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This article by Cochrane is a poorly written hit job (IMHO). Cochrane argues that Krugman is equivalent to an HIV-AIDS disbeliever. Ridiculous. Krugman's the

This article by Cochrane is a poorly written hit job (IMHO). Cochrane argues that Krugman is equivalent to an HIV-AIDS disbeliever. Ridiculous. Krugman's thesis on "what went wrong" is grounded in the GFC experience. That is, grounded in the data. Cochrane is just being a jerk. Tellingly, Cochrane chides Krugman for attributing a quote to him (C) that he "did not write." In the very next sentence, we learn that the "quote" is accurate and accurately attributed to him, just not something he "wrote." He also argues the quote is out of context, but fails to explain exactly how. Okay dude. Cochrane goes on to assert that Krugman grossly distorts fresh water economics as allegedly setting forth the inability of government spending to increase employment. And yet, we have this https://faculty.chicagobooth.edu/john.cochrane/research/papers/stimulus_rip.html https://faculty.chicagobooth.edu/john.cochrane/research/pape... , which clearly argues (by Cochrane himself) that the multiplier on fiscal stimulus is precisely equal to zero. That is, according to Cochrane, every dollar of government spending results in an equal and opposite dollar lost somewhere else in the economy as supposedly required by Ricardian equivalence. This is of course nonsense. This is not an honest article.

AnimalMuppet 7y ago
I could just as well say "This is not an honest comment." Much of what you said was addressed in the article. For example, related to the "multiplier is precisely zero" paper, Cochrane says: > Krugman asserts that I and others ‘believe’ ‘that an increase in government spending cannot, under any circumstances, increase employment’ and that we ‘argued that price fluctuations and shocks to demand actually had nothing to do with the business cycle’. These are just gross distortions,unsupported by any documentation or the lightest fact-checking, let alone by examination of any professional writing. And Krugman knows better. All economic models are simplified to exhibit one point; we all understand the real world is more complicated. Krugman’s job as a professional economist with a newspaper column is supposed to be to explain that to lay readers. These quotes about academic opponents would be rather like somebody looking up Krugman’s early work (which assumed away transport costs) and claiming in the Wall Street Journal, ‘Paul Krugman believes ocean shipping is free, how stupid’. That is: Yes, his paper "said that", and no, that's not what his paper was saying. And a reasonable reading of his paper would have known that. And a thorough and charitable reading of this article would have revealed that.
- hcknwscommenter 7y ago
  Uhhh. Nope. Simply untrue. Cochrane is on-record as asserting that the fiscal multiplier is precisely proven to equal zero. Did you even read the link? His 2011 "paper" simply lies and says it isn't so, but gives literally no explanation or nuance, just lies.
  - AnimalMuppet 7y ago
    From that article: > “Theorem” means that if a bunch of assumptions, then borrowing has exactly the same effect as taxing. That doesn’t mean it’s true of the world, but it means that if you want to defend stimulus, you have to tell us which of the “ifs” you disagree with. > So the biggest impact of Barro’s theorem is not whether it is “right” or “wrong” as a description of the world. The biggest impact is that, if you are at all intellectually honest, it forces you to deal with why it is wrong. Many proponents do not do this; they just cite one assumption they don’t like, on the basis of intuition rather than real evidence, and go back to simplistic always-and-everywhere mulitipliers. > Can’t the facts settle this argument? Alas, not easily – and both policy and economics would be better if they acknowledged this fact. Did you even read the link?
    - dragonwriter 7y ago
      Barro’s theorem is ivory tower economics based, like much ivory tower economics, in the assumptions of the rational choice model (which is not only possibly false, but is grounded in known-false assumptions and has repeatedly been proven to not predict real-world behavior), and, on top of that, the assumption that rational choice model works for individuals (which it doesn't) it assumes that it also does for families as effectively infinite-lifespan invididuals, and that capital markets are perfect (which they at best approximate), and that the path of government expenditures is fixed (since the path of government expenditures is determined at least in part by external economic conditions, this also makes the theorem circular since this assumption essentially includes the assumption that the different funding choice will have no externally visible economic effects that might affect future spending decisions.) Which of those assumptions, then, are wrong when dealing with the real world? All the ones that aren't simply begging the question are known to be false (though the one about capital markets may sometimes be a useful approximation), and the last is a sneaky assumption of what the argument is seeking to prove. Ml And those are the overt assumptions; it also assumes distribution of funding has no effect (or is an argument that borrowing is equivalent to a tax on exactly those who would lend, which, even if it is true, isn't a compelling argument because it's very difficult to mimic the targeting of borrowing with a tax.)

AnimalMuppet 7y ago

I could just as well say "This is not an honest comment." Much of what you said was addressed in the article. For example, related to the "multiplier is precisely zero" paper, Cochrane says: > Krugman asserts that I and others ‘believe’ ‘that an increase in government spending cannot, under any circumstances, increase employment’ and that we ‘argued that price fluctuations and shocks to demand actually had nothing to do with the business cycle’. These are just gross distortions,unsupported by any documentation or the lightest fact-checking, let alone by examination of any professional writing. And Krugman knows better. All economic models are simplified to exhibit one point; we all understand the real world is more complicated. Krugman’s job as a professional economist with a newspaper column is supposed to be to explain that to lay readers. These quotes about academic opponents would be rather like somebody looking up Krugman’s early work (which assumed away transport costs) and claiming in the Wall Street Journal, ‘Paul Krugman believes ocean shipping is free, how stupid’. That is: Yes, his paper "said that", and no, that's not what his paper was saying. And a reasonable reading of his paper would have known that. And a thorough and charitable reading of this article would have revealed that.

hcknwscommenter 7y ago
Uhhh. Nope. Simply untrue. Cochrane is on-record as asserting that the fiscal multiplier is precisely proven to equal zero. Did you even read the link? His 2011 "paper" simply lies and says it isn't so, but gives literally no explanation or nuance, just lies.
- AnimalMuppet 7y ago
  From that article: > “Theorem” means that if a bunch of assumptions, then borrowing has exactly the same effect as taxing. That doesn’t mean it’s true of the world, but it means that if you want to defend stimulus, you have to tell us which of the “ifs” you disagree with. > So the biggest impact of Barro’s theorem is not whether it is “right” or “wrong” as a description of the world. The biggest impact is that, if you are at all intellectually honest, it forces you to deal with why it is wrong. Many proponents do not do this; they just cite one assumption they don’t like, on the basis of intuition rather than real evidence, and go back to simplistic always-and-everywhere mulitipliers. > Can’t the facts settle this argument? Alas, not easily – and both policy and economics would be better if they acknowledged this fact. Did you even read the link?
  - dragonwriter 7y ago
    Barro’s theorem is ivory tower economics based, like much ivory tower economics, in the assumptions of the rational choice model (which is not only possibly false, but is grounded in known-false assumptions and has repeatedly been proven to not predict real-world behavior), and, on top of that, the assumption that rational choice model works for individuals (which it doesn't) it assumes that it also does for families as effectively infinite-lifespan invididuals, and that capital markets are perfect (which they at best approximate), and that the path of government expenditures is fixed (since the path of government expenditures is determined at least in part by external economic conditions, this also makes the theorem circular since this assumption essentially includes the assumption that the different funding choice will have no externally visible economic effects that might affect future spending decisions.) Which of those assumptions, then, are wrong when dealing with the real world? All the ones that aren't simply begging the question are known to be false (though the one about capital markets may sometimes be a useful approximation), and the last is a sneaky assumption of what the argument is seeking to prove. Ml And those are the overt assumptions; it also assumes distribution of funding has no effect (or is an argument that borrowing is equivalent to a tax on exactly those who would lend, which, even if it is true, isn't a compelling argument because it's very difficult to mimic the targeting of borrowing with a tax.)