The Latest Links on Friedman/Sanders, Romers, etc.

Gerald Friedman, Naked Capitalism, 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.* [There’s a footnote contradicting the Wolfers NYT hit piece alleging accusing Friedman of “bad math, or logic”.] 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.”

James Sherman, at his blog The Body Politick, Uncovering the Bad Math and Logic (and the Bias) at the New York Times. A nice takedown of the Romers and of Wolfers. Follow-up to a previous post, Bernie Sanders, Social Democracy, and Economic Growth – Part I.

Robert Waldman, at Angry Bear blog, New Keynesian Orthdoxy and HysteresisWaldman seems to be agreeing with Friedman (against the Romers) that temporary stimulus can have permanent effects; he is also criticizing the Romers for appealing to the standard model to criticize Friedman, when they themselves don’t agree with the standard model. “There is a standard model in which demand stimulus has only a temporary effect on output and certainly no long term effect on the rate of growth of output. The model does not fit the data. In the academic discussion, macro economists note this and discuss alternative models. But if an outsiders (the Sanders campaign) or other than top status academics say something inconsistent with the standard model, economists say they are wrong and appeal to the standard model. This can make the orthodoxy invulnerable to data. It can be noted that it is rejected by data and alternatives discussed when confronting the problematic data, but this discussion isn’t shared with non-economists.” This was the “Weekend Reading” at Brad DeLong’s blog. (Does this mean DeLong is backing away from his earlier harsh remarks about Friedman’s analysis (in this blog post, in which he manages to praise Friedman before criticizing him, as a vehicle for mentioning that he got two summa readings on his senior thesis, one from Friedman)? Will he admit that he’s doing so, vs. siding with Krugman and the Gang of Four, as he said in his original post?)

Laura Tyson,  at Project Syndicate, Closing the Investment Gap. A commenter on Robert Waldman’s Angry Bear post links to a piece by Tyson, who is one of the “Gang of Four,” saying: “Tyson may not realize it, but she just provided a ringing endorsement of the Sanders economic plan as well as Friedman’s analysis of same.” In the paper (which the commenter quotes from), Tyson argues that a temporary fiscal stimulus can have persistent effects: “Under conditions of weak aggregate demand, stronger public investment encourages more private business investment.” Oops. She’s saying what the Romers are criticizing Friedman for saying. I guess if you say it in an article that only other economists are likely to read, and not in support of an insurgent anti-establishment campaign, it’s ok; if not, not.

Menzie Chinn, Econbrowser blog, Visualizing Textbook and Alternative Interpretations of the Friedman Analysis of the Sanders Economic Plan“Now that the dust has (kind of) settled on exactly what is and is not in Gerald Friedman’s interpretation of the Sanders economic plan, I thought it useful to contrast the textbook (at least the one I use, Olivier Blanchard/David Johnson’s) view of how a fiscal stimulus works, versus that in which a one-time spending increase yields a permanent increase in output, in a graphical format.” Nice graphs!

David Ruccio, Real-World Economics Review blog, Looking Below the Surface. “The fact is, the arrogant liberal response to Sanders and Friedman carried out in the name of ‘responsible arithmetic,’ which has created an ‘illusion of consensus,’ has been been both timid (in terms of actual policies) and shallow (in terms of what it focuses on).” There were several earlier pieces on the kerfuffle from the Real-World Economics Review blog that I’d missed (also siding with Friedman, natch): Lars Syll, Real-World Economics Review blog (2/28), Bernie Sanders and the Verdoorn Law. David Ruccio, Real-World Economics Review blog (2/28), The Debate Continues; Peter Radford, Real-World Economics Review blog (2/21), Krugman versus Sanders; and earlier from David Ruccio, at Occasional Links & Commentary on Economics, Culture and Society (2/20), Pushback.

Robert Vienneau, at his blog Thoughts on Economics, Romer and Romer Stumble. Points to three problems with what the Romers say in just one passage about labor markets and regulation. The conclusion: “Even the best mainstream economists seem incapable of writing ten pages without spouting ideological claptrap and propagating silly errors exposed more than half a century ago. Something seems terribly wrong with economics profession.”

Robert Reich, from his blog, Why the Critics of Bernienomics Are Wrong. Short and snappy. Hew as also interviewed on Democracy Now!, “We Must & Can Aim High”: Former Clinton Labor Secretary Robert Reich on Endorsing Bernie Sanders. In response to a question from host Amy Goodman about the kerfuffle, “Bernie Sanders is claiming—and Gerald Friedman, professor Gerald Friedman, an economist, backing him up, is claiming—that he could, because of his proposals, such as a single-payer plan, get economic growth up to 5.3 percent—that’s not out of the historic dimension of what’s possible; in fact, in the early 1980s, we had 5.3, almost 5.4, percent economic growth—and also get unemployment down to 3.9 percent or 3.8 percent—again, not out of historic possibility. In fact, that’s what was the approximate rate in the late 1990s.”

Gerald Friedman, interviewed on BloombergBusiness, Sanders Economics: Do the Numbers Add Up?  Jerry acquits himself well.

Ryan Cooper, The Week, Who’s Afraid of John Maynard Keynes? Nice piece on the debate about output since the Romers’ critique of Friedman came out. “Ultimately, there is only one way of resolving this question for sure: Attempt aggressively expansionist policy, and see how far we can get. No one knows for sure where the top is, or whether serious efforts to bring the millions of discouraged workers with fiscal stimulus, active labor market policies, or paid family leave would pay dividends. But they are unquestionably worth trying. Insofar as the professional center-left economist corps is creating a sense that such efforts are futile, they are doing their nation a massive disservice.”

That’s it for now.

Links on the Kerfuffle about Friedman’s Sanders Analysis

There’s been quite a fuss about our columnist Jerry Friedman’s analysis of the macroeconomic effects that implementation of all of Bernie Sanders’ proposals would have. (The analysis was the basis of two of Jerry’s recent columns for us, here and here.) Here’s a minimally annotated round-up of articles and blog posts related to the kerfuffle:

Jackie Calmes, New York TimesLeft-Leaning Economists Question Cost of Sanders’s Plans I linked to this in my last blog post; this article mentions Jerry Friedman and his analysis, but doesn’t quote him (they apparently didn’t contact him before running the piece–I am sure he would have spoken to them if they had!). The piece also makes it sound as if Jared Bernstein, about the only truly left-leaning economist they quote, is harsher on Friedman than he is, and even more misleadingly, that he is skeptical of Sanders’ plans (more on this below).

Dean Baker, Beat the Press, NYT Invents Left-Leaning Economists to Attack Bernie Sanders.  Lots of good points here critiquing the Calmes NYT piece, especially how the people they quote aren’t leftists, and in one case (Ezra Klein) not an economist.

Doug Henwood, FAIR blog, NYT Rounds Up ‘Left-Leaning Economists’ for a Unicorn HuntAlso a very good critique of the Calmes NYT piece, plus a great new metaphor for hippie-punching–the “unicorn hunt.” Since the kerfuffle really blew up, though, Henwood has been harsh about Friedman on Twitter, calling his analysis “embarrassing.” (Henwood finds Jerry’s the growth-rate projections “risible.” Ouch, comrade.)

Alan Krueger, Austan Goolsbee, Christina Romer, Laura D’Andrea Tyson, An Open Letter from Past CEA Chairs to Senator Sanders and Professor Gerald FriedmanHere is the real driver of the kerfuffle. It is amazing that they take Friedman to task for growth projections that they say are not credible (and take Sanders to task for relying on them–though the Sanders campaign did not commission this analysis), but they don’t give any specific empirical criticism of his analysis. Instead, they fault Sanders/Friedman for making projections that are outlandish in the way that GOP projections standardly are. (But see below–many observers have defended Friedman on this score.)

Jim Tankersley, at WashPo’s Wonkblog, The economist who vouched for Bernie Sanders’ big liberal plans is voting for Hillary Clinton.  Ok, this is just weird. Not an entirely unsympathetic article, but I wish Jerry were more careful not to feed into Clinton’s “one-issue candidate” talking point. (“I agree with Bernie on economic issues, but there are other issues.”)

James K. Galbraith, open letter (dated February 18) to Kreuger, Goolsbee, Romer, and Tyson (posted here). A lengthy response, starting by taking them to task for not providing any substantive critique or analysis of Friedman’s research: “You write that you have applied rigor to your analyses of economic proposals by Democrats and Republicans. On reading this sentence I looked to the bottom of the page, to find a reference or link to your rigorous review of Professor Friedman’s study. I found nothing there.” Then there are a couple of pages of analysis defending Friedman’s analysis and methods. (“There is no ‘magic asterisk,’ no strange theory involved here.” The conclusion: “What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders’ proposals stems from their scale and ambition. When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result.”

Matthew Klein, FT Alphaville, “Extreme” doesn’t mean what it used to, Sanders vs the CEA.  This piece (which you have to be registered to see) explains why Friedman’s growth projections may not be as outlandish as Kreuger et al. suggest, using this chart, showing that Friedman’s optimistic growth rate under Sanders programs only brings the growth rate back to the 1984-2007 pre-recession trend line:

Sanders-growth-590x275

Matthew Yglesias, Vox, Top Democratic economists don’t think much of Bernienomics. He doesn’t care.  Surprisingly, a piece from Vox that is pretty sympathetic to Sanders and Friedman (though he identifies the parts of Friedman’s analysis that he thinks are implausible). Under the heading “Imperious dismissals only make Sanders stronger,” Yglesias writes: “It’s noteworthy that the former CEA chairs criticizing Friedman didn’t bother to run through a detailed explanation of their problems with the paper. To them, the 5.3 percent figure was simply absurd on its face, and it was good enough for them to say so, relying on their authority to generate media coverage.”

Nick Timiraos and Laura Meckler, Wall Street Journal, Democratic Economists Say Bernie Sanders’s Math Doesn’t Add Up. Reporting on the past CEA chairs’ open letter; does better than the NYT piece on reporting Jared Bernstein’s actual views. Requires subscription.

Jared Bernstein, at his blog, I Endorse…(No One!)  Does the best at explaining Jared Bernstein’s actual views. He thinks Friedman’s projections are overly optimistic, but he repudiates the CEA chairs’ comparison with Republican “fairy dust”: “I do give Friedman credit for running all of Sanders’ plans through a macro model, versus Republican candidates’ hand-waving claims that the power of their personalities leavened with massive sprinklings of supply-side fairy dust will generate GDP growth of 4, 6, 8 percent! But such models are a function of your assumptions, and his, including his multipliers, the sharp increase in labor supply and productivity, diminished health care inflation, and a passive Fed amidst all this stellar growth, all seemed way too sunny to me (I called them ‘wishful thinking’ in the NYT).”

Paul Krugman, his NYT blog, Worried Wonks.  (Plus he has two other blog posts on the kerfuffle.) What’s interesting about them is not what Krugman says (which is what you’d expected now that he is in Hillary shill mode) but how many of the commenters (more than three quarters, I would say) are unsympathetic to his siding with Kreuger, et al.

Kevin Drum, Mother Jones, The Sanders Campaign Has Crossed into Neverland. Another piece highly unsympathetic to Friedman, but with no actual counter-analysis–just name-calling (see below). Surprising, for MoJo and Drum.

Ryan Cooper, The Week, Why are big-shot liberal economists hippie-punching Bernie Sanders?  A vigorous defense of Friedman and Sanders. “Ironically, in the frenzy to destroy Friedman’s reputation, nobody actually explained in detail what the problems were with his paper. The CEA pronouncement had no data or economic argument at all — it was 100 percent political handwringing. Krugman gave a very brief gloss suggesting that Sanders couldn’t possibly get labor force participation back up to 1990s levels due to aging, and trying to do so would cause inflation. Kevin Drum gave a similar incredulous stare argument about worker productivity and GDP growth, pronouncing it ‘insane,’ worse than Republican ‘magic asterisks.'” Cooper does what the big-name wonks should have, and has a mixed assessment Friedman’s analysis. But his point is: “Friedman is just a professor who thought it might be interesting to game out the Sanders platform. He doesn’t work for the campaign, or have platoons of graduate students, think-tankers, or public relations experts at his beck and call. His major error, it seems to me, is that he didn’t realize he’d be walking into a buzzsaw of Clinton supporters if he didn’t fiddle with his numbers to make them look ‘sensible.'”

Mike Konczal Roosevelt Institute Rortybomb blog, In Praise of the Wonk: Dissecting the CEA Letter and Sanders’s Other Proposals. This is a nice discussion, which agrees with Kreuger, et al. that Democrats and the left need to have good policy analyses (hence “In Priase of the Wonk”), but takes them to task for not explaining why they reject Friedman’s idea that an expansionary policy could get us back to the historical trend of growth (he uses Klein’s graph from the FT Alphaville post). “To reject Friedman’s analysis, as the former CEA chairs do, seems to involve rejecting that component of the analysis. If so, they have an obligation to explain what happened to that potential output trend from 2007.” He discusses various possibilities, plausible and not.

J.W. Mason, at his blog, Can Sanders Do It?  A nicely argued defense of Friedman, by a former student of Friedman’s who now teaches at John Jay College. He says the discussion should focus on this question “Is it reasonable to think that better macroeconomic policy could deliver substantially higher output and employment?”, where many of Friedman’s critics have focused on whether Sanders programs will get us there, or on whether Friedman has just the right numbers. Mason: “Is it plausible that there could be 5 percent-plus real GDP growth and 300,000 new jobs per month over the eight years of a Sanders presidency? I think it is — or at least, I don’t think there is a good economic argument that it’s not.” He gets there via five points (with arguments for each point–read the post for the arguments):

  1. It’s not controversial to say that a historically deep recession ought to be followed by a period of historically strong growth.
  2. Friedman’s growth estimates are just what you need to get output and employment back to trend.
  3. In other contexts, it’s taken for granted that more expansionary policy could deliver substantially higher growth.
  4. Friedman’s projections are unreasonable only if you think the US is already at full employment.
  5. The argument against Friedman’s piece comes down to the claim that the economy is already close to potential.

Ron Baiman, Chicago Political Economy Group, posting at the D&S blog, The Poverty of Neoclassical Economic Analysis. I’ll give Ron the last word: “No one assumes that Bernie’s economic program will be passed as currently conceived. The fate of these proposals depends on the power of the ‘political revolution’ that the Sander’s campaign is leading. Like the Clinton campaign, the NC-economics trained, former CEA Chairs exhibit abundant ‘pessimism of the intellect” but no ‘optimism of the will’. This is not an economic debate. It’s a political and ideological debate that reflects the deep division in fundamental theoretical outlook between NC progressive and radical democratic socialist economists.”

This is all I have for now. I am sure there will be more.