Friedman, Galbraith, Krugman

Paul Krugman is the economist who made me want to be an economist. Although I was trained in a heterodox program, and have a strong appreciation for heterodox economics, I have nevertheless taken Krugman’s side in the recent debate over Gerald Friedman’s analysis of Bernie Sanders economic proposals. It’s not as if I am unaware of the many reasons to be critical of the neoclassical paradigm followed by the establishment economists criticizing Friedman’s analysis.

When I was a graduate student, I was assigned to write a paper on “The Great Moderation,” and to compare the post-war period, “Les Trentes Glorieuses” (roughly 1946-76) to the period encompassed by the years 1983-2003 (or so). Despite the continued rise of productivity in the American economy, wages stagnated. On the other hand, inflation was very moderate in these years, and the economy was generally quite stable, until the Financial crisis came along. One of the analyses I focused on in the paper was that of Ben Bernanke, who was a proponent of the Great Moderation thesis. In my conclusion I wrote that Bernanke would have had to reach those conclusions, since otherwise he would not have been in the highly influential position he had come to inhabit at the time (he wrote that paper a few years prior to his becoming Fed chairman).

Although economists within the Federal Reserve system certainly have a diversity of views on macroeconomics, virtually all of them are well within what is called orthodoxy. You don’t get to be powerful and influential in the economics world unless you go along with  assumptions acceptable to the establishment. And orthodoxy is a tightly controlled thing. It may exploit workers and deprive millions of economic justice, but saying so doesn’t persuade people. If it did, we’d be living in a completely different world.

Back in 1950, the Big Three Automakers and the United Auto Workers signed onto what has become known as “The Treaty of Detroit,” which tied increases in productivity to increases in wages and benefits. This seems to be, at least in my mind, the gold standard of social justice oriented economic policy. And it has a huge flaw: it left out a huge segment of the labor force. And when the Civil Rights movement came along to demand economic justice for everyone else, it tore the Democratic Party apart. Part of what got Bill Clinton elected was the implicit agreement with white working class voters to throw black people under the bus. It really sticks in my craw, to be honest. It often seems to me like the unions, for all the good they did (and they did a tremendous amount of good in the US), were always in it for themselves, and not necessarily for everyone. And I hear echos of that everywhere in the political and economic debates happening right now.

This election season will be really hard on the left. Reading through the comments on Krugman’s blog, I am struck by how angry Sanders’ supporters are. I get it that Friedman is offended, and I get it that Galbraith is trying to take the high ground. What I don’t hear anybody in the heterodox community acknowledging is the extreme pressure the establishment economists are under all the time. Krugman has been under continuous attack since he started at the Times. The thing I love about him is that he did not back down from his criticism of George W Bush – and I’m quite sure there was a lot of pressure to do so. Why should progressives expect him to back down now?

I was a little disappointed to see Galbraith write a letter to Goolsbee et al with instructions to read his book (or a chapter, anyways). This is why Noah Smith can write reasonable sounding posts about how heterodox economics sometimes feels cultish. I’ve heard heterodox economists denounce Smith as a “hack” – but I read his blog, and he always comes across like a smart guy. Maybe I don’t agree with him all the time. But that’s okay. It’s even de rigueur in economics to be able to appreciate the reasonableness of your ideological opponents.

A lot of my friends, and many people whom I respect, want to see Sanders get the Democratic nomination. Personally, his call for “revolution” persuades me not at all. I knew lots of protesters and activists and “revolutionaries” more than a decade ago in San Francisco, and most of them were just nice, well educated white kids who wanted to walk on the wild side for a little while, until they got bored and went to law school so they could afford to pay the rent on their Mission apartments, go to hipster shows and Burning Man, and live the upper-middle class life they had been raised to expect. When they say they want a revolution, I don’t believe them. Just like they don’t believe Hillary. And that’s okay.

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