So Justin Fox reports that Chicago really, really didn’t like my article. Surprise.
What I think you have to understand here is that for a long time — in fact, for three decades — the Chicago position has been that Keynesian economics was nonsense that has been utterly refuted. Now, you might have thought they’d at least slightly reconsider that position with the rise of New Keynesian economics — an approach that involved plenty of math and lots of hard thinking, and generated a large literature in major journals.
I have my problems with New Keynesian analysis, but surely it demonstrated that Keynesian insights had something to them. When it comes to the current debate, the key thing is surely that New Keynesian models do, in fact, show that fiscal policy can raise output and create jobs.
That’s why the debate over fiscal policy has been such a revelation. It’s perfectly OK to question the desirability of a fiscal stimulus, or challenge the specifics of the Obama plan. But no macroeconomist who has been paying attention for the past 20+ years would assert that fiscal policy is useless as a matter of principle.
Yet that, of course, is exactly what the freshwater types asserted en masse — along with claims that nobody, or anyway nobody at a quality economics department, believes that fiscal policy can do any good. Sneers take the place of actually engaging the argument.
Brad DeLong does a yeoman job of collecting the fallacies. As he says, they show famous economists making sophomore-level errors, again and again. They also show that the Chicago School has spent the past generation looking entirely inward — paying no attention to ideas and research elsewhere. Basically, their worldview has been frozen in amber since around 1978.
And that, in turn, explains the sheer rage over my article. It was actually written in a fairly cool tone — but it did say that the emperor had no clothes, that people who have been posing as the sole guardians of sophisticated macroeconomics have, in fact, been revealed as being remarkably ignorant. Fury was the inevitable reaction.
Again, read those quotations Brad has collected. These are the reactions of people who just can’t accept that they might have missed something — having been caught out in elementary errors, their reaction is to try even more sneers and putdowns, in an attempt to retain their sense of superiority.
What a sad spectacle.
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