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Yellen/Summers and the Twilight of the VSPs - NYTimes.com

Anyway, it's also clear that Summers made some pretty big mistakes in his campaign. Neil Irwin points to his silence on monetary policy, which was supposed to be cagey but ended up looking slippery; John Cassidy points to his failure to offer any kind of mea culpa for past errors, which arguably was about preserving gravitas but ends up making him seem unreformed.

But why did Summers make these errors? In part because he is a whip-smart academic, the terror of the seminar room, who likes to play political operator -- and as a political operator, he's a great academic. But there is, I'd argue, a larger issue: Summers did not recognize the extent to which the political world has changed. He's been carefully cultivating an image as a Very Serious Person, in a world where VSPness has gone from a source of cachet to being a liability on both right and left.

As usual his whole blog is worth a read...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Aug 1st, 2013 at 05:31:25 AM EST
I feared he would go the other way out of respect for Samuelson and the old school tie.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 1st, 2013 at 10:15:08 AM EST
[ Parent ]
I wouldn't be so sure that Samuelson would endorse Summers.

You'd expect the same of Solow, but he's stayed neutral.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Aug 3rd, 2013 at 09:25:15 AM EST
[ Parent ]
Solow has gone off the reservation in his old age, though. Telling people that they are taking silly toy models way too seriously, and stuff like that.

Samuelson, on the other hand, was always a political operator first and a scientist a distant second.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Aug 3rd, 2013 at 09:51:48 AM EST
[ Parent ]
True.  Solow did his share of politicking, but it always seemed to take a back seat to economics as far as his interests went.

Solow was way ahead of most mainstreamers in calling bullshit on DSGE and the Lucas-Prescott program.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Aug 3rd, 2013 at 10:08:16 AM EST
[ Parent ]
He was the lead witness in 2009 Congressional hearings that offered a platform for alternative views about the economy and economics.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 3rd, 2013 at 10:36:19 AM EST
[ Parent ]
The fact that macroeconomics has gotten to the point that Robert Solow can be considered heterodox shows just how fucked-up things got.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Aug 3rd, 2013 at 11:07:30 AM EST
[ Parent ]
The thing is that the Solow model makes absolutely excellent sense, and the only thing that marks it as a neoclassical model is the substitution of "saving" where "investment" should be. And it's always tested using the rate of investment anyway, because we have data on that, as opposed to the rate of saving which is quite difficult to measure precisely.

So yeah I think Solow is quite justified in thinking that of himself as a scientist in contrast to the quacks and charlatans infesting the profession.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Aug 3rd, 2013 at 01:51:20 PM EST
[ Parent ]
Some of that is a difference in eras of economics.  Solow comes from an intellectual framework -- and sort of a period -- in which there was greater emphasis on getting good answers, as opposed to the political horseshit that has characterized economics for the last 40 years or so.

One could perhaps draw a distinction between Solow and Samuelson there.  Not that I blame Samuelson for people like Lucas and Prescott (Lucas and Prescott ultimately own it), but he played a role in laying the foundation for those types.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Aug 3rd, 2013 at 02:17:50 PM EST
[ Parent ]
Well, Samuelson is on record admitting that he deliberately excluded whole ranges of policy space from his modeling, not because those policies were more difficult to model (though they are), or because they were practically infeasible. But because he thought that politicians, when given these policy options, would make "wrong" decisions (i.e. ones he did not agree with).

That, ultimately, is the fence in modern macroeconomics which distinguishes mullahs from scientists. And once you're on the wrong side of it, the difference down to von Mises and Greenspan is merely one of degree, not of kind.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Aug 3rd, 2013 at 02:40:51 PM EST
[ Parent ]
Samuelson is also on record as describing how a Canadian Keynesian economist who published a well received textbook in 1946 subsequently was the victim of a coordinated conservative smear that linked him and his views to, gasp, SOCIALISM. The spectacle caused Samuelson to be very careful not to be vulnerable to such an attack. He did not say so but, likely, this effort to avoid attack by conservatives substantially drove him into their arms. Samuelson knew on which side his bread was buttered.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 3rd, 2013 at 03:49:40 PM EST
[ Parent ]
Samuelson knew on which side his bread tenure and pension was buttered.

FIFY

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Aug 3rd, 2013 at 07:34:50 PM EST
[ Parent ]
Solow is also undoubtedly angry with a lot of people due to the fact that much of Real Business Cycle theory is just the Solow model with some very stupid representative agents -- or brilliant, I suppose (since they live forever, take years-long vacations, and can anticipate everything perfectly) -- bolted on.  Anything they can't explain is the Solow Residual and hence business cycles are all about technology shocks.

Which Solow clearly thinks is completely idiotic.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Aug 4th, 2013 at 09:02:14 AM EST
[ Parent ]
Is 'the Solow Residual' a term of art amongst the RBC advocates?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 4th, 2013 at 01:52:58 PM EST
[ Parent ]
The Solow residual is a term of art among a class of utility theoretic economic growth models. Technological progress is everything in productivity growth you can't account for after you have found all the factors correlated with productivity growth and have estimated their contribution.

Its an admission that utility theoretic growth modelling can't explain the most important long term factor in economic growth.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Aug 5th, 2013 at 10:35:27 PM EST
[ Parent ]
What Bruce said.  The term pre-dates RBC.  The Solow growth model has been around since the '50s, whereas RBC came around in the '80s.

RBC theorists just tend to be wedded to it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Aug 6th, 2013 at 07:36:35 AM EST
[ Parent ]
Of course RBC assumptions about inherent limitations of the market to clear at certain times, about which nothing can be done, blows up if we take account of debt to GDP, as does Steve Keen, and take measures to deal with those implications in light of MMT and three sector national accounting.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 4th, 2013 at 02:02:07 PM EST
[ Parent ]
RBC makes no assumptions about the inability of the market to clear.  Markets always clear in RBC models.  RBC models have instantaneous price adjustment, perfect competition, etc.

To get markets that don't clear, you have to add (usually nominal) rigidities and imperfect competition, at which point your model becomes New Keynesian rather than RBC.

(NK models perform a lot better at forecasting, but a lot better than "fucking terrible" is still not good.  Put it this way: Last I read, internal Federal Reserve forecasts were still putting both to shame.)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Aug 6th, 2013 at 07:46:43 AM EST
[ Parent ]
RBC is essentially an update of Voltaire's Dr. Pangloss.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 4th, 2013 at 02:06:14 PM EST
[ Parent ]
... easiest way to close an anticipatory model. That presumes that an anticipatory model that is a closed system accurately reflects the way that the economy works ...

... even though quite clearly it does not.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Aug 5th, 2013 at 10:37:25 PM EST
[ Parent ]

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