Breaking Bones

by on April 11, 2014 at 10:43 am in Economics | Permalink

It’s sometimes said that conservative economists are heartless bastards who don’t understand the evil of unemployment or what it’s like to live on a low income. Edward Lambert from the left-of-center Angry Bear proves that to get what they want some on the left can be equally heartless.

I would love to support continued aggressive policy to bring the economy back to full employment, but the social cost of inequality is sickening. And if stopping this disease means putting the economy back into a recession, then so be it…It is like re-breaking a bone to set it straight. If the re-breaking of a bone is not done, the bone won’t work correctly in the future. It is proper medicine.

…Current day economists seem squeamish…
Hat tip: Scott Sumner.

prior_approval April 11, 2014 at 10:47 am

‘…that conservative economists are heartless bastards who don’t understand the evil of unemployment or what it’s like to live on a low income’

Thank god this is a place where only libertarian economists are able to post.

Not to mention tenured GMU faculty members, whose apparent life time guaranteed salary (along with their pension, of course) is paid for by the taxpayers of the Commonwealth of Virginia.

Warren April 11, 2014 at 10:59 am

I don’t know the numbers, but I’m pretty sure GMU’s economic department is funded with private donations. Also I doubt if they have pensions, I assume it’s a retirement fund with matching.

prior_approval April 11, 2014 at 11:11 am

And as a former employee of GMU, I am confident that Profs. Cowen’s and Prof. Tabarrok’s GMU salary is fully paid paid by the taxpayers of the Commonnwealth of Virginia. However, you can check for yourself how much that is at this link, from 2011 – http://datacenter.timesdispatch.com/databases/salaries-virginia-state-employees-2011/

(Wow – checking for a previous link detailing the income paid for public servants, I found this – http://reason.com/blog/2014/03/26/gmu-economist-tyler-cowen-pepper-sprayed – ‘Economist, author, and George Mason University (GMU) professor Tyler Cowen was pepper sprayed in his classroom today by a man trying to place him under citizen’s arrest. ArlNow.com reported on the incident, which took place at GMU’s Arlington, Virginia, campus this afternoon.’)

Z April 11, 2014 at 12:52 pm

Am I the only one who thinks it is hilarious that Tyler is being stalked through his blog by a bitter ex-employee? Back in my day we had real stalkers, not like today’s stalkers. Our nuts went outside and followed people around. Today, these guys sit at home and post on blogs.

shivuintheshowers April 11, 2014 at 2:03 pm

Better a virtual stalker than a physical one I suppose. Also this is old news p_a. There were scurrilous comments at the time questioning your whereabouts.

Colin April 12, 2014 at 8:00 pm

Because Tyler personally employs everyone who works at the university, right? “HEY, CHEMISTRY MAN, GET BACK TO WORK! YOU WORK FOR ME!”

prior_approval April 11, 2014 at 11:20 am

‘but I’m pretty sure GMU’s economic department is funded with private donations’

To be more specific – sorry about that reason.com distraction – it is likely TIAA-CREF which will provide Prof. Cowen’s retirement beneits (apart from Social Security, that is). Much like in my case, at least if I hadn’t left the GMU in 1992.

Abe Froman April 11, 2014 at 1:36 pm

When I heard that Tyler had been attacked in class, I quickly deduced that it was a fringe, deranged, leftist nut with an unhealthy obsession with MR.

In short, I immediately thought it was prior_approval

prior_approval April 11, 2014 at 2:12 pm

‘In short, I immediately thought it was prior_approval’

Well, apart from the reading comprehension fail of where I live – in Germany – the fact that my politics (Piratenpartei) don’t fit on an American left/right scale should have also been a tip off.

Nonetheless, that no one mentioned this attack before my incidental discovery and mention is pretty revealing about the U.S. these days. (Correction if someone posted this in a comment I haven’t read is welcome, of course.)

Especially in light of the fact that I probably had better parking permits and more campus police appoved master keys than Prof. Cowen, back in the later 80s and early 90s – including complete access to the Arlington campus at the time.

Butr I’ll admit to an interest in reading any details of what to my knowledge is the first assault against any GMU faculty member – anyone got any first hand links? (The rash of pipe bomb attacks in the later 80s/early 90s at GMU was too random to count as an attack against a faculty member, even in the eyes of the campus police – and one of the first stories I reported on where I intentionally held back factual information after being asked to.)

ricardo April 11, 2014 at 2:57 pm
EoT April 11, 2014 at 7:36 pm

Piratenpartei is a leftist party, socially liberal and support universal basic income.

Not that there’s anything wrong with that!

B.B. April 11, 2014 at 11:09 am

The Left used to say you can’t make an omeltte without breaking some eggs. I guess Angry Bear wanted to be less metaphorical and just wants to break some bones. Or, to use another expression, push comes to shove. Or is it nudge comes to shove?

George Orwell’s reply was, “so, where is the omelte”? Maybe I am missing something, but I think the Left economists are missing something. Aren’t we in Year Six of the Age of Hope and Change? So where is our omette?

I think anger comes out of dashed dreams and disillusionment. And displacement. It is easier to get mad at Sarah Palin on the talk circuit than to get mad at a president you voted for.

In any event, I look at the increasing militarization of domestic agencies, and I am not sure that breaking bones is just a metaphor for the Left. If the Koch Brothers were gunned down by anarchists, how many on the Left would have any sadness?

Nate April 11, 2014 at 11:31 am

“omeltte”, “omelte”, and “omette”. Impressive.

Leslie Nielsen April 11, 2014 at 11:49 am

Strike three, and here’s Leslie on the call…

https://www.youtube.com/watch?v=VWY9S-uKU-4

Thor April 11, 2014 at 1:08 pm

Actually Orwell, and Albert O. Hirschmann, knew a thing or two about certain elements on the far left … both of these thinkers served in Catalonia on the Republican left.

Even as late as 1947, French left wing philosopher Maurice Merleau-Ponty could write a book “Humanism and Terror” defending Communist show trials, using the omelette metaphor.

And then there’s Zizek on violence. Forget breaking eggs. He’s in favour of breaking the entire kitchen.

Marie April 11, 2014 at 6:59 pm

Isn’t that exactly why Orwell turned 1984ish, his experience when he thought the left was all that? Seems like ABBA are the only ones who got a left-is-good message out of that war? Or is my history too superficial?

Ed April 11, 2014 at 11:10 am

I only skimmed the article, but I don’t see much difference between what it is saying and what the Austrians are saying. Are the Austrians now considered to be left-of-center?

There is a misperception on the right that leftish types are motivated by being (over) compassionate towards the poor. As a left-of-center person myself, I am motivated by envy. I think large concentrations of wealth in a few hands is not compatible with either democracy, free markets, or low levels of corruption and have to be broken up periodically. I also don’t see how an oligarchy can run any sort of a welfare state without high levels of corruption, with most of the funding for the programs going to various administrators and contractors.

chuck martel April 11, 2014 at 11:32 am

No evidence of high levels of corruption in democracies, especially of late. Guys like you want to hire thugs to confiscate your neighbors’ stuff so you don’t get any blood on your own hands and can still say that you “care”. If you envy those with more material assets than you have why don’t you go out and get some of them personally, instead of setting up a bureaucratic mega-factory to do it.

Phill April 11, 2014 at 11:44 am

Actually I think for the most part that the bureaucracies in most modern democracies are corruption free – but that’s not true at all of the political process. Look at West Virginia: http://www.newyorker.com/reporting/2014/04/07/140407fa_fact_osnos?currentPage=all

Look at financial crisis prosecutions. Look at the preference for low inflation over low unemployment. Look at how detroit was left to rot. The list goes on.

Jay April 11, 2014 at 1:28 pm

“left to rot”? Please, it wasn’t like there was a mudslide and no one helped. Detroit was the one actively setting the fires over the past few decades so excuse me if I don’t lose any sleep over not bailing them out.

Salem April 11, 2014 at 11:48 am

Never fear, there are plenty of people who point out that you lot are primarily motivated by envy.

Mark April 11, 2014 at 12:29 pm

Thanks for pointing out that there are extremists on both sides of the political spectrum. I forgot. I really did.

byomtov April 11, 2014 at 11:19 am

Edward Lambert is “the left?” Really?

Give me a break.

Let us know when his budget passes the House.

The words of one liberal blogger do not stand for the “left,” or the Democratic party, the wa thatthe words of the entire right-wing media and Republican political leadership stands for the Republican party and conservative views.

Alex Tabarrok April 11, 2014 at 11:25 am

You are correct. I have rephrased.

venuto April 11, 2014 at 12:02 pm

The traditional left-liberal-progressive-Democrat mass has always insisted that market processes and personal liberty must be bent, shaped, and chopped to conform to their demands of social justice, egalitarian ethics, and environmental concerns.

Nothing at all new here. The left is often cheerfully brutal and uncaring in pursuit of their utopia.

Moebius Street April 11, 2014 at 12:06 pm

“the wa thatthe words of the entire right-wing media and Republican political leadership stands for the Republican party and conservative views”

I hope this is the single most biased and least-thought out thing I read today. I have lots of complaints about the GOP, but I can’t see that they’re monolithic.

Perhaps you’ll recall the intra-shi bickering over Ted Cruz’s stand on finances?

Maybe you’ve noticed most non-fundamentalists rolling their eyeballs every time somebody starts pontificating about “intelligent design”?

I respectfully suggest that you’re falling afoul of fundamental attribution error.

byomtov April 11, 2014 at 1:48 pm

All right. I could have been clearer.

Lambert is very far from an influential figure on the left, as an economist or a political leader, or an opinion-maker. To single him out as somehow representative is unfair.

Those who advocate for policies seen as “heartless” or out of touch with the realities of unemployment, etc. are vastly more prominent on the right than Lambert.

One does not see Krugman or DeLong, for example, however much they are concerned about inequality, expressing the opinion that it would OK to have another recession to change matters.

asg April 11, 2014 at 11:23 am

Meh, his heart’s in the right place

bruce April 11, 2014 at 11:23 am

It may be that arguments about inequality never proceed beyond the subjective – if you are offended by inequality then it is bad; if you are not then it is unimportant. The whole argument becomes an emotional tautology. However using the government to fight inequality may be like using the government to fight vice – fighting the sin is worse than the sin.

derek April 11, 2014 at 11:32 am

He claims that a couple years of recession would be worth it if we could drastically, and permanently, reduce inequality. Does MR actually disagree that this would be worth it? If so, then, yes, MR is completely unfeeling and is missing the point of why we like economic growth to occur in the first place.

I imagine that MR, like myself, is somewhat skeptical that Lambert’s proposed methods (a higher minimum wage, more redistribution) would be very effective, but that is a totally different complaint than thinking that inequality, or at least living standards, are an important reflection of an economy’s success along with GDP growth.

ed April 11, 2014 at 11:59 am

I don’t understand how you think we could decrease inequality “permanently.” Does anyone think this?

What do you mean “inequality, or at least living standards?” I can’t decode what you’re saying here.

Also, isn’t unemployment itself a very serious form of inequality?

derek April 11, 2014 at 3:35 pm

1) Why couldn’t we reduce inequality permanently? Over the past few years, labor’s share of income has gone way down, and the upper percentile’s share of income/wealth has also risen a lot. If this is considered undesirable, then there are plenty of policies that could shift the balance back to labor.

2) First, the “are” after the comma should be an “is”. Poor grammar may have made this sentence unclear. By “inequality, or at least living standards”, I mean that even if we reject that equality should be valued on par with economic growth, surely we can at least accept some growth in living standards as a minimum standard for an economy to be considered successful. If all of an economy’s growth is concentrated in the wealthiest class, then that economy is not doing well despite the headline economic growth.

3) Of course unemployment is a cause of inequality. I personally don’t agree with Lambert’s prescription, as I think that the best way to improve labor’s share of income is high employment.

TMC April 11, 2014 at 12:04 pm

“permanently, reduce inequality”

Will never happen. We either remain a meritocracy or starve.
Within 10 years of any ‘reorder’ of society inequality will once again be substantial.

Alexei Sadeski April 11, 2014 at 1:40 pm

Reducing inequality has literally zero use in and of itself.

derek April 11, 2014 at 3:40 pm

How does it have zero use?! If people have plausible utility functions, then society gains when wealth is equalized. There are obviously some trade offs with lower investment levels and work incentives, but I don’t see we can say that there is zero use.

Jody April 11, 2014 at 4:33 pm

Assume a growth model instead of a distribution model.

derek April 11, 2014 at 8:22 pm

Yah, you’re trading off lower growth for greater income equality. This is not news. But greater equality is still a gain, all else equal. The question is how much growth you are trading for how much equality.

TallDave April 11, 2014 at 10:29 pm

If people have plausible utility functions, then society gains when wealth is equalized.

That assumes people all have very similar desires for income, which is demonstrably untrue, and that resources are best applied when owned equally, which is just funny.

Society gains when the distribution of income changes to something people prefer more, which they express by moving their dollars (with the exception of rentseeking/coercion).

Jan April 11, 2014 at 11:55 am

The purpose of this post is to make people say “AAARRGGGHHHH!!”

ed April 11, 2014 at 11:55 am

I clicked on the link to see what he thought the most important “costs of inequality” were, but he didn’t say. Is it supposed to be obvious?

TMC April 11, 2014 at 12:12 pm

From AngryBear: “So let’s remember that the minimum wage was made law in 1938. Unemployment fell after that.”
Just after 1938. Nope nothing happening there.
So now we go from breaking bones to another world war.
Reminds me of those who want to revisit the US manufacturing glory of the 50s and 60s.
– Step 1 – bomb out everyone else’s manufacturing capacity.

Moebius Street April 11, 2014 at 12:19 pm

As the Rush lyrics say:

So the maples formed a union
And demanded equal rights.
“The oaks are just too greedy;
We will make them give us light.”
Now there’s no more oak oppression,
For they passed a noble law,
And the trees are all kept equal
By hatchet, axe, and saw.

Mark A. Sadowski April 11, 2014 at 12:23 pm

Angry Bear advertises itself as a “[s]lightly left of center economic commentary on news, politics and the economy.” But since Edward Lambert has joined Angry Bear his posts have been a constant drumbeat against adequate aggregate demand stimulus, particularly monetary stimulus. I consider myself “slightly left of center” and I think anyone who does would be puzzled why a blog that characterizes itself so would be against adequate aggregate demand.

With respect to Edward Lambert’s current post, he says:

“As it is, Christina Romer is telling us not to fear an economic correction as long as its recovery is done correctly. It is like re-breaking a bone to set it straight. If the re-breaking of a bone is not done, the bone won’t work correctly in the future. It is proper medicine. You will be better off going through the moment of extra pain…My prescription is to re-break the economic bone which has not set correctly, and this time let’s be aggressive in setting straight better wages and labor share from the start. The idea of re-breaking the economy may sound crazy to you, but the methods of medicine have a greater wisdom than what I see currently among economists.”

But if you listen to Christina Romer’s speech (Edward has a fondness for posting videos rather than papers, precisely because I believe he hopes no one will take the time to view them) she says in her list of strategies:

“Avoid crises if possible.”

“End crises quickly if they do happen.”

“Use monetary and fiscal policy aggressively.”

and

“Avoid self-inflicted wounds.”

This is exactly counter to Edward Lambert’s perscription of re-breaking the economy.

Although Edward Lambert’s concern with inequality and the minimum wage may brand him as left-wing, I’m not sure that’s the best way to understand him.

One key to understanding his views is that he considers himself to be a follower of “Institutional Economics”. Paul Krugman had this to say about Institutional Economics recently:

http://krugman.blogs.nytimes.com/2014/03/26/dare-to-be-silly/

“…Before I turn to Syll’s critique, let me summarize my understanding of one of the great turning points in the practice of economics – the turn away from institutional economics in the 1940s and 1950s. Until that time, institutional economics – generally taking the form of long, discursive books rich in historical detail – had been a strong presence in U.S. thought. But then came Samuelson and associates, and models took over.

Why did this happen? It wasn’t, as some might imagine, about free-market ideology: Samuelson started with Keynesian macro (or “Keynesian” macro, if you feel the urge to claim that the master meant something different), and in fact faced a fierce campaign by right-wingers to keep his work out of the schools. No, what happened was the Great Depression.

Think about it. Here we had an utter catastrophe, and people wanted answers: how could this happen, what can we do? Institutional economics replied, in effect, by saying “Clearly what is happening is a complex process with deep historical roots. We need to address those complexities. It would be foolish to expect easy answers.” Meanwhile, American Keynesians said, “We have inadequate demand. Increase government spending!”…”

So you see, indifference to adequate aggregate demand stimulus has apparently always been a key feature of Institutional Economics.

Mark April 11, 2014 at 12:31 pm

Stop posting reasoned replies. I’m fully onboard AT’s Train ‘O Righteousness.

Mark A. Sadowski April 11, 2014 at 12:24 pm

Some other keys to understanding Edward Lambert’s economic views:

1) His model of “Effective Demand” misappropriates its name chiefly from Keynes, but also from Michal Kalecki. In Lambert’s model, labor share of income acts as a constraint on employment and capacity utilization which he terms the “effective demand limit”. But if you actually read Keynes’ General Theory (Chapter 3) you’ll find that “effective demand” is simply the intersection point between the aggregate demand and aggregate supply curves. Keynes argues that effective demand can be increased through monetary stimulus and public works projects. Similarly, Kalecki argues that effective demand can be increased through aggregate demand stimulus. This of course runs completely counter to Lambert’s claim that effective demand is a limit to employment and capacity utilization against which aggregate demand stimulus is totally ineffective.

2) Edward Lamberts’ model of “Effective Demand” is originally derived from the work of Boddy and Crotty (1975), Boddy (2007) and Goldstein (1986, 1996). Rather than link all three I’ll simply link the most recent paper:

http://www.peri.umass.edu/fileadmin/pdf/conference_papers/crotty/Boddy_Crotty.pdf

Boddy shows through careful examination of the research evidence that labor share of income can be described as a function of employment and industrial capacity utilization. Once again Lambert perverts this, this time by inverting cause and effect. In his model, employment and capacity utilization are functions of the labor share of income. The fact that this runs counter to his own sources and a large body of research evidence seems to be of no concern to him, since he is not interested in the truth, only in advancing his own model of “Effective Demand”.

3) If you examine his blog posts, you’ll find that Edward Lambert’s main public policy perscription is the reduction of aggregate demand stimulus, specifically by ending QE and raising interest rates. Given what we know from the research evidence, this is exactly the opposite of what should be done if one’s goal were to raise labor share of income, as Lambert repeatedly claims.

I have a hard time reconciling all of this with the idea that Lambert’s intentions are good and that it is his thinking that is simply muddled. How can one so blatantly misapprehend Keynes and Kalecki, or Boddy, Crotty and Goldstein? There is something seriously amiss here.

Donald Pretari April 11, 2014 at 12:37 pm

Alex and Scott, I don’t think you did conservative economists any favors. Logical speaking, nothing you said addresses the issue of whether or not conservative economists are heartless. You just kinda spread the heartlessness.

Becky Hargrove April 11, 2014 at 2:01 pm

In this instance, the “heartlessness” is implied (on Lambert’s part) by refusing to recognize the importance of aggregate spending capacity – thus shorting said capacity because one particularly party isn’t able to define the “cap” on their own terms.

derek April 11, 2014 at 3:41 pm

brainlessness, rather

FUBAR007 April 11, 2014 at 12:53 pm

“It’s sometimes said that conservative economists are heartless bastards who don’t understand the evil of unemployment or what it’s like to live on a low income. Edward Lambert from the left-of-center Angry Bear proves that to get what they want some on the left can be equally heartless.”

TL;DR: Ideologues are assholes.

Martin April 11, 2014 at 1:04 pm

I think this is the most stupid thing ever published here.

Marie April 11, 2014 at 1:12 pm

It is often said that conservative economists use false dichotomies to get their way. Edward Lambert proves that to get what they want some on the left use false dichotomies, too.

Or, um, maybe usually.

Edward Lambert April 11, 2014 at 2:06 pm

Alex,
I wrote more today…
http://angrybearblog.com/2014/04/scott-sumner-thinks-volcker-recession-was-unintended-really.html

Let me just say one thing.
Larry Summers and Christina Romer are saying that policy needs to be directed at demand, middle and low incomes. They have set the stage for progressive policy changes to combat inequality. The next downturn is more of a threat to the rich than continued policy trying to avoid a recession. The rich get stronger on this policy. Inequality becomes more entrenched. So there is a certain logic to bring on a recession sooner since Summers and Romer would now be more aggressive in pushing more progressive policies.

Jay April 11, 2014 at 3:21 pm

Let us be blunt. The left wants to a** f*** the rich.

*I’m not the rich nor am I into a** f***ing anyone.

Bill Kilgore April 11, 2014 at 5:32 pm

The Left is bought and sold by the rich. Willingly and comfortably.

The Left wants to f*** over people who earn high incomes because those people tend to vote for Republicans, are not sympathetic politically (and thus can be comfortably f***** over) and the Left can buy votes with the money they sieze from those “rich” people.

Conflating people who earn high incomes with people who hold massive amounts of wealth is painfully ignorant- and no one with a double digit IQ would ever honestly make the mistake- but it’s entirely necessary for this effort. And so here we are…

Andrew' April 11, 2014 at 3:23 pm

Great. Something else they can fail spectacularly at.

What about fixing both by 1. return to public goods and 2. slash the government-induced fixed costs of labor.

But they will only do the opposite, so they’ll fail.

Evan Harper April 11, 2014 at 4:13 pm

This is pretty lame. Angry Bear is a well-known group blog and Lambert is one of the contributors, so it’s not *quite* just picking on Internet randoms to make the other side look bad. But it’s still not very meaningful.

Tabarrok seems to have explicitly claimed that Lambert = “the left” in his original post, which he has thankfully corrected. But once it’s acknowledged that Lambert doesn’t necessarily represent anyone other than Lambert, I don’t really see the point of the post.

Alan April 11, 2014 at 4:35 pm

I’ve often heard “It’s sometimes said that economists are heartless bastards”. Noah Smith is a counter example. Tyler Cowen seems to have some definition of “human” that omits components most people include.

Urstoff April 11, 2014 at 5:20 pm

Using moral superlatives like “sickening” is just a signal to me that that person is way too confident in the truth of their views, especially when it comes to economic policy.

A.B Prosper April 11, 2014 at 6:41 pm

I’m note sure emphasis on the greater gain is remotely leftist.

If putting a few people into greater poverty reduces overall national poverty and increases greater well being than its not substantively different than efforts a business might make to increase stability or Secretary of the Treasury Mellon’s desire to “purge the rottenness from the system” . Given that efforts are always made to alleviate the worst effects, its arguably more humane.

hat said there are two issues

#1 Does it work well?
#2 Its not compatible with widespread immigration or Cultural Marxism even where it seems to work.

The current Right is addicted to wage arbitrage and the Left the later so its bound to be much less effective n either case.

Lastly ideas like this are incomprehensible to many libertarians on a basic level . I’ve seen many simply not understand the concept of some kinds of social duty and obligations, the individual being less important than the national group or in extreme cases less understanding the duty to their own family . Its a kind of rugged individualism meets atomization taken to a new level.

if you don’t get the above points than much of the thinking of Conservatives and Liberals won’t make sense

chuck martel April 11, 2014 at 7:43 pm

“That is the shock of a falling labor share which was not normal after a recession and which explains stubbornly high unemployment through weak demand.”

So if labor doesn’t have lots of income to buy things then there will be no jobs for those that would be making the stuff that labor’s not going to buy. If the guys that are working in the warehouse don’t make enough money to buy a new bass boat or an HDTV then the fellows that should be making those things are home watching Seinfeld re-runs. Is that how it works? It’s pretty obvious that the company that sells the bass boats or HDTVs might want lots of people buying their product but what’s that got to do with labor? The only reason they would need an increased income, provided there was no inflation, is to buy additional “stuff”, bass boats, HDTVs. At one time neither of those products existed and nobody built or sold them.

Aside from that, why do you care if any particular individual is unemployed? What’s the rationale behind your concern? If you were really upset about it, you’d start some sort of business and hire some people. But you don’t.

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