macro: Why is Brad DeLong so Dumb?

Roger Garrison is a gentleman and a scholar, and he’s never title a paper like that, instead he’s sought to account for why Brad DeLong is so dumb in a paper titled, “Mainstream Macro in an Austrian Nutshell.”

As a gentleman and a scholar Garrison hides his eyes from a non-trivial part of the story — the fact that a number of top economists are BSing partisans more concerned with advancing a political agenda than they are seekers after truth with a sincere interest in developing a non-pathological macroeconomics.

In any case, here’s a bit of Garrison:

DeLong’s explanation of the Austrian view makes reference only to “the economy’s capital stock”—that phrase from mainstream macroeconomics that treats capital holistically. Willful or not, DeLong has distorted the Austrian theory by force-fitting it into his mainstream macroeconomic framework. And in DeLong’s rendition of the Austrian view, we see that the “overinvestment” that characterized the boom implies that “the economy’s capital stock needed to shrink.” A two-panel diagram showing “boom” and “crash” is used to depict the sequence of overinvestment and shrinkage. The demand for risky assets first rotates up producing the boom and then rotates back down precipitating the crash. The Austrians themselves would claim, instead, that the malinvestment (Mises’s term) that characterizes the boom implies the need for a capital restructuring. In other words, the allocation of resources within the capital structure has to be brought in line with post-boom market rates of interest. This restructuring takes some time and is best achieved, in the Austrians’ view, by the market itself.

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