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Sunday, March 11, 2007

"An Intellectual Gresham's Law in Action"

Brad DeLong makes an important point:

Un-Discourse Situations...: I was sitting on the right end of an nine-person panel at the New School Friday morning (webcast). Bob Solow was sitting on the left end--Solow, Shapiro, Schwartz, Rohatyn, Kudlow, Kerry, Kosterlitz, Hormats, DeLong. Bob Solow expressed concern and worry over the declines in the U.S. savings rate over the past generation. Larry Kudlow, in the middle of the panel, aggressively launched into a rant--about how the NIPA savings rate was wrong, about how the right savings rate was the change in household net worth, about how there was no potential problem with America saving too little, that the economy was strong, and that that day's employment report had been wonderful, and that Paul Krugman had predicted nine out of the last zero recessions, et cetera, et cetera, et cetera.

What is one to do? You watch a guy--Bob Solow--one of the smartest and most thoughtful people I know, having his intellectual impact neutralized by a guy--Kudlow--who really isn't in the intellectual inquiry business anymore. Kudlow clearly has not thought through the biases and gaps in the household net worth number: if he had, there is no way he could say what he is saying.

On paper, in print, on the screen, one can point out that the employment report was anemic--it was not a bloodletting by any means, but it was a bit disappointing. On paper, in print, on the screen, one can say that there is reason to worry about the decline in housing demand and the possibility that it might trigger a recession. On paper, in print, on the screen one can say that reasons (4), (5), and (6) pushing up measured household net worth are reasons to discount that statistic as misleading because they do not reflect any true increase in appropriately-defined wealth, that any increase in household net worth caused by (7) is a transitory phenomenon that tells us little about permanent saving and accumulation patterns, that (1) and (2) affect the level but not the trends of saving, and do not speak to Solow's worry about the savings-investment rate's decline, and thus that only reason (3)--the effects of the now decade-long computer-and-communications real investment boom on our total wealth--provides a reason to even begin to think about whether Bob Solow's worries about declining savings as measured by the NIPA are at all overblown.

But there are ninety minutes for a panel with nine people on it. To the audience it looks like two cocksure economists who disagree for incomprehensible reasons. And my ten minute share will come too late to try to referee Solow-Kudlow in any fair, balanced, and effective way.

It's an un-discourse situation: Kudlow doesn't acknowledge--may not know--the flaws in his chosen statistic. And I can't help wonder what Kudlow would be saying if a Democrat were president.

It's an intellectual Gresham's Law in action...

What can I do? I can blog about it.

And I can try to help as well. A big reason I started doing this was because I was tired of hearing about how tax cuts pay for themselves, hearing the kind of nonsense Brad is talking about and more just like it spouted on TV, in print, on the screen, and on the radio without any rebuttal. People who don't have a clue about the academic research on issues they are discussing or who are selling an ideological agenda are put side-by-side with and given equal time and weight to people like Bob Solow who is "one of the smartest and most thoughtful people" Brad knows, if they are rebutted at all. People watching, listening, or reading are left with the impression that there are schisms and disagreements in the profession that simply don't exist. I'm not sure what the answer is, how to stop people from being misled by sales jobs for agendas disguised as economic analysis, but speaking up is a start. [Update: The numbered items Brad refers to are in a part of the post I cut, but probably shouldn't have. added them in comments.]

Update: Bruce Bartlett, from Brad's comments:

When you saw that the organizers had stupidly put too many people on the panel, you should have refused to participate. You should have also asked who else was invited. When you saw that they had invited some whom you view as having insufficient stature to particpate, you should have refused to participate. If more scholars did this, conference organizers and talk show producers might improve the quality of such events.

    Posted by on Sunday, March 11, 2007 at 07:17 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (16)


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