Just a tangential reference here, but on the last interview on EconTalk, Russ was talking to Edmund Phelps on his work in economics, and he asked him whether or not the current harping for Keynesian Economics was even valid. Pretty much Phelps said that not only were these folks that were beating the drum for Keynesianism weren’t exactly Keynesian (I believe an article here pointed out that for Krugman, who’s glossed over particular parts of General Theory that conflict with his conclusions in some cases.) and that the actual talk amongst economists today take more of a tone on structuralism (not the philosophy, but the stance that it’s the structure of firms that alters the general shape of economic activity (like what Hayek proposed)). So, I think all the newspapers that carry retards like Krugman must be scraping the barrel if folks like Phelps aren’t in agreement with him (or even considering his words at all to be valid).
Jonathan,
Just a note, first off, all my comments were directed at Stiglitz’s comments in the link posted by the OP. So that’s what my comments were directed toward.
It depends entirely on what kind of debt, and how the debt is being funded. What Greg Mankiw in the article you linked to, and Paul Krugman is a number of blog posts, forget is that a large portion of our future debt will be unfunded liabilities, which are the unpaid future costs of our social insurance programs. Economic growth does not make these much more serviceable, given that these have a tendency to increase overtime - even if inflation is kept to a minimum. Social insurance programs are untenable over the long-run for this very reason. You cannot grow or inflate your way out of long-term liabilities that can never be paid in full.
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I think Stiglitz is talking about something different. He is talking about whether the debt the federal government is projected to accumulate over the next 3-5 years should be a concern or not. And Stiglitz’s answer is basically “it depends on what we will spend our money on”. And I think that’s defensible response.
You’re talking a bit further down the road, when we may accumulate debt from the deficits social insurance programs are projected to run a decade or more from now. I would not expect Stiglitz’s answer to be the same for this question. In part, because as you note transfer programs probably do nothing to help economic growth (and could actually impede it). But again this takes us off into another subject.
[quote]
If the government cannot effectively encourage economic growth through investments in infrastructure, technology, education, then Stiglitz’s argument falls apart. But this is strictly an empirical question and it cannot be answered theoretically.
See my response to fakename for clarification.
The free-market argument against government expenditure is not quantitative. It’s not an argument between whether government expenditure increases GDP by 5-percent or 2-percent. It is whether government expenditure can create wealth at all. In fact, Austrian theorists will tell you that the means by which these qualitative measurements are taken are wrong, and in fact many have already shown themselves to be - i.e. GDP and the method by which government measures how much employment they’ve “created”. Empiricism cannot come up with answers, it can only disprove them.
Thank you. Finally someone making some sense of empiricism.
Maybe we should define our terms here. What Stiglitz is talking about when he says economic growth is GDP growing more quickly over time so that the government will receive more revenue even if current tax rates remained unchanged. I don’t understand how you could say it is qualitatively impossible for the government to do this ever. Here’s a bad counter-example of exactly that happening: the Soviet Union.
I’m sure you will say “Yah, but there’s a difference between real value and GDP.” Yah there is, but one of these two concepts is related to the question of whether or not the government can service its debt and the other isn’t. (hint: its GDP)
That isn’t to say I think efficiency considerations are not important, I am just trying to make the terms clear because you seem to be skipping from “wealth” to GDP and back again as if they are all the same. When in fact they are not.
We are talking about empiricism as a valid method by which to conduct economics. So, as far as I can tell, your entire post is irrelevant or at least is very unclear. In any case, I’m not even sure what you’re arguing; you seem to be saying two opposite things.
Giles, is that you again ?
7:09am:
“If you want to disagree Stiglitz, you should focus on illustrating that his logic is not sound (that even though the argument is logically consistent, the assumptions he is utilizing are not true). Maybe that would mean pointing out studies that show how poorly government attempts to assist education or technology work out. If the government cannot effectively encourage economic growth through investments in infrastructure, technology, education, then Stiglitz’s argument falls apart. But this is strictly an empirical question and it cannot be answered theoretically.”
8:07am:
“Measuring the impact of incentives, the size of exteranalities, these are all hard questions to answer and in my opinion most answers will never be definitive. This is why I say most interesting questions are empirical and that we could likely never hope to answer them conclusively.”
First you say that to counter another person’s argument, we have to refer to empirical evidence.
Then you say that empirical questions can never arrive at conclusive answers.
You also write that though a person’s logic is internally consistent, it may not be logically sound:
“his logic is not sound (…even though the argument is logically consistent,…”
That’s funny. I thought we were only talking about empiricism only so far as it related to Stiglitz’s original argument about debt servicing and government spending. That’s certainly why I’ve made an effort to refer back to Stiglitz’ original argument in every single post. And its also why your (apparent?) claim that we can be qualitatively sure that government spending could never ease future debt servicing by increasing future national income (GDP) by investing in human capital accumulation and technological development sounds really really strange. Because it simply isn’t so. Or at least I yet to see that qualitative argument. *
If I somehow gave the impression I was aiming for free-ranging discussion on methodology, I apologize.
- Of course, that may not be what you meant at all. As I noted in my previous post, you were using terms rather loosely, which made your argument a little confusion.
Adam Knott,
One of my many faults is that I love saying things that sound contradictory at first, but are actually quite consistent. For example, I do honestly believe that most important questions (like those Stiglitz raises) are empirical questions that cannot be answered theoretically. At the same time, I also believe, that most empirical questions cannot be conclusively answered. if this sounds confusing, try checking out the Duhem-Quine thesis:
http://en.wikipedia.org/wiki/Duhem–Quine_thesis
Johnathan would probably also benefit from reading up on this. He thinks theories can be disproved empirically, but never “proven”. By contrast, I don’t believe empirical evidence can ever disprove any theory. Its all there in the Duhem-Quine thesis.
Also, there is nothing wrong with saying that an argument is logically consistent (logically valid) and logically unsound. The terms mean entirely different things.
“Proof” is subjective and the empirical-theoretical dichotomy is false. So, none of that really pertains to this.
Thank you for your civility Giles. I appreciate it.
Above (#1), you have just defined an important question as one that cannot be conclusively answered.
On #2, what you seem to be saying is that a person’s argument may be internally consistent, while his premise may be faulty.
In the passage where you wrote that, the person’s premise you referred to is itself an argument:
“If you want to disagree Stiglitz, you should focus on illustrating that his logic is not sound (that even though the argument is logically consistent, the assumptions he is utilizing are not true). Maybe that would mean pointing out studies that show how poorly government attempts to assist education or technology work out.”
The proposition that government programs achieve their intended aims is itself an argument, not an empirical concrete.
You are setting up an infinite regress, whereby you would attempt to show that a person’s logic isn’t sound, by referring to a previous instance of his logic. But you could only show that his previous logic wasn’t sound by referring again to a previous instance of his logic, and so on…
And that might have something to do with why you believe that important questions cannot be conclusively answered.
Giles? Giles is way more annoying and not a Keynesian.
Student,
Relating to our own discussion, you see to have forgotten the context of what you quoted. Funny, indeed. Don’t worry, I will quote it all right here, for you.
I quoted you saying:
Note, you are talking about encouraging economic growth through investments, not about paying off debt through inflation or whatever you’re talking about.
I said:
Don’t accuse me of arguing out of your context, because I am not.
chole732:
Good question. We have:
(statist scholarship) (libertarian scholarship)
(statist society) (…)
To me, the question is how do we change this formula ?
I think that’s an “in house” libertarian issue, not something that can be solved by arguing with S & K and statist society at large.
Johnathan,
I am not sure what you’re trying to say. If you read the rest of the post you find that paragraph in you will see that economic growth is only mentioned to the extent that it realtes to Stiglitz’s argument about servicing the debt. Specifically, he claims that by investing in eduction/technology/etc that it will be easier for the U.S. government to service its debt in the future because of the economic growth it will generate. That is exactly why I said if you can show that these investments will not generate economic growth, then Stiglitz’s argument will fall apart. I then claimed that you cannot answer the question of whether these investments generate economic growth theoretically, only empirically. You have insisted for 4 posts now that there are no need for empirics, but you have not yet actually offered the slam-dunk theoretical rebuke of Stliglitz’s argument you think exists.
And that is actually what I would be interested in seeing. Others may be up for a more methodological discussion, and I blame myself for unleashing it with that antagonist sentence, but those are not really my cup of tea. [H]
Student,
You replied to my argument against the use of empiricism; nowhere did I intend to use this argument against empiricism as a way of providing an argument against Stiglitz. I never hint at that. I don’t really care what interests you; if it doesn’t interest you then don’t reply to it. But then don’t obfuscate the argument by then proceeding to make no sense at all.
Johnathan, haha I never tried to obfuscate anything. I only tried to respond to your post as best I could (which wasn’t easy since they roamed across a variety of topics including Stiglitz’s book on making globalization work, the “qualitative argument against government expenditure”, and the broader argument against empircism).
I can tell you’re getting emotionally involved so we probably should drop it. I just wanted to reply this last time to let you know I wasn’t trying pull the wool over your eyes or anything. Just doin’ my best.
PEACE@!!!
When you say, “how do we change this formula”, do you mean that there is a void where “libertarian society” should be? Are you implying that we should spend our energy trying to fill the void rather than arguing with mainstream economists about sound economics?
(“Sound” economics is described, simply, in Chapter 1 of Economics in One Lesson, where Hazlitt refers to “good” as compared to “bad” economics, in case anyone is wondering.)
Student:
Since this post got off topic anyway, I figured I’d throw this out there. I enjoy empiricism, too. Statistics are really useful, like the fact that the US national debt ceiling is at $14.394 trillion, interest payments are just under $400 billion per annum (2009) at record low interest rates, and unfunded liabilities for Social Security and Medicare alone are at $56 trillion. Perhaps you, or Stiglitz, or Krugman could help me out because I’ve had a boring day. I need a good laugh, and so I require some statistics that will attempt to prove that there is a snowball’s chance in hell that the US has any possibility of ever paying its debts without printing the shortfall. Thanks.
Best regards,
Chris
There is no point in asking a mainstream economist this question. You already know the answer.