tag:blogger.com,1999:blog-582368152716771238.post7675467549775260029..comments2024-03-29T06:52:58.989-05:00Comments on The Grumpy Economist: Summers and the nature of policy adviceJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-582368152716771238.post-72193137394147252482015-08-19T11:34:11.726-05:002015-08-19T11:34:11.726-05:00When laypeople read a serious economist such as Su...When laypeople read a serious economist such as Summers or Krugman ignore econ 101 that small business owners, middle class workers, educated people with little finance expertise, know to be written solely as a political theory /idea ,we simply deem the profession to be kooky. Guys like Summers and Krugman come across as economists who regret they never held public office. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-78546999398909683862015-08-18T13:22:35.542-05:002015-08-18T13:22:35.542-05:00"Once again, bravo. Larry has a new and very ..."Once again, bravo. Larry has a new and very clever theory about companies attracting a too-risk-averse pool of workers when they offer benefits instead of pay"<br /><br />This is really new? I always understood, for example, that the reason that companies only offer one or two weeks vacation for new hires (and max at 4 weeks for senior employees) is that they don't want to attract employees who are especially interested in leisure opportunities. University tenure operates on the same principle -- the only way it can work to offer senior faculty ample opportunities to coast is that the publish-or-perish tenure process filters out natural slackers in the first place. On the other side of the coin, one of the problems with K12 education is that one of the big benefits is summers off, and that's not a recipe for attracting the most ambitious and hard-working candidates.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-66920520073886840692015-08-16T10:30:52.034-05:002015-08-16T10:30:52.034-05:00Larry Summers might be the smartest guy in the roo...Larry Summers might be the smartest guy in the room, but he's no Richard Feynman. Feynman complained that the social sciences have no laws and therefore little hope of really knowing things.<br /><br /><br />Unlike most of the social sciences, economics has laws: self interest, and rational expectations, however imprecise. Larry Summers harms economics as a discipline with his column. To overthrow Econ 101 with "clever new theories", without any evidence or empirical discovery, is like an eminent physicist throwing out the conservation of energy and the second law of thermodynamics because it fits with the political zeitgeist. Carl Sagan taught us that extraordinary claims require extraordinary evidence. Either economics is a science, with actual laws and empirical evidence, which can helps us understand reality and separate ideas, or it's just a form of religious belief.<br /><br /><br />Larry Summers would do well to follow how science actually proceeds lest he further harms economics by promoting it as a lawless discipline of bulverism, run by the authority of "top men".<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49127763605472253642015-08-15T07:44:25.158-05:002015-08-15T07:44:25.158-05:00Larry Summers is breath-taking is his expansive vi...Larry Summers is breath-taking is his expansive view of government intrusion into free markets, and into labor markets. I disagree with him.<br /><br />But then, the U.S. agriculture sector is heavily subsidized, protected and regulated, at county, state and federal levels. The farm sector is often lionized, especially in Red States, and right-wing circles. We have the best farmers in the world--so everyone says. Our food costs in relation to income are the lowest. In fact, Rural America is heavily subsidized by Metropolitan America, and no one condemns that situation. <br /><br />But imagine if for the last 100 years we had free markets in our farm sector and now a Larry Summers came along and called for extensive, even pervasive regulations, subsidies and protectionism. People would say Summers was wrong, had bad ideas.<br /><br />My conclusion is that few really believe in free markets. They believe in partisan politics hidden behind economic jargon. <br /><br />Where is the outcry against agriculture controls and subsidies? Against licensing lawyers? Against criminalizing high-rise condos in single-family detached neighborhoods? <br /><br />But let someone say a higher minimum wage is a good idea.... <br /><br /><br /><br /><br /><br />So, does statism work? Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68882674054424643362015-08-14T16:06:10.202-05:002015-08-14T16:06:10.202-05:00When it comes to labor economics, I don't thin...When it comes to labor economics, I don't think Larry Summers is the smartest guy in the room. That honor goes to <a href="http://davidcard.berkeley.edu/papers.html" rel="nofollow">David Card </a>. Seriously, empirical work on labor force supply and demand very clearly shows that labor is not like refrigerators, airline tickets, video games, or smart phones. Ibnyaminhttps://www.blogger.com/profile/02200468798337178145noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-53390945127089009972015-08-14T15:22:50.183-05:002015-08-14T15:22:50.183-05:00Isn't the minimum wage point just that if the ...Isn't the minimum wage point just that if the firm is at its optimum trade-off for wages then by the envelope theorem the efficiency losses of moving the wage around are second-order, while the transfer gains are first-order? (This argument of course only works for small minimum wage increases...). Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-38554494378403175612015-08-14T13:00:17.632-05:002015-08-14T13:00:17.632-05:00I forgot the quotation marks in the above citation...I forgot the quotation marks in the above citation, sorry.Luís Aguiar-Conrariahttps://www.blogger.com/profile/03063826896953409478noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28181425925397060852015-08-14T11:22:13.882-05:002015-08-14T11:22:13.882-05:00Stupidity being safely excluded in the Summers cas...Stupidity being safely excluded in the Summers case, leaves only deliberate obfuscation as an alternative, so the next question is, cui bono? Suspecting the man himself of thinking of his own interest only is failing to envision the vast multitudes expected to revel in whatever that siren passive voice is describing. Example, from today's news on German scam on carbon taxes: http://www.bloomberg.com/news/articles/2015-08-13/frankfurt-prosecutors-charge-eight-bankers-in-carbon-tax-fraud <br /><br />Abolishing that carbon tax would eliminate that particular fraud - and I've never seen a tax-by-tax comparison matching revenues of a tax to its fully costed expense.Ecoute Sauvagehttps://www.blogger.com/profile/16322296385474846302noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19269030739721920562015-08-14T10:54:29.119-05:002015-08-14T10:54:29.119-05:00John,
This struck me:
"A company that tries...John,<br /><br />This struck me:<br /><br />"A company that tries to stand out by offering especially attractive family leave benefits, or job security, or egalitarian wage structures faces the prospect of attracting a disproportionately risk-averse work force. So there is an argument for using mandates to level the playing field."<br /><br />I disagree - There is an argument for using incentives to level the playing field. No sense using mandates where incentives can do the trick. <br /><br />Also, which way should the playing field be leveled - government mandate eliminates family leave benefits, job security, and egalitarian wage structures? I suspect Larry believes the opposite, but it is kind of funny that he leaves it to the reader to decide.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-8957456421346082102015-08-14T10:36:26.311-05:002015-08-14T10:36:26.311-05:00Larry Summers is the smartest guy in the room in t...Larry Summers is the smartest guy in the room in the same sense that Johnny Cochran was the smartest guy in the room at the OJ Simpson trial. Intelligence without wisdom degenerates into sophistry in Summers' case. <br /><br />I think you nailed the essence of this essay: Summers simultaneously rejects and embraces government interference. He implies that there is some coercive force that can enforce "mandates or incentives" other than "government programmes". What non-governmental force would that be? Where else would one find the power to enact such sweeping "mandates and incentives"?<br /><br />The solution offered is as old as Plato - philosopher kings:<br /><br />"The real need is for a cadre of trusted, tough-minded investors in any given company who can credibly commit to support strong management teams and to provide assurances to a broader investment community so that productive investments are made."<br /><br />I wouldn't be surprised in the least to learn that Summers considers himself to be among the select few capable of guiding us through the wilderness to the Land of Milk and Honey.Michael Gorbackhttps://www.blogger.com/profile/05789268342873061299noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13274069545637664812015-08-14T10:31:08.697-05:002015-08-14T10:31:08.697-05:00Thanks for making sense of this; the article seems...Thanks for making sense of this; the article seems more of a job application than any kind of coherent analysis of economic policy proposals-- and as you make clear, especially disappointing for someone as bright as Summers. In the first paragraph you cite, for him to ignore labor/capital substitution ($15 fast food minimum wage rules may only lead to self service kiosks) just seems lazy, and it just continues from there...<br /><br />Anonymoushttps://www.blogger.com/profile/04679734444973282418noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-20736907923614705152015-08-14T09:43:37.423-05:002015-08-14T09:43:37.423-05:00That's not AER, it's AER P&P.That's not AER, it's AER P&P.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47303408975516584652015-08-14T09:26:00.622-05:002015-08-14T09:26:00.622-05:00Thanks. But an old paper that didn't really ca...Thanks. But an old paper that didn't really catch on seems even less promising as the single basis for a long-debated policy. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-39704549071864435452015-08-14T08:19:28.444-05:002015-08-14T08:19:28.444-05:00What troubles me about neo-Keynesians is not so mu...What troubles me about neo-Keynesians is not so much that they have a definite clear-cut ideology that I dislike, but that they have too little ideology. They’re too good at rationalizing anything. So if I’m worried about anything, it’s that economics as a kind of independent force won’t really be operating in this administration. These guys have enough talent to put a kind of semi-respectable economic rationale on whatever the hell the politicians come up with. I don’t see a neoKeynesian agenda on policy issues. <br /><br />Robert Lucas (1993), https://www.minneapolisfed.org/publications/the-region/interview-with-robert-e-lucas-jr<br />Luís Aguiar-Conrariahttps://www.blogger.com/profile/03063826896953409478noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-10460653175780985772015-08-14T06:54:17.119-05:002015-08-14T06:54:17.119-05:00The point about benefits attracting an undesirable...The point about benefits attracting an undesirable risk pool has been made before by Summers in a 1989 AER article: http://eml.berkeley.edu/~saez/course131/Summers89.pdf,<br />so it's not really that new.<br />Anonymousnoreply@blogger.com