tag:blogger.com,1999:blog-4900303239154048192.post5582380522106620946..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Reading Hicks (so Brad DeLong won't have to)Unknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-4900303239154048192.post-88768930407545159242009-02-19T17:11:00.000-05:002009-02-19T17:11:00.000-05:00elan,I am basically in agreement with your positio...elan,<BR/><BR/>I am basically in agreement with your position. What is curious is that I think DeLong probably is mostly as well. He has made noises about the stim being too small, and everybody knows that much of it will have to be financed by borrowing from abroad, particularly from China, and that while they have been willing to finance US budget deficits in the past, they are going to be financing their own big stim, which will make them less keen on financing the US one.<BR/><BR/>Maybe the most contentious issue is the last one, although it is also probably the hardest one to resolve. Would infrastructure investment be carried out better under a different system with better planning? Quite likely. OTOH, even if there are too many bridges to nowhere and not enough emphasis on green tech and other more productive items in the long run, even under the current system infrastructure investment will have some stimulative effect.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-5065250434235712392009-02-18T05:20:00.000-05:002009-02-18T05:20:00.000-05:00I think Harvey is thinking longer term than the ne...I think Harvey is thinking longer term than the next year. Why do you find it baked? I don't fully agree with it, but I thought it was a valid argument. And I find the argument that a stimulus will necessarily work unconvincing - surely it depends upon the circumstances, and how its targeted. Japan's stimulus was not terribly effective.<BR/><BR/>Harvey's argument seems to be:<BR/>1) Due to political realities, the stimulus is going to be both too small, and of the wrong kind (mainly tax cuts).<BR/>2) The US is going to have to borrow from abroad to fund, and so is dependant upon increasingly reluctant lenders (for example, see the public battle going on between different factions inside China over US treasuries), who in the case of China will have other things to spend the money on (domestic stimulus), or the Gulf states sustaining oil boom spending.<BR/>3) That the infrastucture spending will not contribute to economic growth because (again) of political/philosophical orthodoxies within the US that are hostile towards the kind of state planning that would be required to exploit them. ie. Keynesian solution will not work within <I>the political and philosophical realities of</I> the modern US state. <BR/><BR/>Now there are definitely arguments to be made against all these points, but its a far more subtle argument than you seem to be giving him credit for and its definitely not the argument that Brad de Long seems to think it is (not that I'd expect anything else of the arrogant and childish de Long). Its an argument premised on a) geopolitics (to which neoclassical models bring absolutely nothing), and b) geographic investment (on which Harvey is something of an expert).<BR/><BR/>Actually I'm baffled by Brad's response, which just seems seriously weird. I mean he seems to seriously believe that any bond can be sold if the interest rate is high enough - is the man stupid? Is this what economics does to your brain? Don't let him manage your portfolio...<BR/><BR/>My own response to Harvey's argument would be:<BR/>1) Almost certainly, and this doesn't seem terribly controversial.<BR/>2) At some point yes, but I suspect its still some distance away as there's nowhere else for the money to go (the Chinese are seriously pissed off with the US, as are the Gulf states. There will be some realignment at some point, but not now). However, friends who know far more about China than I, reckon that China doesn't have the flexibility to pull off the kind of Keynesian stimulus, and so is more likely to have severe internal strife. We'll see soon enough I guess. I suspect China is in greater trouble than the US.<BR/>3) Well it certainly looks that way at the moment. Is there a plan? I think Steve Keen makes a better argument. He makes the point that what's happen is that consumer spending has been based upon credit - now credit is withdrawn, and people are paying it back, that debt overhang is the collapse in demand. Any stimulus which doesn't address that (and which may not be addressable) is likely to fail to be terribly successful. Long term, the problem seems like a structural one. Workers salaries are flat, and yet the US economy (and much of the world's export economy) is predicated on them spending ever increasing amounts. Any solution that fails to address that seems doomed to failure.cianhttps://www.blogger.com/profile/12792805870968697706noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-596494628536458882009-02-17T17:12:00.000-05:002009-02-17T17:12:00.000-05:00BTW, we should be clear about what we mean by "wor...BTW, we should be clear about what we mean by "work." I hope that it might halt the decline, but that is about the best I am hoping for out of it. If Harvey says that "not work" is "not cause a boom in the economy," then he will probably be right, but then I have not noticed anybody, including anybody around Obama or Obama himself, who is making such claims (and not Brad DeLong either).Barkley Rosserhttps://www.blogger.com/profile/13114257724762074636noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-6278590667227652802009-02-17T17:09:00.000-05:002009-02-17T17:09:00.000-05:00Well, what is weird about this is that while Harve...Well, what is weird about this is that while Harvey has substantial grounds to criticize neoclassical synthesis economists, including the early Hicks, he somehow comes to the idea that the fiscal stimulus will "not work." Well, it may not work because it is not large enough, but Harvey's argument is just seriously baked. I always find Marxists who sound like conservative Republicans to be a bit odd.Barkley Rosserhttps://www.blogger.com/profile/13114257724762074636noreply@blogger.com