The most powerful AD denier of all

A couple days ago I suggested that Obama might not be particularly well-informed about economics:

It seems increasingly clear that Obama doesn’t have a good understanding of economics.  He approaches issues like a very bright non-economist using his common sense.

It now appears that it’s even worse than I thought.  I found this quotation from Ron Suskind over at DeLong’s blog

Both, in fact, were concerned by something the President had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy.  Summers and Romer were startled.

“What was driving unemployment was clearly deficient aggregate demand,” Romer said.  “We wondered where this could be coming from.  We both tried to convince him otherwise.  He wouldn’t budge.”

I recall reading similar statements by his former colleagues at the University of Chicago.  They’d make arguments to him, and he just wouldn’t seem to get the point.  He’s obviously very bright, but it’s also clear that he falls into that relatively large group of Americans who have their own very strong views on economics, and couldn’t care less what professional economists think.  (An issue recently discussed by Noahpinion, Robin Hanson, and Sean Carrol.) 

Update.  I took another look at Richard Epstein’s comments that I was thinking about when I wrote the passage above.  He claimed Obama was a sort of blank slate.  When discussing issues you couldn’t tell what Obama thought, as he wouldn’t put his ideas out there.  I think the way I wrote the comment above left the impression the Chicago people thought he wasn’t bright, which isn’t necessarily correct.  The first 2:30 here are interesting, see what you think.

So for 200 year rapid productivity growth didn’t cause any serious unemployment problems in America, but now, right after NGDP collapses, we are to believe it is producing mass unemployment, even though recent productivity gains have been rather low.  I’m at a loss for words.  We elected a Luddite as President of the United States.

PS.  Regarding the three links above, I’m not a big fan of physics vs. economics debates.  To me it’s like arguing; “Which is the most important part of a newspaper, ink or paper?”  Without both you have nothing.  Without the physical sciences we are back in the Stone Age.  Without sound economic policy we are North Korea–which means back in the Stone Age.  Physicists can predict well when the problems are ultra-simple, like a rocket to the moon.  Ditto for economics.  Applied physics does horribly when asked to predict the weather, earthquakes, tsunamis, and other complex events.  That’s the sort of applied physics that would be valuable—going to the moon was a waste of money. 

In the end I think physics is a vastly superior field, but for aesthetic reasons not practical reasons.  Both (in their applied versions; engineering and economic policy) are essential to modern life.


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98 Responses to “The most powerful AD denier of all”

  1. Gravatar of John John
    20. September 2011 at 11:26

    That confirms my view that Obama is a pseudo-Marxist. Productivity gains causing unemployment is a Marxist argument. Like all the other Marxist arguments, it fails to see anything besides what happens to specific workers in the “proletariat.”

    If a company profitably outsourced or replaces workers with equipment, te shareholders of the company gain more than the fired employees lose as long as the move was actually profitable. With the added wealth, shareholders can increase their consumption, invest in other lines of business, or reinvest in their own companies (perhaps buying more machines). All three courses of action create jobs.

    Even in the case where the company reinvests it’s profits in more machinery, they have then stimulated a demand for more people capable of building and maintaining the machinery.

    Productivity gains are the sime qua non of economic progress and anyone who fights against them is fighting for stagnation and poverty regardless of whatever good intentions they may express.

  2. Gravatar of OhMy OhMy
    20. September 2011 at 11:27

    Physicists put us on the Moon (even if it was useless) and economists gave us the GFC. So we won’t listen to them.

  3. Gravatar of Benjamin Cole Benjamin Cole
    20. September 2011 at 11:45

    Sad to hear that Obama shares this misconception, though it is a common one.

    I suppose on its most basic level, what Obama says is true: In the wandering tribe or early agriculture days, no one was unemployed. All hands were needed just to survive, and contributions might have been adjudged loosely, and in context. (i.e., One-armed Suzie was not expected to thresh as much wheat as Young Miss, but was allowed to eat as much).

    But in today’s economy, rising productivity is to be sought after.

    And Obama’s perspective offers little solace to those of us in the target NGDP’er camp, which is actually a very right-wing approach.

  4. Gravatar of Bababooey Bababooey
    20. September 2011 at 11:47

    The absence of economists leads to North Korea? Did the Phoenicians know that? Did Daniel Defoe know that? Does the presence of economist lead to good economic policies?

    Anyway, President Obama also knows everything he needs to about monetary policy:

    “It’s clear monetary policy has shot its wad.”

    “What do you mean?” [Christina Romer] asked.

    Obama extended his hand, now ready to greet her. “I guess we need to focus on fiscal policy,” he said.

    “No, you’re wrong,” Romer corrected him. “There’s quite a bit we can still do monetarily, even with the historically low interest rates.”

  5. Gravatar of Morgan Warstler Morgan Warstler
    20. September 2011 at 11:53

    “And Obama’s perspective offers little solace to those of us in the target NGDP’er camp, which is actually a very right-wing approach.”

    Then SELL IT to the right wing, on their terms, and to their exclusive benefit.

    Stop resisting the predictable outcome, and beg the winners to do what you want.

    You need to plead with Perry-san.

  6. Gravatar of David Pinto David Pinto
    20. September 2011 at 11:55

    He’s obviously very bright, but it’s also clear that he falls into that relatively large group of Americans who have their own very strong views on economics, and couldn’t care less what professional economists think.

    I keep hearing this, that Obama is obviously bright. Can someone back this up, because it’s becoming less obvious to me as time goes on.

  7. Gravatar of Chris Chris
    20. September 2011 at 12:01

    It sounds like he might have read The Great Stagnation.

  8. Gravatar of MW MW
    20. September 2011 at 12:04

    Physicists know and acknowledge their limits and don’t make predictions about tsunamis one month to the next. Economists are not so humble. (or at least those economists on TV)

  9. Gravatar of Alex J. Alex J.
    20. September 2011 at 12:07

    It’s not what economists don’t know, it’s what non-economists know that isn’t so.

  10. Gravatar of Benjamin Cole Benjamin Cole
    20. September 2011 at 12:24

    Morgan-

    Remember, a lifetime in politics is six weeks. Perry may get blown out of the water, or his closet homosexual life may become public, or he may just buckle under pressure. End of Perry. Remember, McCain won the nomination last time, and he was widely dismissed at many junctures.

    Romney is okay by me, and if he is elected, I will try to encourage him to adopt NGDP targeting. Actually, I can’t even win an argument with my wife, so I expect to have miniscule impact on national policy making.

  11. Gravatar of David David
    20. September 2011 at 12:32

    Maybe he gets it from here?

    “This observation brings me to my fifth and final possible explanation of the jobless recovery, which is the remarkable increase in labor productivity we have seen in recent years, not only in manufacturing but in the economy as a whole.”

    Ben Bernanke (Nov. 2003)

  12. Gravatar of David David
    20. September 2011 at 12:32

    Sorry, the entire speech is available here:
    http://www.federalreserve.gov/boarddocs/speeches/2003/200311062/default.htm

  13. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 12:41

    Um, can you provide the supporting evidence you are going on here?

    “He’s obviously very bright.”

    He’s obviously bright enough. But so were C students George Bush and Al Gore.

    Most of what Obama says is scripted by others and read from a teleprompter.

    Obama has openly said of himself that he “benefited from” affirmative action, i.e. affirmative action got him into elite institutions — and we know his course load at Harvard law was very left-wing agenda-law heavy in content, e.g. critical race studies law & critical legal studies law & discrimination law & constitutional law with leftist & Democrat partisan professors.

    His grades at Occidental & Columbia are unknown, but reports are they were not outstanding, and there is no record of special honors, etc. Reports of his high school years don’t say anything about particular outstanding academic achievement.

    Obama never published in peer review publications, and his one Columbia undergraduate essay is very weak, and his post college essay on Alinsky is routine. It took Obama years to write his wordy and heavily fictionalized first memoir.

    So, you’ve given us evidence that Obama doesn’t have bright views about economics — in fact he has dim-witted views. And you’ve give us evidence that he isn’t a quick study.

    Where is the evidence on the other side, besides the fact that he has the job that George Bush had, an other guys that haven’t shown themselves to be “very bright” in the sense that very bright academics typically use the term when talking about very bright people.

  14. Gravatar of Becky Hargrove Becky Hargrove
    20. September 2011 at 12:47

    We will continue to get Luddites as presidents if no one is willing to turn technology completely loose on housing. In the present, it takes so much time to build a house (and so much money) that housing is the productivity equivalent of digging a ditch with spoons. Small wonder the economy crashed, only the present day version of healthcare has wrought the same damage.

  15. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 12:49

    John, I don’t think he’s a Marxist, but he’s remarkably uninformed.

    OhMy, Did we have better physicists than the Soviet Union, or better economists?

    Ben, Yes, and check out my newest post.

    Bababooey, I never said the absence of economists, I said the absence of good economic policies. I doubt physicists built those Phoenician ships either, but they did behave according to the laws of physics. It was a sort of applied physics, and applied economics (trade makes you rich) that made the Phoenicians successful. Most American still believe trade makes you poor, so don’t assume that’s obvious.

    David Pinto, He sounds bright when he talks.

    Chris, But The Great Stagnation doesn’t explain 9% unemployment.

    MW, Touche. (I assume you are with me on the EMH.)

    Alex, Good point.

    David, That’s very different. As I recall Bernanke was trying to explain why jobs were doing much worse than RGDP in 2002-03. Rapid productivity increases explained the difference. But that’s not happening today. Unemployment is lower than a year ago, despite very weak economic growth. I’d be shocked if Bernanke took Obama’s side in that debate–I’m quite sure he’s with Romer and Summers.

  16. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 12:50

    Which is why it is so tragic that you guys have discredited yourself with several generation now of utter pseudo-science.

    You can’t keep dancing from one discredited pseudo-scientific fashion to another decade after decade and keep the respect of anyone.

    The examples are far too numerous to need documenting, but if you want examples, read some Kling on the various fashions of macroeconomics and macroeconometrics.

    Hayek provides a deeper critique — with fewer examples — in his widely circulated & referenced Nobel Prize address, which you can find on the web.

    Scott writes,

    “he falls into that relatively large group of Americans who have their own very strong views on economics, and couldn’t care less what professional economists think.”

  17. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 12:53

    Greg, OK, bright, not very bright. But smart enough where he ought to be able to spot an AD shortfall.

    Becky, Yes better housing regulations would help, but right now there are much more serious policy errors.

  18. Gravatar of W. Peden W. Peden
    20. September 2011 at 12:54

    Becky Hargrove,

    I think that education deserves to be in there in the lists of “low development industries”. It has so many characteristics of a luxury market and yet it’s supposed to be a universal service.

    As for Obama being a luddite, it doesn’t surprise me. Would it be fair to say that the best presidents (economically) are those that know that they know very little about economics?

  19. Gravatar of W. Peden W. Peden
    20. September 2011 at 12:55

    (Also, FWYI, I’ve been having problems posting on this blog using Firefox recently. In fact, I’m having to go back to the Stone Age myself and use Internet Explorer. Has anyone else been having the same problem?)

  20. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 12:59

    Greg, As far as the contribution of economics, it’s always relative (glass half full/half empty). We aren’t where we should be, but we aren’t at North Korean/Burmese/Cuban levels either. On balance economics is a plus.

    It’s true the public doesn’t respect us. But many members of the public also think autarchy (North Korea, Burma, etc) is better than trade. So I’m not too worried about “public opinion.” Economics is a very counter-intuitive field dealing with everyday life. Contempt is inevitable.

  21. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 13:00

    Sorry W.Peden, It seems slow to me today.

  22. Gravatar of dwb dwb
    20. September 2011 at 13:05

    lots of presidents were not very well informed about economics. But at least they had the good sense to listen to the experts they surrounded themselves with. Why do people hire experts and not listen to them? That is worse than being uninformed about economics, its just bad (non-existent) leadership.

  23. Gravatar of Pragmaticon Pragmaticon
    20. September 2011 at 13:22

    Do you remember any of the statements by his Chicago colleagues? Or is it one of those “I know this was said but I don’t remember where it was said” kinda things?

    That happens to me all the damn time

  24. Gravatar of W. Peden W. Peden
    20. September 2011 at 13:23

    dwb,

    “Why do people hire experts and not listen to them?”

    I have friends in consultancy who ask that question all the time.

  25. Gravatar of Steve Steve
    20. September 2011 at 13:39

    Why is everyone so quick to affirm that Obama is very smart? There is no objective proof of that. If someone claims he’s smart, believing Marxist economic theory is not a great way to bolster his case.

  26. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 13:43

    dwb, Agreed.

    Pragmaticon, Good question. It turns out I remembered what I thought the guy was hinting at, not what he actually said. I added an update with link, see what you think.

  27. Gravatar of Policy Wank Policy Wank
    20. September 2011 at 14:04

    You’re always talking up Romer, but she seems obsessed with fiscal stimulus. It’ll be interesting to see if there’s any evidence in the book that she was pushing monetary stimulus and was ignored.

  28. Gravatar of Hyena Hyena
    20. September 2011 at 14:05

    Isn’t increasing productivity growth that leads to massive structural unemployment the core of Arnold Kling’s thesis?

  29. Gravatar of Wonks Anonymous Wonks Anonymous
    20. September 2011 at 14:13

    Karl Smith on econ analogies to physics:
    http://modeledbehavior.com/2011/09/20/pre-copernican-models-and-economic-forecasts/
    In the comments Yglesias says pre-DSGE econ is like Ptolemaic astronomy and that’s a good thing. I’ve read less Kuhn than Yglesias, but I didn’t think Copernicus was that deficient.

  30. Gravatar of Policy Wank Policy Wank
    20. September 2011 at 14:19

    Oops…guess I just needed to read the next post.

  31. Gravatar of John Thacker John Thacker
    20. September 2011 at 14:23

    The President’s position is a common layman’s misconception of economics. The economic truth is one of those counterintuitive concepts (like comparative advantage) that economics professors are supposed to teach people.

    The President is refusing to listen to the position his experts, which is the same position as that of the consensus of all the experts.

    Considering the President’s power over monetary policy and the ability to push another policy and have it adopted, this refusal to listen to the consensus is worse than most rejections of consensus that other politicians do.

  32. Gravatar of Lars Christensen Lars Christensen
    20. September 2011 at 14:23

    Scott, why are you surprised? Did you ever speak or hear a politician who was able to grasp the simplest economic concepts? …other than of course public choice theory…

    Frankly speaking I don’t think that Obama is worse than any other post-WWII president – the fact is just that it is a much more critical time to be ignorant about economics. FDR made a fantastically insightful decision to give up the gold standard in 1933, but the same year did terrible things that completely undermined the recovery with NIRA.

    Same with Reagan – he bashed socialism like no other US president but yet he increased public debt and increase public spending. Not to speak of G. W. Bush who did nothing good at all for the US economy.

    Obama is just a politician and they are rarely good for the economy.

  33. Gravatar of W. Peden W. Peden
    20. September 2011 at 14:24

    Wonks Anonymous,

    The key methodological objection to Copernicus, if I remember my first year philosophy of science course correctly, was his conservativism: his “revolution” was an attempt to get back to uniform circular motion. This has been one of the criticisms put forward against the entire Kuhnian thesis: it’s very hard to say who is a revolutionary at times (and can a revolution that lasted 200 years be described as a sudden gestalt shift in perception?). Talking about paradigms in a loose way is fine, but Kuhn really needs paradigms to be precise and ontologically non-vague, otherwise his whole “incommensurable revolutions” view looks kinda shaky.

  34. Gravatar of W. Peden W. Peden
    20. September 2011 at 14:27

    Lars Christensen,

    <>

    From “Yes, Prime Minister”.

  35. Gravatar of W. Peden W. Peden
    20. September 2011 at 14:28

    (That post would have been better with the actual quote-

    “Jim Hacker (having been appointed Prime Minister of the UK a few days earlier and having admitted to doing nothing thus far): You will agree that so far my premiership has been a great success.

    Sir Humphrey: Oh, indeed.

    Jim Hacker: Yes, and I have been asking myself: “What can I do to continue this run of success?”

    Sir Humphrey: Have you considered masterly inactivity?

    Jim Hacker: No, Humphrey. A Prime Minister must be firm.

    Sir Humphrey: Indeed. How about *firm* masterly inactivity?”

  36. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 14:37

    The science / theory relevant here is due to Hayek & Mises, and requires none of the fake science which pre occupies so much of what is produced by the most fashionable Ph.D. candidates and tenured professors working at the top 5 economics graduate programs today. Indeed, these fashionable folks reject or fail to competently comprehend the science of Hayek and Mises relevant here:

    Scott wrote,

    “Without sound economic policy we are North Korea–which means back in the Stone Age.”

  37. Gravatar of Brito Brito
    20. September 2011 at 14:53

    Greg, you’re never going to convert people to Austrian economics by vague, short, incredibly contentious blog comments about a very complicated issue, just let it go and stop reading this blog.

  38. Gravatar of Bababooey Bababooey
    20. September 2011 at 14:58

    Scott-

    Well, if you define “sound economic policy” as “not North Korea”, you haven’t really advanced the concept. The Harvard Economics Department stopped teaching North Korean economic policies decades ago. Everyone knows maximizing aggregate social good by transmogrifying everybody (equally!) into little utility maximizing-bots is a total loser as far as organizing society.

    Your example, the survey, suggests that we achieve “sound economic policies” without benefit of the word “economics”, let alone peer reviewed papers from its systematic study. A majority of people, you said, believe free trade makes you poor, but we don’t prohibit or materially repress free trade. Why?

    Because “not North Korea” or “free trade” derive from endless, non-economic beliefs: Most Americans broadly believe in leaving others alone, in freedom, in treating our friends fairly, in the benefits of reciprocity and fair-dealing, etc etc. Protectionism violates those intuitions. Vast regular trade networks conveyed non-luxury goods across the Mediterranean, the middle east, the European peninsula all before written history and down to this day, all without benefit of policies called “economics”. Its just normal.

    An engineer can make a plane fly even if a physicists can’t figure out how it exchanges graviton particles, and we can can create prosperity without Marriner Eccles, Krugman, and Keynes figuring out how.

    Just saying.

  39. Gravatar of Lars Christensen Lars Christensen
    20. September 2011 at 15:36

    W Peden…I used to work for government – it is much worse than Yes Prime Minister…

  40. Gravatar of John John
    20. September 2011 at 16:14

    North Korea has economists, the problem is that they are Marxist economists. The west became prosperous because they followed the laissez-faire advice of economists such as Adam Smith and David Ricardo. Today the west is in decline from following the doctrines of Keynes and the other socialist moderates. It’s not so much whether a country has economists or not that matters, what matters is whether economists are able to persuade the government to pursue free-market policies.

  41. Gravatar of John John
    20. September 2011 at 16:16

    I’d also like to point out that Obama’s views are only marginally worse than mainstream Keynesianism.

  42. Gravatar of Brito Brito
    20. September 2011 at 16:24

    Bababooey you seem to be completely ignorant of the major role people like Adam Smith played in transforming what was at the time an incredibly mercentalist and protectionist great Britain (and other countries) into a more free trade orientated one, as well as the work of academics at WTO clarifying the case for reciprocal trade agreements and provide research and evidence to make the case for leaders of various countries.

  43. Gravatar of Scott Sumner Scott Sumner
    20. September 2011 at 17:56

    Policy Wank, I have a new post.

    Hyena, I thought he pushed frictional unemployment–the time it took workers to re-allocate to new industries.

    Wonks Anonymous–the story is that the Copernican system was initially less accurate. But I never know whether that sort of thing is true, or just a good story.

    John, I agree.

    Lars, I agree, but it’s just that I would have assumed he might defer to experts on something like stimulus. And Reagan was far better on the economy than Obama, so I wouldn’t make that comparison.

    Bababooey, you said;

    “An engineer can make a plane fly even if a physicists can’t figure out how it exchanges graviton particles, and we can can create prosperity without Marriner Eccles, Krugman, and Keynes figuring out how.”

    I agree, and that was my point. It’s not so much physics and economics that drive progress, but rather applied physics and applied economics. The underlying theory helps in a few cases, but it’s mostly trial and error. Whether one wants to call applied physics and applied economics “physics” and “economics” is a rather unimportant question.

    I would point out that most people want to be rich, most governments want their countries to be rich and powerful, and yet most countries are poor–due to bad economic policies. So getting economy policy right must be harder than it looks.

    John, I agree, I said good economic policies are the key, not “having economists.” BTW, North Korea also has physicists.

    Brito, In Bababooey’s defense, part of the move toward freer trade was countries noticing that the East Asian tigers were doing better than the Latin American countries relying on import substitution. I think these things are very complicated, and drawing the line between the role of pure economists and applied public policy officials is very difficult.

    I’d add that the same is true of technology. It’s hard to say how much of products like airplanes is due to physicists, and how much is due to engineers tinkering with technology. I see the cases as quite similar, although perhaps I’m the only one who sees it that way.

  44. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 18:14

    The best evidence for Obama being “bright” are his study questions for his discrimination law / constitutional law class.

    “Bright” is a different category from “very bright” in my book.

    Robert Nozick & Barack Obama, e.g., live in different universes when it comes to “very bright”, at least in my mind.

  45. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 18:57

    Hey Brito, I reporting a fact, I’m not attempting to convert anything to anyone. If you don’t get the references re North Korea & the scientific limits to central planning, you can read the book: Don Lavoie, _Rivarly and Central Planning_; and follow that one with Don Lavoie, _National Economic Planning: What Is Left?_.

    On how the top econ “scientists” don’t get Hayek & his scientific case against collectivist economic planning, you can also try Esteban Thomsen’s _Prices and Knowledge_ or read the short essay version of his book here: http://www.cato.org/pubs/journal/cj14n2/cj14n2-12.pdf

    The fact that economic “science” has skipped through a series of now in-fashions / now out-of-fashion “scientific” constructions & empirical practices is a trivially true cliche.

    No references should be required, these facts should be familiar to any economist. But for reasons internal to economics and related to the fashion-driven, un-scientific nature of the profession, many of these facts and much of this literature is unknown to graduate students and younger professors. Perhaps you are a graduate student.

    Brito writes,

    “Greg, you’re never going to convert people to Austrian economics by vague, short, incredibly contentious blog comments about a very complicated issue, just let it go and stop reading this blog.”

  46. Gravatar of OhMy OhMy
    20. September 2011 at 19:12

    SS

    OhMy, Did we have better physicists than the Soviet Union, or better economists?

    Soviet Union had better physicists, the US had nazi rocket scientists, the Soviet Union definitely had lousier economists, although the bar is already incredibly low.

  47. Gravatar of MikeDC MikeDC
    20. September 2011 at 20:28

    Greg Ransom,
    If stupid is as stupid does, then so is bright.

  48. Gravatar of Jim Glass Jim Glass
    20. September 2011 at 20:44

    Physicists put us on the Moon (even if it was useless)…

    Engineers put us on the Moon. (It was entirely an engineering problem, no new physical science necessary. JFK made sure of that before setting that goal.)

    The economy provided the engineers and financed the cost, as no other economy could come close to doing.

    As to the extent that the economy derived from economists, as opposed to from history and many other factors … debate that among yourselves.

    Coase used to say that economists are 99.9% ignored on policy, but if only 0.1% of the government and general economy are made significantly more productive by their advice, their salaries are the greatest bargain in existence.

  49. Gravatar of Greg Ransom Greg Ransom
    20. September 2011 at 21:47

    The Stalinist Poles had the very, very solid mathematical / neoclassical economist Oskar Lange …. note that getting Hayek & Mises wrong on the relation between the formal logic of marginal valuation and empirical reality was all it took for Lange to fall into pseudo-scientific fantasies about economic planning, helping produce the economic mess which was communist Poland.

    The Soviets had a number of very good mathematical economists making use of mainstream American mathematical economics to “plan” and coordinate the Soviet economy — some of them still believe in what they were doing, one of them blogs at the Huffington Post. See his discussions of dynamic programming and the Soviet
    economy, for example.

    So citing mainstream neoclassical economics as the “cure” for communist economic failure is a bit much, when core mainstream mathematical economics was part of the inspiration for and technological machinery of centrally planned economies in the 2nd half of the 20 century.

    And note well — the alpha male of the late 20th century neoclassical economists predicted the economic parity of the Soviet Union and the United States, while belittling the economics of those who where explaining the scientific limitations of central planning. Only well after retirement did Samuelson acknowledge that Hayek had a point against his own teacher Schumpeter on central planning (even while still attempting to trash the man with disreputable personal attacks).

    Referencing centrally planned economies counts much more against the scientific pretentious of the dominant explanatory strategy in economics than it does in favor of those pretensions, e.g. if you comprehend that Lange & Samuelson among many other standout mathematical mainstreamers failed to scientifically comprehend the scientific case against central planning, while the principle rivals to the dominant explanatory paradigm did “get it”.

  50. Gravatar of Lorenzo from Oz Lorenzo from Oz
    21. September 2011 at 00:27

    The Copernican system had more epicycles than the Ptolemaic, since it still accepted the notion that celestial movement had to be circular, as a “perfect” form of motion. The lingering effect of scholasticism. (Scholasticism was Aristotle, monotheistically refigured by Ibn Rushd/Averroes and the reformulated by Aquinas–who referred to the first as “the Philosopher” and the second as “the Commentator”.)

    Ellipses were a major breakthrough, but required careful observation and basing one’s conclusions on empirical evidence, not a priori notions of perfection and form.

    In modern economics, the equivalent is Coase going out and asking folk in business how they decided whether to produce in house or buy on the open market and discovering transaction costs. (It is a revealing exercise, counting how many of Nobel Laureates in economics had their key work based on the concept of transaction costs.)

  51. Gravatar of John John
    21. September 2011 at 00:50

    Greg Ransom,

    Great posts. Mainstream economics which emphasizes static states, mathematical equations, and maximizing social utility make it seem that central planning can produce better outcomes than a free market. In the case of Marxist economies, the labor theory of value misled people into believing that they could compare costs based on labor without relying on market prices. Even in Microecon 101, the teachers produce graphs showing how the government can improve outcomes in cases of “imperfect competition.”

    The reality is that these models, especially perfect competition, are an absolute fantasy. Economics, like life, is a process of change and static models are only tools of reasoning that have to be used carefully. In addition, there are no constant relationships in economics that make equations useful. Studying static, equilibrium states misleads economists into using mathematical models and believing that interventions can create better equilibrium conditions.

  52. Gravatar of Elise Elise
    21. September 2011 at 06:01

    Look, he cannot be ‘obviously very bright’ and yet be so obdurately unable to ‘get it.’ I believe he wants to be a success, but he is unable to grasp the lessons to bring success about. Period. It is just outside his zone.

    Please. We have the situation we have. Do not blow the sunshine. Hasn’t there been enough obfuscation? Where has that gotten us?

  53. Gravatar of Tearlach61 Tearlach61
    21. September 2011 at 06:16

    In Obama’s defense, (I can’t believe I am defending him), he has economists advising him to believe these things.

    Paul Krugman seems to have no notion of the impact of productivity on an economy. He has repeatedly stated that disasters are good for the economy because it puts people to work which isn’t really that far off from what Obama believes. It ignores the fact that rebuilding smashed cities nevertheless means a whole lot of wealth has been destroyed.

    This puts us in the realm of digging holes and then filling the holes, paying people to pretend to work (or to pretend to make solar panels).

  54. Gravatar of Duncan Duncan
    21. September 2011 at 06:45

    You write “He’s obviously very bright,…” How is this obvious? I would suggest that the evidence clearly points in the other direction.

  55. Gravatar of Nick A Nick A
    21. September 2011 at 07:02

    Rising productivity does not cause unemployment, but artificially low interest rates will allow gains to accrue to a small group, rather than to savers generally. Furthermore, the interest rate brake from higher natural interest rates would have made labor appear less expensive than the technology (read: capital) projects that have led to those efficiency gains. Bad monetary policy has robbed the general public of their share in recent economic growth.

  56. Gravatar of David Gillies David Gillies
    21. September 2011 at 08:38

    He’s not obviously very bright. He’s a shallow, doctrinaire narcissist. We hear so much about Keynes; well how about the cleverest think Keynes said: “when the facts change, I change my mind. What do you do, Sir?”

  57. Gravatar of johnleemk johnleemk
    21. September 2011 at 09:21

    I would think that by Occam’s razor, Obama is probably quite smart. Not necessarily knowledgeable, especially outside his field(s) of expertise, but certainly intelligent. You can’t win the presidency by being an idiot or naive, as much as people might want to think that about Bush or Perry. You can be overly dependent on your advisers, as Bush and perhaps Obama are, but still be very smart.

    It’s so perplexing to me that people keep questioning Obama’s intelligence when he went to Columbia and Harvard Law, where he held the most prestigious position a Harvard law student can hold. Sure, affirmative action may have greased the wheels, but similar forms of affirmative action (though often in the guise of alumni or athletic preferences) grease the wheels every day for thousands of white Ivy college kids who spend the better part of the day drinking, getting high, and having sex. It may make them immature, but that doesn’t make them stupid.

    It’s extremely difficult to get into a good university — let alone two good universities — without having some modicum of brains. I can buy Obama being inexperienced, ill-advised, unwise, ignorant, etc. But the evidence suggests his IQ is certainly far from subpar. He wrote some crappy papers? Never got published in an academic journal? You mean exactly like most of the kids who go to an Ivy for undergrad and then an Ivy for professional school?

    (By the way all the arguments I am making apply more or less to GWB too.)

    That digression aside, I see plenty of smart people who make stupid decisions or hold on to stupid beliefs against the evidence all the time. (In fact, in some ways this might be a classic hallmark of an Ivy League education. They didn’t call Harvard the Kremlin on the Charles for no reason.) Obama doesn’t have to be stupid to make bad economic policy. He just has to have the wrong set of personality traits.

    This is why Rick Perry worries me. He’s smart. But his personality resembles Bush’s too much for me to believe he can do even an average job as president.

  58. Gravatar of John Thacker John Thacker
    21. September 2011 at 09:53

    In Obama’s defense, (I can’t believe I am defending him), he has economists advising him to believe these things.

    No, you’ve missed the point here. He is steadfastly refusing to listen to or believe his economist advisers on these issues. That’s the problem.

    You can be overly dependent on your advisers, as Bush and perhaps Obama are, but still be very smart.

    Again, no. The complaint here is that President Obama is *not* dependent on his advisers enough.

    Smart people who don’t understand economics often come to precisely the conclusion that President Obama did. I’m not faulting him for that. I’m faulting him for refusing to listen to his advisers. Smart or not, not having the wisdom to know when you might be wrong is a problem.

  59. Gravatar of Hyena Hyena
    21. September 2011 at 10:08

    Prof. Sumner,

    That’s what he says, but his favored examples are things like the post-World War I mechanization of farming and the post-1990 automation of office tasks. In both cases he’s essentially arguing that productivity changes are what drive a need for “recalculation”.

    I think that’s perfectly viable as a theory. You only avoid unemployment when AD is high enough that there is someone waiting to employ a displaced worker. He argues, instead, that it’s basically hopeless and the displaced staffs are forever obsolete, resigned to the junkyards of our economy (as they deserve, since he’s a pretty doctrinaire libertarian).

  60. Gravatar of MikeDC MikeDC
    21. September 2011 at 10:16

    Johnleemk,
    I think intelligence in the IQ sense that you’re defining it here is incredibly overrated, especially by the folks who tend to tout it as some kind of selling point. Every time I hear someone talk about Barack’s big, fast, bright, brawny computerized Vulcan brain, I want to throw a copy of The Fatal Conceit at them.

    Maybe doubly so for people who understand how foolish it is but still feel obligated to pass on the president’s intelligence.

    Beyond that, I have little idea of what Rick Perry’s personality is like, nor do I see that George Bush’s made him uniquely unqualified to be a good president. I think that’s delving beyond supportable notions and into the realm of our own prejudices.

    I don’t know what matters as far as personality, just that IQ does not matter :)

  61. Gravatar of johnleemk johnleemk
    21. September 2011 at 10:46

    John Thacker,

    Indeed.

    MikeDC,

    No doubt intelligence is overrated. As I said, one can be intelligent while still being thoroughly ignorant and unwise. You need a diverse basket of traits to truly succeed; intelligence can only take you so far.

    I would say we generally have little idea what most public figures’ personalities are like, since we don’t personally know them. (Mitt Romney is apparently supposed to be wickedly witty and funny in the right circles.) But I’m going off:

    1. How they present themselves as candidates and act in office
    2. What others have said about them

    I don’t think Perry’s personality is terribly hard to read. He’s GWB cranked up even more. Bush’s personality I think was to shoot from the hip — we need to act on the WMD issue now, Mission Accomplished, etc. Perry struts around showcasing an even more aggressive personality than that.

    I realise of course that these are based on personal prejudices; we each have different ideas of what an ideal personality is for a leader. And I have seen some information suggesting that Bush was a lot more thoughtful than people gave him credit for. But I double majored in economics and history; sometimes you just need to chalk up quirks of history to personality, not just impersonal social/political/economic forces. Who Bush is, who Obama is, etc. do matter. Obama’s personality I think has not served him well when it comes to economic policy. It possibly serves him well in foreign policy.

  62. Gravatar of Morgan Warstler Morgan Warstler
    21. September 2011 at 10:59

    There’s an old funny story about George Bush at Havard MBA – while earning gentleman’s C’s, he was crushing the Harvard poker circuit… he was good at the actual the thing that impressed people.

    I saw Rick Perry perform up close and personal. He’s PHENOMENALLY good at the retail level. Like better than Clinton.

    I say this having been around debate and venture capital money raising for most of my life, I came out of the meeting just in awe of his skill set.

    I’ve waited 15 years to see a political run on states’ rights. So I’m double barrel excited.

    Its early, and I’ve written at BG that I think as President Romney would be a conservative fiscally as Perry – I think as President- both will warrant monetary easing.

    But man o man, the first two years of a Perry Presidency with a landslide Congress could go along way towards proving to a vast majority there is nothing in left in liberalism worth saving.

  63. Gravatar of Teresa Teresa
    21. September 2011 at 11:15

    People keep saying he’s “bright”. Most intellects have stuffed their brains with lots of information. As to whether or not that is practical always remains to be seen. His brightness is not doing much good for the majority of Americans. It got him elected, but hopefully we are a bit smarter now than in 2008 and will reward him for his lack of real life experience by making him a one-term president.

  64. Gravatar of Teresa Teresa
    21. September 2011 at 11:22

    Too bad Obama didn’t have enough “on the job training” to handle a job like the President of the United States. I’d say this is the epitome of the failure of affirmative action. We elected someone who had no experience with the hope that he could do some good in the world and prove to every one that every person can become unique and special. That is the American way. But just like those folks who believe in the welfare state as a way to make people equal, the freedom and drive that is born from experience, building ingenuity and the freedom to create is what makes a genius. Not just going to an Ivy League school that basically said, “hey, here’s a bright guy. Let’s grease the wheel and give him every opportunity. Then we’ll be the good guys.”

  65. Gravatar of johnleemk johnleemk
    21. September 2011 at 12:23

    Teresa,

    I don’t see why we are singling out Obama. I think it’s crazy to argue that anyone can have close to the requisite amount of experience to be POTUS. Do governors make foreign policy? You only come even close if you’re governor of a big state, preferably close to the border, like California or Texas. Bill Clinton was just about as green as Obama in my estimation. Do governors make economic policy? Someone on the relevant House or Senate committee probably has more experience with serious monetary and fiscal policy issues than the Governor of Arkansas or Florida — last I checked, states don’t issue their own currencies and most can’t even legally run deficits. And nobody except top military officials has the experience to be commander-in-chief of the military.

    Overall I think Obama has been an ok president on the foreign and military policy front, but a terrible one on the economic front. He hasn’t ****ed anything up on those fronts, compared to the economy. That’s something in his favour, though it’s likely not enough to save his butt.

    When evaluating candidates, I think it’s more important to look at their personality and intelligence. The presidency, for better or for worse, is something almost anyone would have to learn on the job for.

    I attended an Ivy League school. I’d say the Ivies and to a large degree society takes the “hey, here’s a bright guy. Let’s grease the wheel and give him every opportunity” approach to everyone there: white, brown, black, yellow. It’s better to be bright than to be stupid, but still even better to be wise than foolish. I believe Obama is bright. I also think he’s tremendously foolish.

  66. Gravatar of Steve Lyons Steve Lyons
    21. September 2011 at 12:27

    The most entertaining item said here is Obama thinks productivity gains have led to high unemployment. Well then start paying farmers to stop using combines and force welfare recipients to pick cotton.

    Any means to force the welfare / handout absorbing class to return some value for our continued sustenance would be a move in the proper direction.

  67. Gravatar of Economics Economics
    21. September 2011 at 12:28

    “deficient aggregate demand” is another way to say people aren’t spending money.

    People aren’t spending money in part because many are out of work and the others are scared.

    People are out of work because many of the companies that employed them didn’t NEED them because of increases in productivity or because the services they provided were not necessary for basic survival. Companies like the cable company make a product that is essentially optional in a way that a bed, house, car, clothes are not optional. Unskilled labor is less and less involved in the necessary manufacturing in the US due to automation and off-shoring leaving an entire underclass depending on jobs like cable installer for the optional cable TV product.

    When 1% of the world can make all the things that are necessary for the entire world we will have an economy that could collapse to 99% unemployment in theory. Once at 99% unemployment economists would declare “deficient aggregate demand” to be the cause. They will be both right and wrong when they do so.

  68. Gravatar of Peps Peps
    21. September 2011 at 12:47

    Everyone keeps saying they believe Obama is bright. Why? He hasn’t released any grades from his years in education; one would assume that, were they stellar, they would have been released with great fanfare. He benefited from affirmative action to gain his college and law school admissions. He was on the law review but never published a singe article (unheard of in any law school). He reads his speeches from a teleprompter, and (unlike the much maligned Palin) resorts to incoherent mumbling when the text goes off. His policies are sophomoric versions of discredited European socialist models. His picks for advisers are mediocre at best.

    What in the world convinces people to start off with the premise that he’s bright?

  69. Gravatar of Steve Lyons Steve Lyons
    21. September 2011 at 12:48

    I’d take a Bush re-run over Obama any day. But more to the point saying, if Bush was a shoot from the hip, then Perry is hit what you aim at.

  70. Gravatar of Peps Peps
    21. September 2011 at 12:51

    *single

  71. Gravatar of Titus Oates Titus Oates
    21. September 2011 at 13:17

    I submit that Mr. O’s economic is medieval. He believes there is a finite source of wealth (once upon a time that was land). The rich get that way by cheating others out of their “fair share” of the source. A prime example would be William the Conqueror parceling out England to his supporters.

    He also subscribes to the fallacy that infinite wealth already exists. In his view, the reason we are not all fat and happy is that the evil rich are hording “more than their fair share.”

    It is depressing to think that such an ignoramus was elected to the most significant job on the planet.

  72. Gravatar of Krazy P Krazy P
    21. September 2011 at 13:46

    Obama was neither a National Merit nor even a Commended scholar, so he was not in the top 5-10% of his cohort. He doesn’t understand economics either in theory or practice. Embarrassing, really. He keeps saying that productivity improvements result in job loss. This is what he really thinks.

  73. Gravatar of truzak truzak
    21. September 2011 at 13:48

    “He’s obviously very bright”.

    There is your first mistake – and the only one that matters. Your supposition is based upon what? What evidence exists that Obama is “very bright”? And what is the criteria against which such brightness is accredited?

    Has anyone seen the college transcripts from any of the universities Obama attended? It is my understanding he has spent considerable money to block requests for release of his records. I wonder why?

    Does getting into Harvard prove he is bright? Or is it proof of having the right color skin to qualify for special consideration?

    Is being president of the Harvard Law Review evidence of a superior intellect? Or is it like being elected president – a novelty to vote for the black guy?

    Has any of his writings from the Harvard Law Review or at the University of Chicago given any hint of brilliance? Do any writings of any kind even exist?

    Has any of his policies proven so effective as to demonstrate his keen insight and understanding into complex subjects like economics and foreign affairs?

    Has he shown an ability to recalibrate in the face of reality to adjust his polices, such as a Bill Clinton? Or does he repeat the same mistakes over and over again?

    Can somebody provide some example somewhere of Barack Obama’s “brightness”? And reading a teleprompter and giving a speech does not count. As they say, talk is cheap.

    I would suggest Obama appears like a blank slate without proposing ideas because he has none. Face the facts: Obama is not bright enough to understand the concepts discussed in his staff meetings, and is therefore incapable of proffering even semi-intelligent sounding ideas that would not expose him as being a vacuous talking head.

    But then that’s not a bad thing. As the Book of Proverbs says, “Even a fool is thought wise if he keeps silent, and discerning if he holds his tongue.” Maybe Obama ain’t so dumb after all.

  74. Gravatar of Red Red
    21. September 2011 at 13:48

    The common assertion that Obama is smart does not seem correct. That he is glib and delivers a good speech does not translate to being smart. His knowledge of the world and how it works is lacking. On many levels he compares unfavorably to a box of rocks.

  75. Gravatar of Dave H Dave H
    21. September 2011 at 15:03

    There IS a connection between productivity and employment, but not the one Obama thinks is there. It is, in fact, just the opposite. Rising unemployment tends to create productivity gains. These are “forced” productivity gains that occur when companies fire their least productive workers and redistribute their work to their remaining, more productive workers. However, you can’t get those jobs back by reversing those productivity gains. Lower productivity would lower profits and therefore suppress, not increase, hiring. Those “forced” productivity gains are now baked into the mix, and only increased demand will lead to additional hiring.

    I don’t think this is rocket science. I also don’t think the President is bright enough to figure it out. I don’t think he’s stupid, but I see no evidence whatsoever that he is significantly above average in intelligence. As for the presidents in my (boomer) lifetime, I’d put him with Carter and Ford (or mayble a little lower, given his utter lack of achievement), slightly below both Bushes, definitely below Kennedy and Johnson (and Reagan, who had a different kind of intelligence altogether) and significantly below the two smartest, Clinton and Nixon. (Interesting that the ones with the most raw intelligence had the least moral character.)

    I’ve been on Law Review at a top tier law school (many years ago). “President” of the law review is primarily given to the most ambitious and obsequious student, who generally wants the position only for his resume, not because he likes editing (or even reading) the idle ramblings of “legal scholars”. The smart students who do the real work are given lower positions such as Articles Editor. At any rate, an institution as long-standing as the Harvard Law Review runs itself and is all but immune to any significant influence by any particular officer. Obama didn’t “run” HLR, he merely sat there (and apparently didn’t even do that, showing up only a faculty receptions and the like) while it ran itself.

  76. Gravatar of maxwello maxwello
    21. September 2011 at 15:20

    The repeated assertions here that productivity gains do not lead to unemployment seem a bit simplistic. While, in a normally functioning economy, productivity gains will not lead to long-term structural unemployment, in the short run, they do obviate the immediate need to rehire until such time as an economic recovery appears to be sustainable. Since we have not reached that point, there is some validity to the contention that more people are currently out of work than would be if those who remain employed were not able to pick up the slack for their fallen colleagues. A business owner is not going to hire people in response to their need for employment, as I’m sure all here know. With the concentration of wealth over the last three decades, it has become impossible for the working class to provide the jolt to consumption that is needed to perform their normal balancing function. A shock to the system is what’s needed at this time, and insisting that nothing change from the equilibrium state of the last few years will doom us in the long run.

    The complexity of the problem is greater than your Obama soundbite could possibly address, but he is not necessarily wrong or misguided just because his detractors decide to focus on a single proposition from a potentially extended logical argument. From past experience, he knows that when he addresses the complexity of an issue, he is lambasted by the less well-educated for not speaking plainly. When he breaks down an argument to make a particular point, he is accused by the more erudite of not understanding complexity. I bemoan the fact that these rhetorical inconsistencies go unrecognized by so many people in the U.S.

  77. Gravatar of al al
    21. September 2011 at 15:28

    The base problem is that Obama can’t go 48 hours without loudly bashing businesses and their executives, for totally political purposes. Overlay that with constantly expanding regulations…and you remove the incentive to grow and take on more risk.

    At his core, Obama believes that the government is better at managing everything for us, rather than letting the free market operate…warts and all.

    Irreconcilable fundamental political differences…not economics…is the issue.

  78. Gravatar of beekums beekums
    21. September 2011 at 15:43

    Obama is stupid.

    He always has been stupid.

    He has always lied about it.

    Next topic.

  79. Gravatar of JBH JBH
    21. September 2011 at 15:55

    Just by watching him speak you can see he is bright. Also, you have to go back to the 19th century to find someone able to reach the highest office of the land to find someone who is not bright. He is not a Nixon or a Clinton, but he is bright.

    After long study I’ve concluded he didn’t release his academic records because they reveal too much Marxism, and the American people would never have elected him had they known the extent.

    Being a Marxist, he is doing what he wants to do — redistribute. Or try to. That doesn’t work, and it especially doesn’t work at a critical juncture like this, down phase of the long credit cycle where the economy must fight the headwinds of deleveraging by households and banks.

    Of course then he has advisers from the conventional neoclassical Keynesian school which proved unable to foresee the largest economic collapse since the Great Depression ahead of time. In other words, a badly lacking school of economics that is and will be displaced by the next paradigm.

    In addition the arrogance of liberals in pushing Obamacare against the wishes of the majority, with the singular most important negative impact being small and mid-size businesses hunkering down and not hiring until the dust clears (election 2012 and thereafter?).

    No matter bright, this is the most economically incompetent president since FDR (who had a 19% employment peak still after two full terms in office. The shorthand encapsulation of Obama’s economics — anti-business. Ask any and all small and mid-sized businesses and community bankers any place in the country. Absolutely this is what they all say.

    And I haven’t even mentioned the utter incompetence of mainstream economics to see that the unemployment rate is massively tied to and caused by offshoring, which has been accelerating for three decades now because of NAFTA, Berlin Wall, mercantilism by China and rest of Asia, etc. Obama has not a clue because his advisers have not a clue because Nobelists have not a clue (Spence being an exception).

  80. Gravatar of Texas Texas
    21. September 2011 at 16:11

    It’s actually a decent argument that productivity gains could be a partial cause for today’s unemployment. Just like the period between agricultural life and the industrial revolution produced short term dislocation, so is this transition from a manufacturing to a high tech/service based economy has it’s share of dislocation. I think the housing boom was like the blow off top to a disappearing way of life. If it was purely a demand based phenomenon, then you wouldn’t hear the majority of economist describing the structural nature of this unemployment.

  81. Gravatar of Albert_II Albert_II
    21. September 2011 at 16:42

    Extending unemployment benefits extends unemployment.
    Says who? Me.
    And Larry Summers. Check it out.

  82. Gravatar of Michael P Michael P
    21. September 2011 at 17:50

    I don’t know that Obama is a Marxist, but I definitely think he’s steeped in the economic theory popular in liberal arts academia. Their economic theory, of course, is Marxist, albeit a very simplified version of it. To see that theory in play, just look at Obama, scion of academia if there ever has been one.

  83. Gravatar of Moderate Mom Moderate Mom
    21. September 2011 at 17:56

    Maybe this is why Obama said that ATMs are contributing to unemployment.

  84. Gravatar of Dawson Watkins Dawson Watkins
    21. September 2011 at 18:20

    Your observation is somewhat too late. Where has the ecomonists’ profession been – their lack of response to the economic climate in the mainstream media is deafening.

  85. Gravatar of Division of Labour: September 2011 Archives Division of Labour: September 2011 Archives
    21. September 2011 at 19:27

    [...] [...]

  86. Gravatar of Sven Nater Sven Nater
    21. September 2011 at 20:32

    Why would you say obviously Obama is very bright? I have seen no evidence that he is particularly “bright”. On the contrary, I have seen plenty of evidence that Obama is not very bright.

  87. Gravatar of On economics, an uninformed president – CycloneFanatic On economics, an uninformed president - CycloneFanatic
    21. September 2011 at 21:29

    [...] [...]

  88. Gravatar of Yash Yash
    21. September 2011 at 21:59

    In a situation with differing expert opinions how does a non expert decision maker decide? The answer is simple, he should not make the technical decision but personnel decision. And of course be willing to fire if results do not meet expectations. President Lincoln did not make war strategy decisions, he did choose the Generals.

  89. Gravatar of Martin Ford Martin Ford
    21. September 2011 at 22:51

    Scott,

    Do you really think that the technology that caused the Luddite revolts 200 years ago is JUST LIKE the technology we have today? Exactly the same rules apply? Maybe you are a bit too sure of yourself.

    Check out this blog post:

    Krugman and Delong on Automation
    http://econfuture.wordpress.com/2011/03/07/krugman-and-delong-on-automation/

    Also, read a longer excerpt from the Bernanke speach that Dave references above:

    This observation brings me to my fifth and final possible explanation of the jobless recovery, which is the remarkable increase in labor productivity we have seen in recent years, not only in manufacturing but in the economy as a whole. … I suspect that some of the recent expansion in productivity is instead the delayed result of firms’ heavy investment in high-technology equipment in the latter part of the 1990s. Only over time have managers learned how to reorganize their production and distribution so as to take full advantage of these new technologies and thus enhance the productivity of capital and workers.

    Do you believe that this was something that happened in the 1990s, and NOW IT IS OVER? It is just getting started.

  90. Gravatar of tz tz
    22. September 2011 at 00:41

    Obama’s problem is he’s way out of his depth.

    Obama surrounded himself with people who pitched him the wrong ideas for solving our economic problems, and now he’s in way to deep to backtrack.

    Obama must be in a frightening place. He’s the Peter Principle projected at a national level. All the accolades placed upon him didn’t ready him for this job, and now he’s screwed it up royally.

    Most people, who have much smaller jobs, move on to the next job, and then the next, until they start figuring things out. In Obama’s case, the price paid for his inexperience is a continued decade of economic malaise, if not dangerously turning into a depression.

  91. Gravatar of TTSSYF TTSSYF
    22. September 2011 at 02:16

    There’s no way anyone will convince me that Obama is “bright”, much less “very bright.” At least, not in any way that impresses me. He’s adept at manipulating words, but I haven’t seen any evidence that he has high abstract thinking ability, nor does he display the practical intelligence of a good businessman by changing course when conditions change. I think he has hidden his transcripts for a variety of reasons…because the grades or scores themselves were poor, they reflect his immersion in and adherence to Marxist ideology, and, possibly, because they reveal some issue of his citizenship or scholarships.

    Combine a mediocre mind with laziness, rigid adherence to ideology despite facts on the ground, racial resentments, and a total disconnect between his own behavior and what he publicly rails against (partisanship, putting politics above country, passing huge debts on to future generations) and you have what we have today: chaos. He would probably come across as more intelligent (although he likely would never have been elected) were he free to speak his mind and be the pure Marxist that he secretly is…he would not stumble on his words when off teleprompter, much as he was able to rattle off basketball brackets without hesitation. But even then, the fact that he could be wedded to so failed an ideology makes him, in my opinion, a mediocre mind at best.

  92. Gravatar of Greg Ransom Greg Ransom
    22. September 2011 at 08:15

    You can’t give top 5 grad school economics scientific legitimacy by citing what economic science has to tell us about North Korea, because the “mainstreamers” reject & utterly fail to comprehend the economic science of Mises and Hayek which explains why the mainstream top 5 grad school image of “economic science” will fail to produce a economic success in a centrally planned economy.

    Centrally planned economies accept and exploit the “mainstream” image of “economic science” to “plan” their economies, using Nobel prize winning work of folks like Leonid Vitalyevich Kantorovich and Tjalling Charles Koopmans. Oskar Lange did the same in post-war Soviet Poland, using cutting edge neoclassical economics as the “science” behind the planned economy of Poland.

    North Korea as the case for the scientific status of “mainstream” neoclassical economics? Meh. That dog won’t hunt.

    Scott writes,

    “Without sound economic policy we are North Korea – which means back in the Stone Age.”

  93. Gravatar of Assorted Links « azmytheconomics Assorted Links « azmytheconomics
    22. September 2011 at 15:01

    [...] Very depressing article on Obama and monetary policy. At least Perry things monetary policy would work, he just would rather see the economy be [...]

  94. Gravatar of Scott Sumner Scott Sumner
    26. September 2011 at 08:02

    Nick A, I agree, bad monetary policy has caused low NGDP, which causes low interest rates.

    We need easier money.

    Hyena, But productivity can’t explain cyclical unemployment.

    Economics, Boosts in AS don’t reduce AD, only monetary policy can do that.

    Maxwello and Texas, It doesn’t explain cyclical unemployment.

    Albert II, I agree.

    Martin Ford, I addressed the Bernanke quotation above, that is focused on a different issue.

    I’m not going to waste time on all the “is Obama bright” comments, as that’s not what this post is about. He’s plenty smart enough to be President.

  95. Gravatar of iHATEnoamCHOMSKY iHATEnoamCHOMSKY
    26. September 2011 at 16:00

    wait, wait, wait. Are we serious here? Talk about the pot calling the kettle black. Productivity gains CAN, and does, cause unemployment. Ive read piece after piece arguing that the lose of manufacturing jobs in America has had more to do with productivity gains has its had to do with NAFTA and free trade in general.
    On top of that, I would say its the right whos more guilty of falling victim to the fallacy of composition. Evidence of this is the believe that we should cut governemnt spending because “if i ran my house like this Id be bankrupt.

  96. Gravatar of Don Stegemoller Don Stegemoller
    27. September 2011 at 10:09

    Hows that hopey changey thingy working for you guilt ridden socialists?

    You voted for Obama in 2008 to prove you weren’t a racist, you were enlightened, you knew better than the millions that asked for a fair vetting of this complete unknown, you celebrated his calls for redistribution of private property, you relished the promised handouts, the unions and the socialists got their payoffs, did you get yours?

    You had better vote for anyone but Obama in 2012 just to prove you aren’t completely retarded and crazy.

    Obozo could’nt run a lemonade stand. His Attorney General can run guns though, and the DNC appears to run a pretty big money laundering operation through a now bankrupt solar company. Don’t forget about the administration’s non-war in Libya that is still killing 1000′s of non people!

    We are still in Afghanistan!
    We are still in Iraq!
    Guantanamo bay is still open!
    Wall street and the bankers are still getting handouts!
    Boeing wants to open a new factory for 1500 jobs in SC, no says Obama and his union thugs!
    Border patrol agents are dying at the highest rate ever, yet Janet says there is no problem.
    Blacks are at their highest unemplyment rate in 28 years, Obama tells them to quit complaining and vote for him again!

    Wake up people!

  97. Gravatar of ssumner ssumner
    28. September 2011 at 16:28

    iHate, It replaces specific jobs, but it doesn’t cause the overall unemployment rate to rise. There was lots of productivity growth in the 1990s, and falling unemployment. The problem today is a lack of AD, not productivity.

  98. Gravatar of Is Obama as ill-informed about economics as his frequent statements imply he is? Is Obama as ill-informed about economics as his frequent statements imply he is?
    16. July 2012 at 07:58

    [...] (in their applied versions; engineering and economic policy) are essential to modern life. source: http://www.themoneyillusion.com/?p=10904 James Cessna Is Barack Obama the Messiah? "… a light will shine through that window, a [...]

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