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Well, before that, a summary of Nixon's health reform plan. Pretty similar in spirit to Obama's, but more assertively defined, and maybe further to the left in helping the poor. The country may have moved to the left on gay, women, and black rights, but well to the right on economic issues. AFAIK *Truman's* attempt would have been Medicare for all, essentially, sweeping government insurance a la Canada or Australia.

* "freshwater" economist backlash. These are the "unemployment is voluntary" types if you haven't been keeping up. Chicago school, neo-Friedmanites (more radical than Milton himself.) Followup and dissection of their rage, with brief mention of their mistakes.

* 19th century globalization: the jute industry in Dundee Scotland, using Indian raw materials.

* Even the WTO agrees that carbon tariffs are an allowable and possible essential tool. But free market fundamentalists and fetishists won't.
* Review of a biography of Keynes.

* "Memories of the Carter Administration". Actually on the macroeconomic debate in the late 1970s. Robert Lucas claiming government policies couldn't affect recession or employment, Robert Barro expressing a negative interest in contradictory data. Someone asked him how he could reconcile his model with the severe recession taking place as he spoke. “I’m not interested in the latest residual,” Barro snapped.
** John Quiggin on the same subject. And, back in 2003,

In fact, it’s striking that there is now almost no academic discipline whose conclusions can be considered acceptable to orthodox Republicans. The other social sciences (sociology, anthropology, political science) are even more suspect than economics. The natural sciences are all implicated in support for evolution against creationism, and for their conclusions about global warming, CFCs and other environmental threats. Even the physicists have mostly been sceptical about Star Wars and its offspring. And of course the humanities are beyond the pale.

* Bankers are going straight back to the pay policies that contributed to the current crisis. "In this case populism is good economics." Obama, of course, gives few signs of actually being a populist.

* The low cost of saving the environment. Not a deep essay, but of interest is Even corporations are losing patience with the deniers: earlier this week Pacific Gas and Electric canceled its membership in the U.S. Chamber of Commerce in protest over the chamber’s “disingenuous attempts to diminish or distort the reality” of climate change.
** The missing depth (blogs don't have word limits.) Even Greg Mankiw supports externalty (e.g. pollution) taxes.
** And more depth, graph and better explanation.


( 4 comments — Leave a comment )
Sep. 28th, 2009 12:54 pm (UTC)
Is there a brief primer that exists somewhere as to the basic philosophical tenets of all these different economic schools?
Sep. 28th, 2009 02:59 pm (UTC)
New column on climate!.

I was wondering if someone would ask that. I was going to just point at Wikipedia, but this is a non-Krugman summary I hadn't seen before, meat starting a few paragraphs in. (Page is long due to comments, essay isn't that long.)

Ooh, Arnold Kling in 2002, which seems to be good despite being on a CentralStation site.

There's Wikipedia:
First: http://en.wikipedia.org/wiki/Saltwater_economics (which links back to Krugman's recent essay.)

Chicago school: "free markets" and minimal government, rejection of Keynes, embrace of monetarism and then rational expectations, Say's law (apparently that society can't save money).

I'd have said that they take perfect competition (from Econ 101) as a useful model of reality, but Wikipedia says they often don't use pure equilibrium models, so I dunno. Market fundamentalists and libertarians in the political sphere often seem to argue from perfect competition, though -- market is perfect, government can only make things worse. I don't know if I can fairly summarize monetarism, but it starts with the idea that money supply is paramount, and price stability is a goal; rational expectation seems to be the assumption that aggregate behavior is as if done by rational actors, all information is taken into account.

Chicago boys planned Chile's jump into free market/free trade policies and are associated with the Washington Consensus of development policies pushed by the IMF, that developing country governments should privatize services, drop trade barriers, balance their budgets, and keep inflation low.
Sep. 28th, 2009 03:20 pm (UTC)
Hmm, the really short summary would be "laissez faire = Chicago/freshwater + Austrian, saltwater = interventionist/concern with market failures/everyone else".

Freshwater being the new term for Chicago school, it seems. You've also got the Austrian school, which policy-wise is if anything even more libertarian and free-markety, but is philosophically different... I don't know it that well, but years ago I read some Hayek, and was struck by his rejecting the assumption of perfect information -- "with perfect information, any system will work" -- instead extolling markets as giving incentives to produce information. Gold standard and Ron Paul live here, though Hayek advocated commodity baskets.

On the other side you've got Keynes. As some of the essays say -- and as economists on an alumni list of mine have confirmed -- the freshwater types have been treating Keynes as debunked, not even worth teaching, while on the saltwater side he's something of a demigod, who explained the Great Depression to us, taught us how to manage recessions, and saved capitalism from itself. A key idea is the paradox of thrift, where everyone's trying to save money, which means they spend less money, which means less income for everyone else. Freshwater types tell us prices (including wages) should simply drop quickly, so a recession can't happen unless the government is messing things up.

My own anti-libertarian mantras include externalities and public goods and social justice. The counter-arguments might be that while government can provide public goods in theory, getting it to do so (especially in democracy) rather than being captured by special interests is itself a public good problem, so we're better off keeping government out, rather than letting an imperfect government try to fix imperfect markets. At one time that made sense to me, but the success of the Nordic social democracies and the development of the East Asian countries seem to be profound counter-examples, as is the failure of IMF policies.

Urgh, hope this helps. Problems are that I'm not sure I understand the schools well enough to write my own primer, and really short descriptions use a bunch of terms that need their own primers.
Sep. 29th, 2009 07:36 am (UTC)
A friend's summary:

(12:30:23 AM) Amy: Hmm. Well, freshwater econ is pretty clear. It's about mathematical models, which will nearly always spit out a low-government interpretation.
(12:30:43 AM) Amy: Saltwater econ seems more historically-minded and less into models.
(12:30:52 AM) Dam Raph Sul: Why, because gov't is too complex to model?
(12:31:41 AM) Amy: No, because externalities, market imperfections, and arbitrary, exogenous social fairness preferences are.
(12:32:22 AM) Dam Raph Sul: Ah, all the things that justify gov't.
(12:33:09 AM) Amy: Yep. Simple market imperfections like monopolies are still easy to model. Complex ones like externalities are harder - if there were an easy way to measure the things, they'd quit being externalities faster.
(12:33:36 AM) Amy: That and econ generally stops where someone pulls out a gun, and that's a lot of gov't too.
(12:35:05 AM) Amy: Although, to be fair, a lot of the divide was about less crude concepts - freshwater econ tended towards concepts like monetarism and efficient markets and other such that make logical sense given the constraints and assumptions of the models but don't always work in practice.

This seems consistent with the various essays. Also with 'saltwater' and Keynes being part of the "reality-based community". "This is reality, how can we explain and deal with it?" vs. "This is our model, how can we get away with pretending reality conforms to it?"
( 4 comments — Leave a comment )


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