Saturday, March 31, 2012

Stephen Williamson: Wrong on Inflation, Wrong on Krugman

     His worry about "stagflation" hiding around the corner by now is more comic relief than anything else. Why even treat his absurd inflation phobia seriously? To paraphrase Jimmy Carter, Stephen Williamson suffers from an inordinate fear of inflation. However, the time for interventions are over for Williamson, he's beyond hope in his desire for deflationary policies.

    While he is sympathetic to ideas like Tyler Cowen's Great Stagnation theory, there's a chicken and egg problematic here. If we do have stagnation how much credit do austerity lovers like Williamson and Cowen actually deserve? For no doubt if we followed their policy prescriptions that's exactly what we would have.

     The trouble with the Stephen Williamsons of the world is that for them the nightmare scenario was the 70s, when in reality the nightmare scenario that is more meaningful to us throughout this crisis is the 30s. One thing that is not appreciated about the 70s is that in important ways it was better than 2008. The 70s never got into a deep recession and this is partly thanks to higher inflation rates-in a bad downturn there are two ways to proceed-as Minsky shows us-either asset price deflation or price inflation. In the 70s we had the lesser of the two evils, price inflation and so we never had a long, protracted recession like this one.

   Oh well, again, Williamson is a lost cause and even discussing this is more comic relief than anything. We can laugh at Williamson as long as we don't follow him down his dead end.

   On the issue of Krugman, he clearly is very exercised about him, and seems to consider Krugman a kind of blight on the existence of all that is good and true.

   "In the better world I'm thinking about, we would not have to put up with arrogant loud-mouths like Paul, Brad, and their "fellow-travelers." The world these people envision is one where lazy macroeconomics has free-rein. We would forget everything we have learned in the last 40 years or so. Better still, we could set the way-back machine to 1937. Why fuss with all those bothersome details? IS-LM is so easy - and so right. If you believe that, I have a bridge to sell you."

      See what I mean about him seeing this in existential terms? Williamson got a lot of push back in the comments section however, he actually got  over 200 comments-and counting. He furiously answered many of them continuing to inveigh against the Dark One, Paul Krugman. Noah Smith dropped in and wondered what he got out of attacking Krugman so much-it must be fun for him? Williamson sniffs,

      "I don't think it's good fun for some people to set out to destroy something they don't understand."

       See, here we catch Williamson being disingenuous. He makes it sound like Krugman is an ignoramus doing this for perverse kicks, that he is just offering up bold opinions with no substance behind it, Yet in another post he decries, "What Happened to the Krugman We Used to Know and Love?"

       "Someone forwarded a link to this post, from October 25, 1996, by Paul Krugman in Slate. This is an excellent piece. It's beautifully written and well-argued. I agree with essentially everything in it. It's bold, in that Krugman sticks up for Economic Science in the face of a barrage of criticism from what he thinks are loose-thinking innumerate "economists."

      "somewhere between 1996 and 2012, Krugman changed his tune. He stopped being defender-of-the-nerds and went over to the dark side. "

     Here Williamson is contradicting himself. How can Krugman be attacking ideas he doesn't understand if he used to be an advocate of these same ideas himself? What's happened is he changed his mind. Evidently this is not something that Very Serious People (VSP) like Williamson take very kindly to.



  1. Mike - I just did a post that "reviews" Plosser, who Williamson frequently "defended":

  2. Thanks for the link Marcus. Will check it out.