I did a post over at Econlog, discussing Paul Romer’s recent crusade against academic malfeasance. It turns out that I didn’t do my homework, relying solely on Romer’s numerous blog posts on the subject. Now that I’ve had a chance to read rebuttals by people like David Andolfatto and Stephen Williamson, I’m a bit more skeptical of Romer’s project (and I was already pretty skeptical in the Econlog post.) But it was this remark by Nick Rowe that really set me off:
Paul Romer might like my old post “Macroeconomics when all goods are non-rival“, (even though it’s short run macro and not growth theory like he does). And I was doing (short run) macro with monopolistic competition (pdf) (a couple of months) before it was fashionable. So it’s especially silly (not to mention intolerant of disagreement) for him to make this accusation of me: “After twenty years of playing whac-a-mole with the die-hard price-taking neo-Marshallians, I can tell you exactly where the argument will go next. When the choices are stated as clearly as Dietz does, the neo-Marshallians will claim that there is no such thing as a nonrival good. Nick Rowe has already started laying down a smoke screen of obfuscation on this point.” Nope. He got that one totally wrong, on both counts.
And that sort of response doesn’t create a productive environment for new ideas. People need space to muse over old and new ideas, without the authorities making nasty accusations about their motives.
If you are going to be rude and obnoxious to an economist with lower academic status, you might at least try to avoid being laughably wrong. For those why don’t know, to call Nick Rowe a “die-hard price-taking Marshallian” is about as silly as calling Milton Friedman a die-hard Keynesian. In this case, Paul Romer literally doesn’t know what he’s talking about.
Paul Romer is a brilliant economist, but like a certain other brilliant economist blogger, when he takes a stab at trying to evaluate the motives and quality of his fellow economists, he quickly becomes a very ordinary human being. (Maybe that’s an unfair comparison, I haven’t seen Romer claim that Donald Trump might win the nomination.)
Here’s the latest from Romer, posted yesterday:
Faced with macro fluctuations, there are some policies, such as providing support for cartels, that the government should not try. There are other policies, such as countercyclical purchases of construction services, that it could safely try. After all, it is hard to see the harm that could come from buying more when the price is low. If economists stick to the well established methods of science, it shouldn’t be that hard to tell the difference.
There is no reason to stifle the development of new lines of theoretical or empirical inquiry out of fear that some terrible harm will ensue. If economists stick to science, the insights that are wrong will fade away. Only the ones that are right will having lasting influence. Sticking to science means both paying attention to scholars who are exploring new paths and refusing to pay attention to breakaway groups. No matter what they say, when they stop engaging with outsiders who disagree, they stop doing science.
Hard to see the harm? So are we now to believe that “the well-established methods of science” means making the simple error of reasoning from a price change? No, there is nothing in economic theory that says that more construction should be done when the price is low. That would be true if the price is low because there is more supply of construction services, but not if the low price is caused by less demand for construction services. And at least since 2008, the fall in the cost of construction services is almost certainly do to a decline in demand.
After 2008, there was a virtual collapse in housing construction across the US. If governments had responded to that development by building lots of roads, sewers, schools and other projects in the desert outside Phoenix, I don’t think it would have been a wise use of resources. Military construction? What’s the marginal value of spending another trillion dollars on jet fighters, when our primary enemies are ISIS and Al Qaeda? How about high speed rail? That’s fine in theory, but because of environmental red tape those projects take at least a decade to be “shovel ready”, by which time the recession will be over. In fact, government investment should have declined after 2008, as the small areas where an increase would have been useful (say filling potholes) were nowhere near substantial enough to offset the drop in construction of infrastructure for new housing developments that quite sensibly occurred in the sunbelt. So a claim that seemed patently obvious to Romer is in fact very likely wrong.
PS. This post has nothing to do with Romer’s dispute over the right way to do growth theory. I’m not well informed on the issue, and suspect that if I was I wouldn’t agree with either Romer or his UC school opponents. I don’t think mathematical models are very useful in economics, with a few exceptions. For me, Friedman and Schwartz’s Monetary History is a model (at least in term of method) of what macroeconomic research should be. So both Romer and Lucas are too mathematical for my taste. I was deeply influenced by Lucas, but it was by his verbal arguments.
PPS. I just found out that Romer was at the UC at the same time as I was. We both had Lucas advise our dissertation. He’s one month younger than me. And yet I don’t recall ever meeting him. Possible reasons:
1. Perhaps he was a high status student; I was definitely not a high status student.
2. It was a very big program.
3. I have a poor memory (so perhaps I did meet him, and don’t recall.)