobel laureates in economics like Paul Samuelson, Robert M. Solow and James Tobin as those at the pinnacle in the over-65 generation. All are Democrats. Mr. Blinder, Mr. Lawrence and Mr. Krugman, also Democrats, are ranked among the top 20 or so in the younger generation.

There is in fact “a pecking order” that has closed off Krugman to many important advances for decades because the advances were not made by people he considers to be sufficiently exalted in his “pecking order.”  I am sure, however, that Ms. Tyson feels the irony that Krugman has now elevated her so high in his pecking order that no one is permitted to critique the Gang of 4’s smear of Friedman.  Note that Krugman’s dismissal of Tyson was based on the fact that she had no expertise in macroeconomic modelling – precisely the skill necessary to critique Friedman’s modelling of Bernie’s economic proposals.  Paul can’t even maintain logical consistency in his smears.

Ms. Tyson may wish to reflect on Krugman’s earlier sexist smear of her, based on status.  I hope doing so will prompt introspection about her own role in smearing Friedman.

But you will learn none of these things in the New York Times, where the Upshot column, without any analysis, treats the smears of Friedman as revealed truth.  Upshot does not mention Jamie Galbraith’s destruction of the Gang of 4 and Krugman.  The stories inaccurately portray Friedman as a Bernie rather than a Hillary supporter.  The column inaccurately claims that Friedman has made extreme assumptions.  The results do not flow from idiosyncratic assumptions by Friedman.  The “huge beneficial impacts” flow from the standard models and the far larger magnitude of Bernie’s plans to revive the economy.  Yes, the Davos Democrats that Krugman once routinely reviled in Washington, D.C. do often roll their eyes at Bernie.  The Davos Democrats, as Krugman once aptly pointed out, have been wrong about a vast range of economic issues.  They are not “rigorous,” they are arrogant, errant, and represent the Wall Street wing of the Democratic Party.  A considerable number of Americans have figured that out.  Read Tom Frank’s new book (Listen, Liberal) if you want the revolting details.


Response to Krugman

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  1. craazyman

    who cares about all this faux–Geekery. What a sleeping pill this stuff is! it might be interesting on a rainy cold day at the beach if you don’t have youtube or beer.

    Their models never worked and never will work. They’re nothing but tales told by idiots . . everybody knows the rest. Determinism worked for Isaac Newton because he was an empiricist. Determinism worked for Shroedinger and his buddies because Nature hath it’s own laws that appear fixed and perhaps eternal.

    But man has imagination and free will.

    Here’s the bottom line

    Fuikk these retards. I gave $100 to Bernie’s campaign yesterday! I don’t care if projected GDP by some modeled concoction of faux-math under Bernie’s plan goes up or down. Why worry what the Ouija board says? At the end of the day you need to do what’s right and the world will take care of itself

    1. Moneta

      Everything we do is based on what happened to us in the past and our genetic makeup. Our actions are based on determinism. But because the equation is too complicated for our brain to grasp, it looks like something else is at play.

      What is the right thing to do? Do we fix the infra in California or right-size the activity in that state and promote activity in other states? We. Don’t. Know. Jack.

      So resources, just like they have been throughout history, will be split by cajoling, conniving and force.

      1. inhibi

        Are you implying we don’t have any free will?

        In my mind, nature is much too chaotic for determinism to exist. You mention genetics and the past, but if those were not ‘determined’ then how is one’s action ‘based’ on determinism? If all human actions were based on determinism, then choice would seem to be predetermined, and it would be easier to model economics based on mathematics. But I believe this entire article shows that using simplified models that assume fixed constants that in reality are entirely variable (and chaotic, meaning they cannot be predicted) is a fools errand.

        And from what Ive seen in my career as an engineer, there is no equation and never will be. Nature is much too random to ever predict, even in a completely isolated vacuum chamber.

        1. Moneta

          All actions have consequences. It’s not because we can’t predict the consequences that determinism is not present.

          For each decision, our brain with the help of numerous heuristics, does a computation using all the data it has and shoots off an answer. It might look like we have multiple choices but we don’t. There is only 1 answer that fits all the variables at that point in time.

          I believe our destiny was determined along time ago, we just don’t have the brain power to know what it is. Our brain makes us just a little bit more clairvoyant than most animals.

          1. Chris

            But SO much will be changing, basically everything will be changed by the Trade in Services Agreement, and other deals now pending. Certainly their intent is to globalize service procurement, pushing the likelihood that any signatory government spending (such as the US, or any other Member) Domestic spending would be no more likely to lead to jobs in the US than any other Members, if it did it would be discriminatory. Contracts under the revised WTO GPA have to go to the lowest qualified bidder, internationally. get ready for big changes. Its estimated that as many as 60 million US jobs may eventually be effected by TiSA’s mandate to privatize and globalize services. Because of the negative list, which says, basically, include all services unless they are explicitly excluded. of course this will prevent any increase in prohibited state owned enterprises, in health care and education.

            If its a battle between a nations FTA commitments and elections and promises by a politician, there is no contest, the FTA’s dictates rule. Otherwise, what would be the point of entering into them? Corporations demand predictability now. Their whole purpose is to make international investments and policy with economic implications predictable *and take them out of the hands of the politicians*.

            So Sanders or whomever can promise all he/she wants, he likely wont have the power to DO anything by January. WTO or RGFS will likely have final authority at that point to discipline domestic regulations.

            Businesses throughout the developing world are gearing up to service the US market, its seen as the long awaited payoff for participating in globalization.

            1. Yves Smith Post author

              The US could simply go rogue on TiSA and refuse to pay judgments. We welsh on treaty commitments all the time. With the US the backstop of the dollar, which is the world’s reserve currency, no signatory is gonna be able to take action if we ignore judgments. Then the whole deal falls apart. What’s not to like?

              1. attitude_check

                So, the only way that TISA is a good thing, is if we plan to renege on our agreement if it goes bad? Woa that is one big endorsement!

                Bad faith, meet power politics.

                How very Bush II of you.

        2. Claude

          Your problem lies in your preconception of what genetics is. If one was to read on the recent genetic understandings we would find epigenetics to be the ruling construct of how genetics makes changes to one’s genes so that happenstances in one’s life may be impressed onto the genes and passed along to one’s offspring. It is no longer the view that your genes are immutable instruction sets passed from parents to children. They are instructions that pick up revisions at each iteration and as such are not deterministic, generation to generation.

      2. Michael C.

        Not all our our actions or present conditions are determined by past actions and genetics. In the present moment we have the ability to act differently, otherwise for Buddhists (for example), the holy life could not be lived, or in modern language, all would be predetermined and we having no control of the future we would be relegated to living out what is our fate or destiny, and we would not be responsible for our actions. Fate would rule the day, or predestination, but not in the heavenly sense. Though not the best explanation I have read about it (but the quickest one I found googling it) this below sufficiently and accurately explains our relationship to the past, present, and future:

        Refuting the erroneous view that “whatsoever fortune or misfortune experienced is all due to some previous action”, the Buddha said:

        “So, then, according to this view, owing to previous action men will become murderers, thieves, unchaste, liars, slanderers, covetous, malicious and perverts. Thus, for those who fall back on the former deeds as the essential reason, there is neither the desire to do, nor effort to do, nor necessity to do this deed, or abstain from this deed.”

        It was this important text, which states the belief that all physical circumstances and mental attitudes spring solely from past Karma that Buddha contradicted. If the present life is totally conditioned or wholly controlled by our past actions, then certainly Karma is tantamount to fatalism or determinism or predestination. If this were true, free will would be an absurdity. Life would be purely mechanistic, not much different from a machine. Being created by an Almighty God who controls our destinies and predetermines our future, or being produced by an irresistible Karma that completely determines our fate and controls our life’s course, independent of any free action on our part, is essentially the same. The only difference lies in the two words God and Karma. One could easily be substituted for the other, because the ultimate operation of both forces would be identical.

        Such a fatalistic doctrine is not the Buddhist law of Karma.

        I agree what this fundamental take in that we do have the power to shape the future by a free will to choose. In terms of economics, which I admittedly do not understand, I guess it means that if there is an invisible hand, the results are not predetermined but dependent upon systems and how we we choose to act within them or alter them to get different results.

        1. Moneta

          Of course we are living out our fate and destiny. We just don’t know what it is because there are just too many variables.

          You kick the ball. You have a pretty good idea where it will go. You won’t be able to measure it perfectly because there are quite a few variables…. But it’s pretty clear that it is deterministic.

          It’s the same thing with life in general, the difference is that there are many more variables.

    2. Alex Hanin

      The good old Austrian/Randian argument: man has free will, so models and predictions are worthless.

    3. jhallc

      I’m in complete agreement. Economics is looking more and more like a psuedo-science everyday. While is has its place, it’s practitioners are often blinded by the formulas and models. The economist’s that realize this, Steve Keen comes to mind, are the realists in my opinion.
      By the way I just donated to a political campaign for the first time ever, go Bernie!

      1. Ron Maimon

        If you are donating to Bernie, you should know that his policies are designed to maximize growth in economic models, by reducing unemployment. He is not a starry eyed dreamer, but a cold calculating Keynesian, and he is doing the best-possible policy to maximize growth.

        There is no substitute for Keynesian economic modelling, it gets the numbers roughly right. Economics gets a bad reputation from the right wing quackery that poses as serious economics, and sometimes wins Nobel Prizes, like the so-called work of Milton Friedman. You need to look past the superficial debates, and realize that there is a right side and a wrong side in every quantitative field of study, and the right side is the one that predicts the correct numbers.

    4. craazyboy

      Yeah, who cares if GDP for the 1% goes up 5% or 1%? What’s that got to do with us anyway? Other than bigger endowments at Ivy League schools, I mean.

      Then the Krug Dude says Bernie is gonna make Trump president? What about Hillary! making Trump president??? Maybe the Krug Dude should worry about that.

      1. Left in Wisconsin

        The only reason to want HRC to win the nomination is to then watch her lose to Trump and then watch all these sh#theads have to explain how she lost. Except that I’m sure they will blame it on Sanders supporters regardless. And the conclusion will be that the real problem with HRC was that she was too far to the left. Bloomberg Dem 2020.

    5. washunate

      I particularly like that comparison of GDP to ouija boards. They are both perfectly useful when used appropriately.

    6. Nathan Tankus

      Come on Craazyman. you don’t think this wild attack by establishment economists on other is interesting and important?

      1. Chris Sturr

        I’m with Nathan. Government policies have an effect on (among other things) unemployment, and it’s worthwhile to try to estimate those effects. And, contra craazyboy, unemployment *does* affect us.

      2. craazyman

        It’s not at all interesting to me, but I concede it may be important to other economists. But not to me.

        I gave Bernie $100 yesterday!

        I hope he kicks some butt and gets 62% of the vote this November. I’m ready for Ber-nie! Ber-nie! Ber-nie!

        1. craazyboy

          But you gotta admit having them declare that the same econ models are full of crap is kinda funny.

          Of course, we knew that already, after being personally lab tested for 40 years.

          1. craazyman

            what’s really going to be funny is when Professor Kelton gets her hands on the budget. Oh man. These dudes are gonna have intellectual nervous breakdowns. We better get the mental ambulance ready right now. When they see all that money flying around like candy from a pinata, and then they see nothing bad happens, they’re gonna be in a state of ontological shock.

            It’s like the dude who came face to face with an alien in the woods behind his house. Your entire world just disappears and you’re confronted with something so bizarre, so unimaginable, so shocking, so incomprehensible, all you can do is drool gape jawed in panic at what you think must be a psychotic break from everything you’ve ever known and nothing is ever ever the same.

            That’s what it’ll be like. They may never recover and we may have to put them in an insane asylum in the Newtonian Delusion wing. They can play with marbles all day long, counting them and modelling them with math as they roll around on the table. Then they can go to bed.

            Economics is a mental disorder because it can’t separate Quantity and Form. The only Form it knows is “number”. The only logic it knows is math. The only meaning it knows is size. The only metaphorical system it knows is Newtonian physics of bodies moving in a gravitational field. They are already insane but they don’t know it. If you do know it and you point it out, they think you’re crazy. Can you believe how lost they are? hahaha

            1. craazyboy

              Professor Kelton doesn’t want a budget.

              But anyway, the biggest problem with economists is they think the Money Gravitational Field Vector points downward to Earth and money “trickles” down according to Bernoulli’s laws of Compressible Flow. We then need policies to keep us from being crushed with all this money.

              Either their counter policies have been wildly successful, or the Money Gravitational Field Vector points upward towards false gods.

    7. lyman alpha blob

      Call me crazy but at the risk of exposing myself as a physics dilettante I’m pretty sure Mr. Schroedinger and pals showed that nature was NOT deterministic with their quantum mechanics because the cat in the box is dead and alive at the same time. And if I haven’t exposed myself as a dilettante, I have definitely exposes myself as a noodge.

      Other than that I couldn’t agree more. I’m sick and tired of everything being done because of how much money someone can make off it and not just because it’s the right thing to do. The serious people seem to think that money does grow on trees in the sense that it’s a naturally occurring phenomenon following eternal economic rules and forget that it’s a tool made by people who can do whatever they want with it.

      1. Moneta

        I understand that electrons might move in a non-deterministic probabilistic way… but maybe it looks that way because we still have not figured it out.

        For a long time we were sure there were multiple gods responsible for the weather…

    8. Pespi

      If orthodox economics is a priesthood in service of a strategy of accumulation, heterodox economics is iconoclasm. Necessary! Needs to be done, smash the models, the super models, and let the rivers run red with numbers.

    9. determinism

      “But man has imagination and FREE WILL.”

      >2016 anno domini
      >people are still believing in a concept of free will

  2. fresno dan

    Thanks for this great post and all the refs!!!!
    It isn’t just about Bernie and his economic plan. It is about the cabal that says what is and is not possible, and beat people down as if economics is some science like physics, when most of it is POLITICAL decisions.
    It is heartening that people are catching on about the gurus, and that where you end up depends a great deal from where you start.
    Late yesterday in the links I posted this:

    fresno dan
    February 21, 2016 at 6:24 pm

    Gerald Friedman, an economics professor at the University of Massachusetts at Amherst, produced an analysis of Bernie Sanders’ economic plan predicting eye-popping benefits from the candidate’s program: 4.5 percent real GDP growth between 2016 and 2026, at which time median income would be $82,151 — about $23,000 above the Congressional Budget Office baseline.

    Reaction from the economics establishment was swift and vicious. Democratic Party heavy hitters — Alan Krueger of Princeton, Austan Goolsbee of the University of Chicago, plus Christina Romer and Laura D’Andrea Tyson of Berkeley, all four former chairs of the Council of Economic Advisers — put out an ex cathedra declaration that Friedman’s paper was utterly beyond the pale of serious analysis.
    Ironically, in the frenzy to destroy Friedman’s reputation, nobody actually explained in detail what the problems were with his paper. The CEA pronouncement had no data or economic argument at all — it was 100 percent political handwringing. Krugman gave a very brief gloss suggesting that Sanders couldn’t possibly get labor force participation back up to 1990s levels due to aging, and trying to do so would cause inflation. Kevin Drum gave a similar incredulous stare argument about worker productivity and GDP growth, pronouncing it “insane,” worse than Republican “magic asterisks.”
    Let’s do what the Very Serious Wonks did not, and actually look closely at the paper. Friedman’s analysis is certainly far outside the mainstream, and from my informed amateur perspective, the amounts by which he predicts Sanders’ program will exceed the CBO baseline are mighty implausible. But the basic shape of his analysis — a sharp initial growth spike driven by massive fiscal stimulus, falling rapidly to a lower but still-strong rate — is not at all ridiculous.
    But even a lack of political acumen can be valuable. People who don’t automatically calibrate their work to fit the current intellectual fashion often have a vital role to play in the economic discourse. Because what “sounds reasonable” changes over time, and has an inconsistent at best relationship with economic reality. Austan Goolsbee, who was in early 2007 writing this utterly brain-dead article about how subprime mortgages would help minorities and the poor (days later one of the biggest subprime lenders would file for bankruptcy) ought to know this better than most.

    So should Christina Romer, who was bullied by Larry Summers into low-balling her estimate of how large the Obama stimulus should be, which probably played some role in making the Recovery Act too small and hence creating this milquetoast recovery at the heart of why we’re having this discussion in the first place.

    So if “wonk” is to mean anything besides a cudgel for walloping the unwashed lefties out there, the establishment economists ought to do more actual fine-grained analysis and less wagon-circling.
    So……if standard economic hocus pocus is used, the economist who evaluated a Sanders economic platform found it would be quite nifty. Ostensible (i.e., fake) liberals poop their pants because increasing growth for the benefit of the lower quintiles (take me seriously cause I use economic jargon too!!!!) just isn’t done in a modern global free market economy!!!! This isn’t the 1960’s!!!!!!

    Really, the only mistake the economist supporting Sanders made is not clearly explaining that what happens in an economy is not the result of free market fairies, but due to the clout that those with vast sums of money have to shape and bend, if not limit, and veto rules that would prevent their controlling markets to their own advantage…
    If you want health care for all, you can have, and have it cheaper as well. If you want fuller employment, you can have it if you want it. And if you want more equality, you can have it if you want it.
    Goldman Sachs doesn’t pay Hillary to listen to her pontificate about the Federalist papers – it pays so it can get her in a room where it can tell her what to do…

    1. optimader

      Why was Krugman so fervid in its efforts to smear Friedman and prevent any critique of the Gang of 4’s smear that he revised his article within two hours and amped up his rhetoric to a shrill cry of pain?

      I always enjoy Bill Black’s rhetorical style!

      I like this line wherein Krugman is relegated to the status of a pronoun (its), and referring to his style as fervid. Its and fervid invoke in my mind all the substance of the fan inflated fabric tube man waving around in the wind in front of a hotdog joint to attract attention. All frenetic style no substance.

      The thing is, Krugman resorts to the fallacy of Speaking from Authority as his argument rather than setting up a robust critique.

      Krugman resorts to the parroting of HRC’s “Believe me, I am advised by all sorts of important people I’m the expert here!”, and “Yes we can agree things are FUBAR, but that’s the reason to stay the course!” mumbojumbo.

      On the notion of the validity of Economic forecasting, yeah science and economics should not be located too close in a paragraph. The underlying issue is the attempt to discredit Friedman because Krugman /Gang of 4 don’t like the output from his use of standard and accepted modeling tools.

      Economic forecasting is “fragile” if you want to use a kind word. The world is non-linear, non-Gaussian and for the most part the details are Stochastic, as in human behavior is not so rational necessarily, so what unfolds in time is not strictly dependent of previous events.

      My take away from a couple years of system engineering electives is not so much the mathematical tools, most of which I’ve forgotten, but the understanding that prediction of complex systems ( eg: economics) should be viewed as a range of possibilities benchmarked with correlation coefficients. The degree of success or failure is highly dependent on insightful (lucky) and fortuitous assumptions. As well, the further out on the time line the more whimsical the possibility of getting it right because unconsidered events conspire and multiply.

      So in principle I concur w/ Craazyman. BUT what is good for the Goose is good for the Gander when it comes to taking a position based on economic forecasting.

      Krugman shreds his own credibility on that count.

      1. James Levy

        Krugman has credibility to the extent that: 1) “serious” people listen to him, 2) they can justify listening to him because he is from Princeton and has a Nobel Prize, and 3) he can use the commanding heights that affords him in academia to piss on anyone below him who dares disagree with him, and most academics, who are the most status-conscious people you will ever meet and are in thrall to the pecking order and the “meritocracy” it purportedly codifies, will always side with the guy from the Ivy League by default. He does not have credibility because he is in any way objectively correct about anything, or is honest and goes where the data take him. Those are not criteria that matter in academic Economics.

        1. digi_owl

          Nah, its always been this way.

          Salt vs fresh has been a case of musical deck chairs, while constantly repeating “there is no iceberg”.

      2. Hayek's Heelbiter

        As a severely lapsed Krugman-ite, can anyone tell me the date and the blanidshments that caused him to “jump the shark” and cross over to the Dark Side?

        1. Skippy

          “Some decades ago the British economist Joan Robinson – one of John Maynard Keynes’ most brilliant students who helped him with the original draft of his General Theory – half-jokingly referred to some of her colleagues as “Bastard Keynesians”. These colleagues were mostly American Keynesians, but there were a few British Bastard Keynesians too – such as John Hicks, who invented the now famous ISLM diagram. What Robinson was trying to say was that these so-called Keynesians were fatherless in the sense that they should not be recognised as legitimately belonging to the Keynesian family. The Bastard Keynesians, in turn, generally assumed that this criticism implied some sort of Keynesian fundamentalism on the part of the British school. They seemed to assume that Robinson and her colleagues were just being obscurantist snobs.

          Such a misinterpretation exists to this day. The second and third generation Bastard Keynesians – which include many of those who generally collect under the title “New Keynesian” – have reinforced this criticism. Paul Krugman, for example, in response from criticisms that he was misrepresenting the work of Keynes and his follower Hyman Minsky wrote:

          So, first of all, my basic reaction to discussions about What Minsky Really Meant — and, similarly, to discussions about What Keynes Really Meant — is, I Don’t Care. I mean, intellectual history is a fine endeavor. But for working economists the reason to read old books is for insight, not authority; if something Keynes or Minsky said helps crystallize an idea in your mind — and there’s a lot of that in both mens’ writing — that’s really good, but if where you take the idea is very different from what the great man said somewhere else in his book, so what? This is economics, not Talmudic scholarship.

          This is a classic misrepresentation of those who accuse Krugman and his ilk of Bastard Keynesianism. When people accuse Krugman and others of distorting the work of others it is not because of some sort of sacredness of the original text, but instead because Bastard Keynesianism is racked with internal inconsistencies that its adherents cannot recognise because, blinded as they are by their neoclassical prejudices, they never get beyond a shallow reading of actual Keynesian economics. What is more, these inconsistencies are not simply some sort of obscure doctrinal or theoretical nuance that only matters to hard-core theorists; rather they generate concrete policy responses that may well cause a great deal of trouble and, quite possibly, discredit Keynesian economics itself if and when they fail spectacularly should they be implemented.”


          “Yves here. If comments on this site are any guide, readers appear to have taken considerable interest in a blogosphere debate on the role of money and banking, with Steven Keen and Scott Fullwiler (among others) arrayed against Paul Krugman and Nick Rowe. Krugman’s latest piece not only misrepresents Steve Keen’s argument, as Philip Pilkington explains below, but Krugman also appears to have shut down any discussion at his blog after quite a few of his readers pointed out his sleight of hand.

          There were 65 comments from 12:46 PM to 5:22 PM. Krugman put an update (no time marker) at the top of the post”OK, I’m done with this conversation.” Did the last comment, reproduced in full below, hit a nerve?

          I predict this sorry exchange that started about Krugman’s misuse of Minsky will one day haunt the good Professor if he doesn’t do his homework with an open mind immediately. If not, the damage to his credibility will be permanent and irreversible.

          Paul, at least come clean and admit you misread Keen here and quoted him out of context. It’s obvious.

          Your doubling down with each new post is very unbecoming and your [sic] beginning to look like a Republican.

          What was that post you wrote awhile back on hypocrisy?”

          Skippy…. I would loan you some of my mental steel wool, but its little more than a nub these days….

        2. Skippy

          Till the fog clears…. bastard Keynesians are from inception not Keynesian in the same way Bretton Woods was bastardized… imo…

  3. brian t

    What is it with this blog and Krugman? The guy’s sometimes wrong, but the sheer amount of invective tossed in his direction is well out of proportion to the reality. Foraging for latent sexism in something he said in 1993? I’d say “don’t let him get in your (collective) head”, but it’s clearly too late for that.

    1. Yves Smith Post author

      So the best you can do in defense of Krugman is yet another ad hominem attack?

      If Krugman didn’t engage so regularly in making intellectually dishonest attacks on those who dare take issue with 1. Team Deam and 2. mildly leftist mainstream orthodoxy (see his dustup with Steven Keen) we wouldn’t write about him so regularly. He’s using his brand name as a weapon to squash critics, and routinely engages in straw manning, cherry-picking, and other tricks to make his case.

    2. Optimader

      The deal with Krugman, for me at least, is his fake objectivity.
      Everyone is entitled to an opinion and an agenda for that matter, but it shouldn’t be misrepresented as objective fact, particularly by someone who is alleged to be a professional.

    3. Dugless

      Like it or not, Paul Krugman is one of the most influential “liberal” economists. As a non-economist, I (and I am sure many others) have relied on his opinion as an expert to both explain and critique economic policy. If he was merely wrong on occasion, this would be understandable. However, it appears that he is not just occasionally wrong but actually relies on his prominence to level unsubstantiated attacks on those who do not agree with him. If the emperor has no clothes, someone needs to stand up and say it. I sincerely thank Yves, Lambert and the rest of the writers on this blog to be willing to point this out.

  4. Keith

    We need economists that understand economics.

    The response of main stream economists to 2008 was:
    “How did that happen?”

    After 2008, even the Queen was asking the revered economists at the LSE “If these things were so large
    how come everyone missed it?”

    In the common parlance “What do you morons do all day?”

    Main stream economists, in the intervening eight years, have come up with no explanations for this gargantuan flaw in their understanding.

    It is time to look for those that know what they are doing.

    In 2005, Steve Keen, saw the crisis coming and the private debt bubble inflating.

    In 2007, Ben Bernanke, could see no problems ahead.

    We know Central Banks were using fundamentally flawed economics prior to 2008 and have not put forward any reasons why they didn’t see 2008 coming.

    It should hardly be surprising that their fundamentally flawed economics does not come up with the right solutions.

    Steve Keen is a man that can see what Alan Greenspan, Ben Bernanke and Janet Yellen can’t:

    1. James Levy

      My question two years after the meltdown was, how many of the small number of heterodox economists who saw it coming have been hired by the top universities, and how many of the people who not only didn’t see it coming, but swore it couldn’t, had lost their endowed Chairs (not their jobs, mind you, just the sinecure of a an endowed Chair)? The answer, of course, was zero and zero. If Economics was even remotely a science, the former at least would have happened. But it is not. It is a circle jerk of about 12 elite programs that provide all the cadres for those self-same elite programs, a good old boys network and I do mean boys. It is buttressed by an academic establishment that equates where you go to school with how bright you are and where you “deserve” to get a job. I went to university both here and in the UK. In the UK when someone was up for a job, the department members read the person’s work and compared it to other people’s work they were considering hiring. If the woman from Leeds writes better and has more interesting things to say, she gets the job over the guy from Cambridge. In America, my experience is that they don’t read your work–they read your recommendations from “names” and look at what program you graduate from. Then, to cover their asses, they hire the Ivy because if they don’t work out, no one questions the initial hire, but if you hire someone from Kansas or Iowa and it doesn’t work out, the Dean and the Provost will want to know what the hell you were thinking and not give you a new line to replace the lost one because they don’t trust your judgment.

      1. fresno dan

        I think it is very much like everything in the world.
        Let’s take your point:
        My question two years after the meltdown was, how many of the small number of heterodox economists who saw it coming have been hired by the top universities, and how many of the people who not only didn’t see it coming, but swore it couldn’t, had lost their endowed Chairs (not their jobs, mind you, just the sinecure of a an endowed Chair)? The answer, of course, was zero and zero.

        And apply it to 9/11, weapons of mass destruction, and Iraq – how many people fired – at the CIA, NSA, DoD? How many congressmen resigned in shame? How many trillions spent – and no clues anywhere…

        I have come to believe that the people responsible for those outcomes do not believe that they failed to foresee anything, or that they failed to do what was EXPECTED of them. What is in our interest, and most Americans interests, is not necessarily in their interests. And when “screw-up” after screw-up happens, maybe, just maybe, things are working out exactly as the 0.1% and their minions desire…

        1. Amateur Socialist

          Or the philosophy summarized in a pithy saying we used to have around the plant back in the day (regarding an often questionable promotion or award given…)

          “$hit Floats”

        2. JTMcPhee

          Years ago the floating bridge over Lake Washington out of Seattle foundered and sank to the bottom of the lake. Engineering jurisdiction was as I recall under the Washington Highway Department, which also as I recall was not accountable to anyone in the political economy hierarchy, for some local historical reason. The mechanism of failure: the bridge was a series of reinforced concrete boxes, joined together end to end, two rows of them in parallel across the lake, anchored by cables to sinkers on the lake bottom. Concrete boats do float, as long as you keep the water out…

          Somehow the WaHD management got it into its bureaucratic head that the bridge deck for the Interstate (I-90) was not wide enough to satisfy federal highway-funding requirements and had to be widened. The chosen approach was to use high-pressure water jets to cut off the upper edges of the boxes, insert reinforcements and new concrete cantilevered deck extensions on both sides, with about a 10 foot wider plan. The construction work required access through the sides of the boxes, so 3 ft by 4 ft holes were cut into the sides of all those concrete boats. There was only about 18 inches of “freeboard” from the lake surface to the bottoms of these holes. On the shores of the lake were large piles of big steel watertight hatches to cover the holes. And a construction schedule that did not have hatches being placed over each hole as it was cut.

          Further follies: The high pressure water jets carved tons of little concrete particles off the boxes. The Washington Department of Environmental Protection determined that this effluent was a “pollutant or contaminant” that required a Clean Water Act permit and treatment before it could be discharged into Lake Washington. The WaDOT said “never mind,” just let the cut water run down into the bilges of the concrete boats.From which a stream of tanker trucks would slurp it up and transport it to a permitted wastewater treatment plant up the road. Millions of gallons of it. No problem!

          Comes The Thanksgiving Day storm in 1990, and 50+mph winds from the south sent 4 ft waves up against the sides of the floats, dumping more millions of gallons of water into them. Add inches of rainfall, and pretty soon the construction crews noticed one of the floats was sinking. Because they were all so well tied together, they went down in a long sequence that made some fascinating video. Only cost about &70 million to replace the span. (Note that the original bridge was an engineering failure too, for different reasons… see link) (And also that — file this under “infrastructure collapse watch,” maybe — another WaHD bridge of similar design had failed and sunk a decade earlier, and still another has been determined to be “under-engineered for local environmental conditions” and is being replaced. “It is at this cost that you have trade…”)

          Turns out that the widening was not actually mandated by federal law. And the Seattle TV station, KING-TV, interviewed the then head of the WaHD, and asked what were the reasons for this horrible terrible really bad outcome? The guy’s response, behind his Nordic engineer’s sangfroid, was “I do not see any problems with this situation. The paperwork is all in perfect order.”

        3. Optimader

          Americans interests, is not necessarily in their interests. And when “screw-up” after screw-up happens, maybe, just maybe, things are working out exactly as the 0.1% and their minions desire…

          Some of that, butI am of the school of thought that a lot of these yahoos in The Mutual Admiration Society that are Societies tapeworms really dont know what the heck they are doing, consequently really ovestimate thrir ability to control outcome (file unde: The New American Century).
          The thing is , if you’re close to power/ first use of money it’s hard to have a bad outcome at the persinal level or in the bubble. Same theory as: if you have enough money you can find a nice place to live anywhere

    2. a different chris

      Dean Baker sold his freaking house at the peak and rented thru the downturn. That’s balls – especially since he didn’t have to explain that to other economists, he had to explain it to his wife!!

      And he’s not nearly as far off the mainstream as Keen, he just pays attention to what the data actually tells him rather than simply admiring his own reflection in the mirror.

    3. different clue

      I don’t believe that Greenspan didn’t see this coming. I believe that Greenspan tried engineering crash-ogenic conditions on purpose so that the already-rich would have an opportunity to get even monopoly-richer, in the way that Andrew Mellon advised during the Great Crash.

      I don’t believe that Bernanke didn’t see this coming. I sometimes watched Bernanke testifying to Congress on CSPAN. I could hear his voice trembling with fear for at least a year before the crash, and since no Tenured Professor is going to tremble in fear before the collective intellectual mediocrity of Congress; I knew he was terrified of something “over the horizon” which he could see but I couldn’t. But I knew it was there from the fear in his trembling voice.

      1. Mark P.

        ‘I don’t believe that Bernanke didn’t see this coming.’

        Bernanke was installed as Fed chairman in Feb. 2006 precisely because his masters saw the GFC coming, for heaven’s sake.

        Why else would the position be given to an academic economist whose primary expertise was the economic and political causes of the Great Depression, and who had publicly advocated that “the U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost”?

  5. fresno dan

    From the article:

    There is in fact “a pecking order” that has closed off Krugman to many important advances for decades because the advances were not made by people he considers to be sufficiently exalted in his “pecking order.” I am sure, however, that Ms. Tyson feels the irony that Krugman has now elevated her so high in his pecking order that no one is permitted to critique the Gang of 4’s smear of Friedman. Note that Krugman’s dismissal of Tyson was based on the fact that she had no expertise in macroeconomic modelling – precisely the skill necessary to critique Friedman’s modelling of Bernie’s economic proposals. Paul can’t even maintain logical consistency in his smears.

    Ms. Tyson may wish to reflect on Krugman’s earlier sexist smear of her, based on status. I hope doing so will prompt introspection about her own role in smearing Friedman.

    But you will learn none of these things in the New York Times, where the Upshot column, without any analysis, treats the smears of Friedman as revealed truth. Upshot does not mention Jamie Galbraith’s destruction of the Gang of 4 and Krugman. The stories inaccurately portray Friedman as a Bernie rather than a Hillary supporter. The column inaccurately claims that Friedman has made extreme assumptions. The results do not flow from idiosyncratic assumptions by Friedman. The “huge beneficial impacts” flow from the standard models and the far larger magnitude of Bernie’s plans to revive the economy. Yes, the Davos Democrats that Krugman once routinely reviled in Washington, D.C. do often roll their eyes at Bernie. The Davos Democrats, as Krugman once aptly pointed out, have been wrong about a vast range of economic issues. They are not “rigorous,” they are arrogant, errant, and represent the Wall Street wing of the Democratic Party. A considerable number of Americans have figured that out. Read Tom Frank’s new book (Listen, Liberal) if you want the revolting details.

    First, I will acknowledge that Krugman is often on the receiving end of some hateful, illogical, and particularly vituperative comment. HOWEVER, as this shows, and despite Krugtron’s assertion that he does ad hominem ONLY to those that use it, this reveals that Krugtron is a rather obnoxious character, who is perfectly willing to impugn people’s motives, integrity, and intellect when he merely disagrees. He often starts with the premise that of HE THAT CANNOT BE WRONG (he actually did a column once that essentially was ‘I was wrong ONCE because I thought I was wrong when I wasn’t). The fact that when Krugtron is insulting someone that he uses particularly verbose and varied lexicon does not mitigate the fact that he is often as bad as many of his critics.

  6. diptherio

    More proof, as if it were needed, the Krugman and his VSP cohorts are a bunch of douches.

    On another note, I’m glad to see that old Samuelson interview getting a little play. I’ve had that one bookmarked on Youtube for awhile. The basic argument it, “you can’t be trusted to handle the truth; only those at the top can.” Or, even shorter, “Sit down and shut up like the child you are, daddy’s got this and no questions allowed.”

    It is ironic that Samuelson compares mainstream macro to old-time religion – which has much the same ring to my ears as “voodoo economics.” The populace of this country is long overdue for a “there is no Santa Claus” moment…

    1. fledermaus

      Krugman is just returning to form from the shrill days of the Bush II years. He sees no problem with TPP, doubts that inequality is a problem and the Wall Street banks are just peachy

  7. Doug

    Kudos to Jerry Friedman for his scholarly curiosity and effort — and for his no bullshit letter to Krugman who, perhaps, we here among the NC commentariat might henceforth reference as Thugman

  8. DakotabornKansan

    I’m curious. Has Paul Krugman ever apologized to anyone?

    “I never wonder to see men wicked, but I often wonder to see them not ashamed.” – Jonathan Swift

    1. Detroit Dan

      Kevin Drum had a post with the same question about Krugman. I did some quick research and easily found a dramatic instance of Krugman been totally wrong about a fundamental issue (and very much related to the current discussion of Sanders’ plan).

      Is Paul Krugman Ever Wrong?

  9. jared thomas

    All this sounds like a hissy fit among astrologers. As for the presidential candidates, they’re all dead useless, a pathetic joke.

    1. 3.14e-9

      Jared T., I am an astrologer and I was thinking the same thing!

      FWIW, I minored in economics and have said many times that economics is no more a “science” than astrology, although that isn’t saying much for astrology. It’s worth noting that some financial astrologers actually did see the 2008 meltdown coming. In his annual forecasts from 1994 on, Ray Merriman spoke of a rare planetary configuration in 2008 that hadn’t happened since the Great Depression.

  10. RDeschain

    Ironically, PK’s intended mic-drop here:

    Actually makes the case for Friedman pretty well, as 10 years of 4.5% growth just offsets the last 10 years of what should have seemed an equally implausible 0.5% growth, with the 20-year average of 2.5% being right in line with the long-term central tendency in the 2-2.5% range.

    1. David Carl Grimes

      Krugman’s graph only goes back to 1957. The kind of economic program Bernie is talking about is similar to that of the New Deal where there was a massive fiscal stimulus.

  11. zapster

    Thank you for this, Yves. The Hillary supporters I deal with are all over this nonsense, and this is much – needed ammo against it.

  12. Rhondda

    Galbraith’s letter is a marvel. Sharp as a blade and cuts right through the crap. Thanks for posting this, Yves. I no longer burn my eyes with the NYT’s lies, so I would’ve missed it.

  13. ScottW

    To the point of possibly defaming Friedman–the issue is whether there are any misstatements of facts that hurt Friedman’s reputation. Claiming Friedman did not use “responsible arithmetic” might be considered a statement of fact. It would be an opinion if they provided underlying facts that were true to support this conclusion, but they do not. And since facts and figures are the staples of economists this claim is very damaging.

    As you say–time for the public editor and Times’ attorneys to get involved. As a former attorney for a newspaper, I would not relish that role in talking to someone having Krugman’s ego. Now that is an example of expressing an opinion since “ego” cannot be quantified.

  14. Steve H.

    “And as we and others have discussed, Sanders is not “representing” a legacy party. The party apparatus is dead set against him. He is making a hostile takeover.” – Yves

    “First they ignore you, then they ridicule you, then they fight you, and then you win.” – Gandhi

    This now looks a fight. Whether the hostile takeover succeeds is unknowable until elections, with priors in flux and veracity declining daily. It looks like a hostile takeover against a board that is pumping cash into executive bonuses.

    Is that a poor model? If not, and if the takeover fails, does history have anything to tell us about the organizations after the fact? In this case, is the organization in question confined to the Democratic Party? Given the Republican Party seems under similar stressors, are we talking Federal governance instead, and what does that mean?

    1. DW

      Great quote for sure. But probably not Gandhi.

      From Wiki:

      Describing the stages of a winning strategy of nonviolent activism. There is no record of Gandhi saying this. A close variant of the quotation first appears in a 1918 US trade union address by Nicholas Klein:
      And, my friends, in this story you have a history of this entire movement. First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you. And that, is what is going to happen to the Amalgamated Clothing Workers of America.
      Proceedings of the Third Biennial Convention of the Amalgamated Clothing Workers of America (1918), p. 53

  15. Mark J. Lovas

    One might equally ask whether Krugman has not betrayed the public trust, and should resign his post as Seer and Prophet at the NYT.

  16. Stephen Gardner

    As Gandhi said: “First they ignore you, then they laugh at you, then they fight you, then you win.” May it be as he said for Bernie. We seem to be at stage 2.

  17. RUKidding

    Thanks for this info, which I had ferreted out. Of course Krug the thug said what he said because he’s highly compensated to do just that. No surprises, albeit, sadly, a lot of D-voters hold Krug the Thug in high regard. ugh.

    I hope Sanders keeps running and keeps putting this info out there. Sadly, I doubt that he’ll make it now, but that’s no reason to stop running. I’ve donated to him.

    I took some grim satisfaction in fascist racist sexist Trump shafting the Bush Crime Syndicate with his long knives. Hooray for someone, even Trump, actually spelling out factual reality to the rabidly propagandized fan-base.

    That said, now that Trump’s sent JEB! home to a big old dressing down by Bar, my prediction is that HRC becomes the candidate of the PTB, and they’ll ensure she ascends the throne. HRC is a NeoCon/NeoLib with bags and gobs of money from Wall St, the Hedgies, the MIC, the Prison Indus Complex, BigPharma, etc. From their stand point, what’s not to love? So HRC will have to push for some very very incremental changes that appear kinda sorta liberalish? Who cares? Big deal.

    And the beat down goes on…

  18. washunate

    That’s another great tidbit to file under “why economists and the corporate media have no credibility with most Americans”.

    It’s modestly sad in the scheme of things what has happened to both Krugman and the NYT, but at this point, over a dozen years since the overt WMD lies, it would be rather shocking to find the corporate media not engaged in anti-intellectualism and public deception.

  19. John Wright

    Yves wrote: ” Being a Nobel Prize winner does not give you a free pass on accountability or legal liability”

    I believe it is misleading to refer to the “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” as a “Nobel Prize” as people confuse this with the “real” Nobel prizes awarded to great scientists.


    “The prize was established in 1968 by a donation from Sweden’s central bank, the Sveriges Riksbank, on the bank’s 300th anniversary. Although it is not one of the prizes that Alfred Nobel established in his will in 1895, it is referred to along with the other Nobel Prizes by the Nobel Foundation.Winners are announced with the other Nobel Prize winners, and receive the award at the same ceremony.

    The Nobel Family has protested this usurpation of their name.

    “Some critics argue that the prestige of the Prize in Economics derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel, a great-grandson of Ludvig Nobel. Nobel criticizes the awarding institution of misusing his family’s name, and states that no member of the Nobel family has ever had the intention of establishing a prize in economics”

    A different title is needed. I prefer “Ersatz Nobel Prize in Economics” as it has a European cast while capturing the current common referenced title.

    1. fresno dan

      John Wright
      February 22, 2016 at 11:28 am

      Thanks for posting that! It should be posted every time Noble Prize and Economics are mentioned in the same article. Very much like Ph.D’s appropriating the title of Doctor to try and get the cachet of a physician, the title Nobel Prize confers the status of an physical science or medicine on something much, much more subjective. You may as well give a prize for political or religious theories.

  20. grayslady

    The political revolution clearly needs to extend to the field of economics, as well as to the issue of auctions rather than elections. It’s heartening to see professors Black and Galbraith leveling their academic muskets at neoconservative and neoliberal economists masquerading as the only true voices of knowledge.

    How long ago was it that Charles Ferguson warned us, both in his book and his movie, Inside Job that so-called prestigious economists were for sale to the highest bidder? This is not new news. As for Krugman, he has always considered himself the “liberal” gatekeeper: For years he has seen himself as the eminence grise who, alone, is allowed to tell those on the left just how far left they are allowed to stray. Poppycock!

    As for Krugman being a Nobel Prize winner, for years the Norwegian Nobel committee has been trying to use its selection process to influence U.S. and world politics. Nobel prizes to Al Gore and Jimmy Carter? How political can you get? Peace prizes to Obama and Kissinger? Spare me. As usual, the Nobel committee probably misinterpreted Krugman’s role incorrectly, with no real understanding of the subtleties of U.S. politics or the attempt to influence voting patterns by the owners of the MSM publications. I stopped reading Krugman back in 2007 when it became clear to me that he was allowing his opinions to get in the way of objective economics. To me, this whole ruckus about Gerald Friedman’s analysis is more of the same establishment hysteria that occurred (and is continuing to occur) in Britain regarding any of Corbyn’s policies.

  21. dk

    I worked through some of the Friedman analysis. He is, as mentioned, using very standard models.

    One characteristic of the Friedman analysis deserves some mention, the assumption that ALL of the examined Sanders programs would come into effect IMMEDIATELY upon his inauguration, and that is simply impossible. It ignores program draft, approval, and implementation startup times, not to mention differences in any actual programs from their proposals in current form. This gives the 10 year projections (Friedman’s 10 year numbers are for 2026) a context that has to be understood as purely hypothetical, a simulation to examine program behaviors given an arbitrary starting point. And economists are expected to know and understand this, and accept it as characteristic of any such projections, including their own (in contrast to journalists and pundits, who are apparently no longer expected to understand anything at all).

    I think some other assumptions are a little questionable as well (net zero cost for carbon-neutral conversion, for one) but these are based on other people’s work (see the papers references) and many have also been cited and used by other economists… including Paul Krugman.

  22. Fool

    One undercurrent to this which is so disturbing is the unspoken condescension towards Friedman because he teaches at UMass Amherst (as opposed to, say, Amherst College). The coercive, circle-jerking dogmatism with respect to neoliberal economics — and intolerance to varying schools of thought — at “elite” institutions has created a caste system that is less representative of intellectual merit than of sycophancy and opportunism. But I guess this grievance is a broken record? In any case, one can only hope for the asencding prominence of institutions like Missouri, UT, CUNY, UMass, Bard, others(?)…

    1. fresno dan

      Agree 1 squillion percent!!!!
      One particularly pernicious undercurrent to me is the implicit defense of “meritocracy” – – and I use meritocracy as a euphemism for “old boys network” and translated in the new world order as “Davos man speak.”

      Other than these self aggrandizing, self proclaiming, and self reinforcing shills for the status quo, what is the objective evidence of their brilliance???? Why, ONLY other people of the priesthood. When Larry Summers had a chance to participate in the market, he made a hash of it.
      These are the policy influences….that have given the majority of Americans declining affluence for 50 years.

      1. Left in Wisconsin

        If you’ve won the meritocracy, it kind of defeats the purpose to not let everyone else know.

  23. Donald

    One of the ironies here is that Krugman was pro-big stimulus–he’s the one who’s been writing for years that we needed a much bigger stimulus to pull us out of the hole the Great Recession caused. Even if he thinks the Friedman paper is wrong, he should be supporting Sanders’s stimulus package,but because he is a shill for Hillary he prefers to trash the Friedman paper rather than talk about the virtues of the Sanders plan.

    Furthermore, the Obama administration settled for an inadequate stimulus (presumably because of political opposition). Krugman said that and if I recall correctly, wasn’t happy when the Obama administration claimed the stimulus was the right size. But that claim surely did much more harm than a possibly inaccurate paper by Friedman ever will–people had the impression the Obama stimulus package was massive and didn’t do what it was supposed to. Did Krugman say that Obama wasn’t ready for prime time? I think he was critical, but not that critical.

    My problem with Krugman in the current situation is that what he says now is very hard to reconcile with what he had been saying for most of Obama’s term. This also goes for single payer–previously I thought the line was that it wasn’t politically possible. Now it’s that single payer would create a tremendous number of losers in the upper middle class. (Did he call out Obama when he oversold the ACA? Some people didn’t get to keep their plans.) How serious will their loss be? Are upper middle class Canadians hurting that badly?

    1. RMO

      I’ve said it before but I think he genuinely thinks Sanders would lose to the Republicans if he was the Democratic candidate and that only Clinton could possibly win (unlike a lot of the people here I do like reading Krugman on economics but I also think he’s out of his depth in the political arena which is why he goes with the conventional Very Serious People’s views in that area). As you point out he has written extensively in the past in favor of the very things Bernie Sanders is proposing. Extensive stimulus, single payer, carbon taxes and other policies to combat global warming, reversing the years long decline in government regulation, policies intended to reduce the huge income disparity, European style public welfare programs – the lot. Now all of a sudden he’s he’s almost frothing at the mouth arguing against those very ideas. No way in hell is he being paid off or influenced directly to shill for Clinton because he just isn’t that important or influential in Washington or Manhattan. I think he’s doing this to himself because he (mistakenly) thinks that Sanders getting the nomination would result in a Republican administration, likely with either Cruz or Trump as president. In some ways this is sadder than it would have been if he had actually been influenced by money or the promise of power or stature. The interesting thing is to read the comments as they seem to be overwhelmingly in favor of Sanders. Considering those comments are coming from people like me who for years have found Krugman to deliver worthwhile insight (and I know I’m in the minority on this site who think that way:-) I think this indicates just how big the divide between the, shall we say “establishment” liberals, and citizens with liberal and progressive views has grown.

      1. Darthbobber

        “I think he genuinely thinks Sanders would lose to the Republicans if he was the Democratic candidate and that only Clinton could possibly win…”
        Yes. And he also seems to believe that the end justifies the use of any means necessary, including tossing in fake economic arguments that cannot be reconciled with his own past positions in order to justify a position that is not being taken on economic grounds at all.

        As an economist, Krugman is a reasonably liberal practitioner of the “consensus”, and shares the strengths and the obvious weaknesses of that viewpoint. (Though his original claim to fame came from touting the revival of Ricardian comparative advantage theory, to cheerlead for the present version of globaloney, hardly a “liberal” view, except in the classical Gladstonian sense.)

        As a political prognosticator I’ve never seen any sign that he’s any better than me or my butcher.

      2. Donald

        I’m not a regular here (might become one), so I too have been a Krugman fan, though I am old enough to remember what a complete jerk he was on the subject of globalization and free trade in the 90’s. But he was (relatively speaking) radicalized by the fawning coverage given to Bush in the 2000 election.

        And yes, I think it is fair to say that the Sanders economic plan is the logical outcome if you took Krugman’s writings seriously over the past several years. And he probably is motivated in part by fear that only Clinton can win. What he should be saying to be consistent is that Sanders has great ideas, but he doesn’t think they are poltically feasible. That would be defensible. I’m not sure his motives are 100 percent pure, because some of his current nastiness seems like a throwback to the bad Krugman of the 90’s and he actually seems to be contradicting his positions from a few years ago just to denigrate Sanders. His hippy punching tendencies are coming out again. He’s gotten better, but the old Krugman is still in there.

        As for the fundamental economic issues that separate the neoclassicals from people here, I’m too much of a dilettante to say much. I think that mainstream economics is in part an ideological scam job, but don’t feel at all confident in my ability to say where the science ends and the scamming begins.

  24. Dikaios Logos

    There seems to be an asymmetry at work here: if Sanders (and Friedman’s analysis) are even a little bit right, then the more mainstream HRC-supporters are deeply and seriously wrong. That seems to be the main reason for jumping all over Friedman on the very day his paper was published. Hopefully that defensiveness will be recognized and become the story.

  25. susan the other

    thanks yves for this post…bill black and jamie galbraith are smart, precise, funny and right. I personally love the funny part bec. as tina fay says, it’s funny because it’s right. i think funny and love might be the same thing…

  26. JEHR

    “Moreover, no less an orthodox economist that Larry Summers has strongly. . .”

    should be

    “Moreover, no less an orthodox economist THAN Larry Summers has strongly. . .”

  27. Pookah Harvey

    Krugman et al have been pushing the” Sanders can’t win the general election because he only pulls in the liberal college kids”

    The latest West Virginia poll: Clinton 29%, Sanders 57%.

    As the WaPo puts it

    Clinton has consistently lost less-educated white voters to Sanders. In Iowa, white voters who lacked a college degree went for Sanders by one point. In Nevada, those voters went for Sanders by eight points. In New Hampshire, Sanders won them by 38 points, obliterating Clinton in working-class towns she’d previously won.

    Tell me that Sanders can’t win the general election.


    1. Darthbobber

      Other than the obvious materialist self-interest explanation for the “less (formally) educated” whites’ attitude, I think there’s another. Part of formal education is actually a systematic miseducation and indoctrination, and less-formally-educated people are less likely to be coming into contact with the self-appointed progressive gatekeepers’ arguments. Also less likely to have been socialized into acceptance of the deplorable econ 201 and 202 apologetics of the neoclassical synthesis. In the Vietnam era, for all the emphasis on the middle-class college kids, the first demographic groups to turn against the war were poor blacks and high school dropouts, who hadn’t had the benefit of the full round of hysterical cold war indoctrination that came with the education.

  28. marym

    Friedman also did a study of HR 676 in 2013. (PDF)

    Under the single-payer system created by HR 676, the U.S. could save an estimated $592 billion annually by slashing the administrative waste associated with the private insurance industry ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion).

  29. Plenue

    So now the question is has Thugman changed over the years, or was he always an asshole? And was his opposition to the Iraq War based on genuine moral outrage, or did he just have a Hitchens-like contrarian streak in him and Iraq was just the issue he latched onto, for whatever reason?

    1. NotTimothyGeithner

      The Iraq War was one of the most obvious and monstrous scams of all time. Picking against it shouldn’t earn anyone accolades.

  30. marym


    Clinton’s campaign has updated its website to note her continued support for the government-run health plan that was dropped from Obamacare during the law’s drafting.


  31. Skippy

    Whats in a name… when one genuflects before the IS-LM + bolt-ons…

    At least Milton had the nads to put his money where his mouth went… 6000% wrong, but anywho…

    Skippy… Maybe like Gallipoli+ the brass should endure their policy’s firsthand… oh if forgot… that might drain the brain trust….

  32. Vassilis

    Excellent article; typically, it went over the heads of a lot of respondents, judging from the commentary! One person even compared the text to a “sleeping pill”. Ah well, detailed and thorough rebuttal is not to everyone’s taste. Keep up the good work.

  33. Justicia

    Wonderful post, Yves. Krugman’s political economics was shredded by Matt Klein’s FT Alphaville column. Here’s the take-away:

    “One simple test is to compare what’s happened with actual output since the crisis against its longer-term historical trend. This trend is far from a perfect benchmark of where GDP “should” be, but it’s a reasonable place to start. The chart below compares actual growth against the “Great Moderation” trend and against our simplistic forecast based on Friedman’s analysis of Sanders’s plan:

    [The chart, titled “Soft bigotry of low expectations,” shows the growth “implied by the optimistic analysis of Sanders program” is in line with the historic trend.]

    This supposedly “extreme” and “unsupportable” forecast implies American output will return to its previous trend just as Sanders would be finishing up his second term, in the third quarter of 2024. (If this looks familiar, we used a similar test to defend Jeb Bush against similarly partisan charges.)

    It’s possible the critics think the economy will never recover the losses from the crisis, in which case the arguments for radical financial reform are even stronger. More likely, they think the deviation from trend is misleading because “structural forces” just happened to have emerged at exactly the same time as the worst financial crisis since the Depression — and that policy is powerless to lean against these “structural forces”.

    1. Yves Smith Post author

      No, he’s just being honest. This is about the impact of the Paycheck Fairness Act. It’s women’s wages relative to men. I’ve never seen any academic work on what legislation might do, so he could either ignore that (which is arbitrary too) or guesstimate what the effect might be.

      It’s utterly inconsequential in terms of what Krugman and the Gang of 4 are bitching about, which is the GDP growth that results from the model.

      1. Jon Murphy

        I don’t understand the distinction you are trying to make. He’s being honest that some of the numbers that go into the model are made up. That, in turn, calls into question at least part of the model he’s using, which means the outcome is, at least partially, in question. Garbage in, garbage out.

        Wouldn’t it be more academically honest if there were rationale behind his assumptions? Why did he choose those figures? He was able to give rationale for everything else.

        1. Yves Smith Post author

          No, you are missing the point, and you appear not to have read the post and in particular Galbraith’s letter. And I am being charitable in saying that.

          If there is no objective basis for reaching conclusions about a policy, because there is no research and no analogy overseas, then any assumption is indeed making it up. He could have written a bunch of verbiage to make it less arbitrary than it is, or he could simply point out that his assumption in ONE SPECIFIC INCONSEQUENTIAL matter is made up. The part on the relative distribution of men’s v. women’s incomes isn’t even part of the main model.

          Friedman uses standard models, and THE key assumption that drives growth is the fiscal multiplier. Everything else is noise. It has nothing to do with the growth rate that results. And as Galbraith and I (and now quite a few other economists and writers) have said, his multiplier assumptions are perfectly reasonable.

          You are engaging in broken record and ad hominem attacks, which are against our site’s written policies. And you also make it obvious that you did not read the post in full. We don’t permit that here. This is not a chat board and commenting is a privilege, not a right.

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