Krugman Ignores Economic Evidence to Slight Sanders — Sharmini Peries interviews Gerald Friedman

The saga goes on.

Real News Network
Krugman Ignores Economic Evidence to Slight Sanders

Sharmini Peries interviews Gerald Friedman

Brad DeLong — A Methodological-Moral Struggle Over the Sanders Economic-Policy Proposals

Turning up the heat.

Grasping Reality
A Methodological-Moral Struggle Over the Sanders Economic-Policy ProposalsBrad DeLong | Professor of Economics, UCAL Berkeley

Noah Smith — Policy recommendations and wishful thinking

Contra Gerald Friedman on the Sanders economic program.

Perhaps the Sanders campaign needs to address this directly instead of through a surrogate like Friedman.

Again, the progressive "left" seems to be falling flat on the economic front. "They" are winning this debate except with true believers.

Noahpinion
Policy recommendations and wishful thinking
Noah Smith | Assistant Professor of Finance, Stony Brook University

Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics

Differences between my evaluation of the impact of the Sanders economic program from that of the Romers reflect different views of the economy, the difference between a static model where national income and employment are largely fixed and a dynamic one where these are shaped by effective demand and are, therefore, susceptible to change in response to economic policy. There are no errors in arithmetic.* It is a fundamental difference in vision that divides our approaches; the same distinction that divided John Maynard Keynes from those he labelled the Classicals in his General Theory of Employment, Interest, and Money.…

Naked Capitalism
Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics
Gerald Friedman, Professor of Economics, University of Massachusetts at Amherst

Chris Sturr — The Latest Links on Friedman/Sanders, Romers, etc.

Like it says. Some links not posted here at MNE previously.

The D and S Blog
The Latest Links on Friedman/Sanders, Romers, etc.

Chris Sturr

James Sherman — Uncovering the Bad Math and Logic (and the Bias) at the New York Times

Excellent summary and analysis of the debate over Gerald Friedman's projections about the Bernie Sanders economic plan. It's a Post Keynesian takedown of Justin Wolfers and Christina and David Romer for failure to understand and address Friedman's actual position.

The Body Politick
Uncovering the Bad Math and Logic (and the Bias) at the New York Times
James Sherman, lecturer in the Program in Ethics, Society, and Law at Trinity College, University of Toronto, a research fellow of the University of Toronto’s Centre for Ethics, and the recipient of a Social Sciences and Humanities Research Council of Canada fellowship
ht David Fields

Galbraith: Attack on Sander's Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible — Sharmini Peries interviews James K. Galbraith

So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It's reasonable, certainly, for the first three or four years that that would transpire in practice. And what happened was that people who didn't like that result politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and that there were responsible people on one side of the debate, and irresponsible people on the other.

And that was, again, something that--an impression that could be conveyed through the mass media, but would not withstand scrutiny, and didn't withstand scrutiny, once a few of us stood up and started saying, okay, where's your evidence, on what are you basing this argument? And revealed the point, which the Romers implicitly conceded, and I give them credit for that, that in order to criticize a fellow economist you need to do some work.

"Stop Sanders." "Stop Trump." 

Same Establishment voice. 

And the people know it.

Real News Network
Galbraith: Attack on Sander's Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible

Sharmini Peries interviews James K. Galbraith

Ron Baiman — On the Neglect of Class in Neoclassical Macroeconomics

A lack of awareness of the importance of changes in class structure (via income distribution) is another important distinction between mainstream Neoclassical (NC) Keynesian macroeconomics and the Keynesian-Kaldor PK macroeconomic tradition that Friedman is working out of. Left PK heterodox economists incorporate class analysis as a fundamental driver of macroeconomic outcomes, whereas it is largely absent in mainstream NC macroeconomics as a fundamental driver of economic growth.…

The D & S Blog
On the Neglect of Class in Neoclassical Macroeconomics
Ron Baiman, Chicago Political Economy Group

Bruce Bartlett and James Galbraith — The Battle Over Reagan’s Economic Plan

The spirited debate about the merits of Bernie Sanders's economic plan reminds two prominent economists of one that they were on opposite sides of 35 years ago.…

JKG: "The lesson for today is that we shouldn’t be imprisoned by the conventional wisdom of establishment economists. When the magnitude of our economic problems is great, as it was with inflation in the early 1980s and stagnant growth now, bold policies must be enacted."

Moyers & Co.
The Battle Over Reagan’s Economic Plan
Bruce Bartlett and James Galbraith

In 1981, Galbraith was executive director of the Joint Economic Committee and head of its Democratic staff. Bartlett was deputy director of the Joint Economic Committee and head of its Republican staff.

Gerald Friedman responds to Christina and David Romer

The Romers, and I suppose other neoclassical macro economists, believe that the economy tends towards full employment equilibrium and will move there on its own without need for government intervention or stimulus. They would acknowledge that following a negative shock, government stimulus spending may accelerate the recovery somewhat, as Bernstein and Romer in 2009 anticipated the Obama stimulus would speed recovery by about 6 months. They deny, however, that stimulus spending could change the permanent level of output because the economy will on its own return to full employment at a capacity output set without regard to the level of employment by factor endowments, by preferences, and by the level of exogenous technology. From this perspective, because a period of prolonged measured slow growth cannot be caused by involuntary unemployment, it must, by a priori assumption, be due to a decline in the exogenously determined growth rate in capacity. Like mosquitos on an otherwise delightful summer afternoon, slow growth is unfortunate but there is little that can safely be done about it.

Or maybe we can find safe pesticides. Here I agree with John Maynard Keynes that the economy can have a low-employment equilibrium because of a lack of effective demand, and I agree with Nicholas Kaldor and Petrus Verdoorn that productivity and the growth rate of capacity can be increased by policies that push the economy to a higher level of employment. And to the contrary, periods of prolonged unemployment and underutilization of capacity can lower capacity by discouraging workers and reducing the incentive to invest, to innovate, and to raise productivity. Unfortunately, this is what has been happening in the US for the last few years; and, fortunately, there is reason to believe following Keynes/Kaldor/Verdoorn that policy can reverse this decline by pushing the economy to a higher level of output and thus a higher level of productivity….

Gerald Friedman responds to Christina and David Romer

James Galbraith — The Friedman v. Romers Growth Debate on the Sanders Plan – A Summing Up

Here is a brief summary of the state-of-debate over the Sanders economic program and the growth projections made by Professor Gerald Friedman.

Major points

1) The growth projections have no bearing on the desirability of Sanders’ program, which consists of major structural reforms in health care, education, and public investment, in public governance and in the distribution of the tax burden.
2) The original mudslinging by four past Chairs of the Council of Economic Advisers was based on nothing, except that Friedman’s growth numbers looked high. No analysis preceded that claim.…

Naked Capitalism
James Galbraith: The Friedman v. Romers Growth Debate on the Sanders Plan – A Summing Up
James K. Galbraith, Professor of Government/Business Relations at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin. His most recent books are Inequality and Instability and The End of Normal

Chris Sturr — Yet More Links on Friedman-Sanders Kerfuffle

I can't keep up.

The D&S Blog
Yet More Links on Friedman-Sanders Kerfuffle
Chris Sturr

James K. Galbraith — Economic Forecasting Models and Sanders Program Controversy

The Romer/Romer letter to Professor Gerald Friedman marks a turning point. It concedes that there are indeed important issues at stake when evaluating the proposed economic policies of Presidential Candidate Bernie Sanders. These issues go beyond the political debate and should be discussed seriously between and among professional economists.

All forecasting models embody theoretical views. All involve making assumptions about the shape of the world, and about those features, which can, and cannot, safely be neglected. This is true of the models the Romers favor, as well as of Professor Friedman’s, as it would be true of mine. So each model deserves to be scrutinized.

In the case of the models favored by the Romers, we have the experience of forecasting from the outset of the Great Financial Crisis, which was marked by a famous exercise in early 2009 known as the Romer-Bernstein forecast. According to this forecast (a) the economy would have recovered on its own, in full and with no assistance from government, by 2014, (b) the only effect of the entire stimulus package would be to accelerate the date of full recovery by about six months, and (c) by 2016, the economy would actually be performing worse than if there had been no stimulus at all, since the greater “burden” of the government debt would push up interest rates and depress business investment relative to the full employment level.

It’s fair to say that this forecast was not borne out: the economy did not fully recover even with the ARRA, and there is no sign of “crowding out,” even now. The idea that the economy is now worse off than it would have been without any Obama program is, to most people, I imagine, quite strange. These facts should prompt a careful look at the modeling strategy that the Romers espouse.…

Dare I say smackdown. 

INET
Economic Forecasting Models and Sanders Program Controversy
James K. Galbraith

Lars P. Syll — Bernie Sanders and the Verdoorn law

So, the nodal point is — has the Verdoorn Law been validated or not in empirical studies?

There have been hundreds of studies that have tried to answer that question, and as could be imagined, the answers differ. The law has been investigated with different econometric methods (time-series, IV, OLS, ECM, cointegration, etc.). The statistical and econometric problems are enormous (especially when it comes to the question, highlighted by Romer & Romer, on the direction of causality). Given this, however, most studies on the country level do confirm that the Verdoorn law holds — United States included. Most of the studies are for the period before the subprime crisis of 2006/2007, but if anything, it is more in line with Friedman than Romer & Romer.

Lars P. Syll’s Blog
Bernie Sanders and the Verdoorn law
Lars P. Syll | Professor, Malmo University

Dean Baker — Romer and Romer Do the Numbers on Friedman-Sanders

Since I had been critical of elite economists for using their authority rather than evidence to trash Gerald Friedman’s analysis of Bernie Sanders’ program, I should acknowledge a serious effort to do exactly the sort of analysis I advocated. Christina Romer, one of the four former heads of the Council of Economic Advisers who signed the earlier letter criticizing Friedman’s analysis, along with David Romer (both of whom are now Berkeley economics professors), did a detailed critique of the Friedman analysis.

I could quibble with aspects of their critique, but I would say it is basically right.…

Beat the Press
Romer and Romer Do the Numbers on Friedman-Sanders
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

Peter Dorman — Romer^2 on Friedman on Sanders

Oh dear. Today's Romer and Romer response to Gerald Friedman’s paper on the economic consequences of Sanders seems to have identified the core problem in GF’s analysis, confusing one-time and ongoing stimulus effects. According to the R team, F attributed increases in economic growth in perpetuity to single bursts of stimulus, and not just once but repeatedly—in his treatments of demand stimulus, income redistribution and health care. That plus his belief that the output gap is large enough to accommodate extremely rapid growth over a full decade, explains his headline numbers. If this is true it’s an embarrassment.…

Econospeak
Romer^2 on Friedman on Sanders

Peter Dorman | Professor of Political Economy, The Evergreen State College

See also

ProGrowth Liberal, Authority Figures Criticizing the Junk Science from Gerald Friedman

Progrowth Liberal — The Sanders Fiscal Stimulus and Verdoon’s Law

I have been saying Team Bernie needs to hire economists to model out the economic effects of his policy proposals. This Verdoon effect might be something worth exploring.

Econospeak
The Sanders Fiscal Stimulus and Verdoon’s Law

Progrowth Liberal

Menzie Chinn — Implied Output Response to Demand Side Shifts in the Friedman Scenario under Local to Potential Assumptions

I was wondering what a conventional (estimated) macroeconometric model implied for a sustained 7.7% increase in government consumption and investment as a share of GDP implies for output…

So, where you think you will end up depends a lot on where you think you are now…

Thomas Aquinas, citing Aristotle, in De ente et essentia: "A small mistake in the beginning is a big one in the end…."

Econbrowser
Implied Output Response to Demand Side Shifts in the Friedman Scenario under Local to Potential Assumptions
Menzie Chinn | Professor of Public Affairs and Economics. Robert M. La Follette School of Public Affairs, University of Wisconsin–Madison

Brad DeLong — Comment of the Day: Charles Steindel: "That's Kocherlakota's point: through 2020.

I didn't put up Narayan Kocherlakota's view since it is behind the WSJ paywall. Here is some discussion of it.

It really comes down to assumptions since these are estimates and also involve expectations. The uncertainty is pretty think and the best that can probably be done is estimate floor and ceiling. This makes Gerald Friedman's view more plausible than the nay-sayers are willing to admit and it satisfies the skeptics, too, in that significant growth resulting from fiscal stimulus is possible under this.

Grasping Reality
Comment of the Day: Charles Steindel: "That's Kocherlakota's point: through 2020.
Brad DeLong | Professor of Economics, UCAL Berkeley

Mark Thoma — Here’s Why Bernie Sanders’ 5% Growth Plan Isn’t Crazy After All

Because uncertainty. Critics are assuming that they know the actual employment numbers and output potential. They don't. The numbers are estimates. Both could be much larger than assumed, and we won't know if we don't try. 

Assumptions don't prove conclusions except in a model. The argument is really about assumptions.

The Fiscal Time
Here’s Why Bernie Sanders’ 5% Growth Plan Isn’t Crazy After All
Mark Thoma | Professor of Economics, University of Oregon