Will fiscal policy return to hibernation?

Sometimes the only way to diminish an idea is the try it, to see what happens when it is implemented. Keynesianism was largely irrelevant from the 1970s until George W Bush revived it in his administration, and the Obama administration is crowded with Keynesians. But is this revival supported by the evidence? Michael Boskin said "No" in the Wall Street Journal more than a week ago:

These empirical studies leave many leading economists dubious about the ability of government spending to boost the economy in the short run. Worse, the large long-term costs of debt-financed spending are ignored in most studies of short-run fiscal stimulus and even more so in the political debate.

Only time will tell if we will see Keynesianism again recede. 

One attraction of Keynesian policy is that it lets the government do something and people want the government to do something when there is a problem. There is, however, an asymmetry in how the results are judged. The Obama economists projected a path for unemployment with and without the stimulus program that Congress enacted shortly after Obama became president. Unemployment did not follow the projected path; on the contrary, it has greatly exceeded the path predicted if there were no stimulus. The Keynesians have not acknowledged that this is evidence that their program did not work. Rather they argue it shows that the program was not big enough. They are taken seriously in this response. However, consider what things would look like if the stimulus had not been enacted and unemployment had taken the course that it has taken. Would anyone take seriously the response that the initial shock was bigger than we had realized? Everyone would have concluded that we made a mistake in not passing a stimulus.

There is an incentive for politicians to "do something" in the way the media and the public react to failure. They are more willing to forgive failure or explain it away when the government acts than when the government does not act.

A great start

An article in Forbes begins with this great sentence:

The sovereign debt crisis now threatening Europe, as well as major American states and cities, discloses the sheer incompetence of a political class that has over-promised, under-delivered and squandered vast amounts of their citizens' wealth. 

That really gets to the heart of the matter, doesn't it?

The unfunded pension liabilities of the city of Chicago are $40,000 per household. Things must have looked really bad at the White House for Rahm Emanuel to have quit and gone back to Chicago.

Precocious

From the Wall Street Journal:

A 23-year-old Russian man accused by U.S. authorities of generating nearly a third of the spam e-mails worldwide is expected to be arraigned Friday in a Milwaukee Court.

The quotation is from the article in the print edition, which goes on to say that he used 509,000 infected computers to send as much as 10 billion spam e-mails a day that sold items including fake Rolex watches and counterfeit Viagra.

I am so impressed that I cannot get too angry, even though his operation has cost me wasted time deleting unwanted e-mail messages. At 23 I was unable to earn a living, so I went to graduate school.

Another viral youtube video

It is not too often that an economics video goes viral, but another one has.



It is rather funny, which probably explains its success.

Dirty jobs

Found from a link on a teaching-economics mail list, an article in the Chronicle of Higher Education about life as a professional paper writer:

I've written toward a master's degree in cognitive psychology, a Ph.D. in sociology, and a handful of postgraduate credits in international diplomacy. I've worked on bachelor's degrees in hospitality, business administration, and accounting. I've written for courses in history, cinema, labor relations, pharmacology, theology, sports management, maritime security, airline services, sustainability, municipal budgeting, marketing, philosophy, ethics, Eastern religion, postmodern architecture, anthropology, literature, and public administration. I've attended three dozen online universities. I've completed 12 graduate theses of 50 pages or more. All for someone else.
....
From my experience, three demographic groups seek out my services: the English-as-second-language student; the hopelessly deficient student; and the lazy rich kid.
....
...it's hard to determine which course of study is most infested with cheating. But I'd say education is the worst.

The attitude of the students that he works for, who are not interested in learning but only in being credentialed, is a major reason that I was happy to retire from academia this year. That, and the denial of the problem that was pervasive among the faculty.

Addendum: One of the contributors to the e-mail list on which I found this believes that this article is fiction. He argues that it seems too much designed to cater to the prejudices of the readership of the Chronicle--such as emphasizing writing papers for seminarians about ethics. It certainly is possible that it is fiction. With anonymous sources is that you cannot check them.

the Billion Prices Project

The billion prices project at MIT, an attempt to use online prices to form price indices: http://bpp.mit.edu/

Predictions

James Taranto considers some predictions:

there are no signs of a dramatic rebound for the party, and the chance of Republicans winning control of either chamber in the 2010 midterm elections is zero. Not "close to zero." Not "slight" or "small." Zero.

Making predictions is risky, which is why I try to avoid them. However, when someone makes a prediction that turns out correctly, that person deserves to be taken more seriously in the future. The correct prediction shows that they have understanding. Obviously when a person's predictions are completely wrong, that person should lose credibility because the failed prediction shows that their understanding of the situation is flawed.

Accuracy of government data

This does not give one confidence in government data:

Two people were found to have filed multiple W-2 forms that made them into multibillionaires, an agency official said yesterday. Those reports threw statistical wage tables out of whack and, in figures released Oct. 15, made it appear that top U.S. earners had seen their pay quintuple in 2009 to an average of $519 million.


The agency yesterday released corrected tables that showed the average incomes of the top earners, in fact, declined 7.7 percent to $84 million each.

Is Barack Obama a Keynesian

Mildly funny, but not really surprising. How many college students have ever heard of Keynes?

Another youtube video of Hayek and Keynes

Found on Division of Labor: