Tuesday, November 24, 2009

Smackdown w/ Steven Landsburg

See it all here.

Landsburg linked Cochrane's "devastating" critique of Krugman. So I asked Landsburg why he backs Cochrane on Cochrane's belief in the discredited "Treasury View".

Landsburg replied: "If you believe this [the Treasury View] is Cochrane’s view, then you cannot possibly have read the piece I linked to (see the section headed “Stimulus”). I suggest that you read it."

To which I replied:

I suggest you read this.

I’ll give the mike to John Cochrane, and let him say what he believes:

“Most fiscal stimulus arguments are based on fallacies, because they ignore three basic facts.

First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both1 . This form of “crowding out” is just accounting, and doesn’t rest on any perceptions or behavioral assumptions. ”

That is the Treasury View. John Cochrane wrote that, presumably because he believes it. You say you back John Cochrane. Krugman and DeLong attacked John Cochrane for re-inventing the Treasury View. Now is your time, defend the Treasury view. I.e., tell your readers why you believe, in Cochrane’s words, that: “Every dollar of increased government spending must correspond to one less dollar of private spending."


Apparently Landsburg did not follow the Stimulus debate...

I'm kind of curious to see what he'll write. I predict he'll go crazy, and write stuff that makes no sense whatsoever... 40-60 he's too yellow to respond at all.

Update: Landsburg replied, suggesting I read Barro's Ricardian Equivalence paper, and other mumblings by Cochrane. I protest that he didn't reply to my question, and that Cochrane's other mumblings are just as crazy -- Cochrane says "the multiplier is likely less than zero". Commenter Gabe then points out that Barro's Ricardian Equivalence gives a positive multiplier in contrast to Cochrane.

Landsburg replied by cutting off the debate and refusing to let me post again. He did not reply why he supports Cochrane's belief that "the multiplier is probably less than zero" and why he told his readers to go read about Ricardian Equivalence to show why Cochrane's right when it shows the opposite.

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