“I tend not to think about the problem of people forecasting in different ways, as things are hard enough already and I want to focus on other things.”
This is the damage which Robert Lucas has done to macroeconomics:
This is _the_ great fallacy introduced into economics by Robert Lucas (whether he still embraces it or not). The fallacy is so massive and significant that it arguably wipes out the significance of any other contribution Lucas might have made to economic science.
One of the properties of false price signals in an essentially complex network of millions of systematically related relative prices across time it that these false prices have the capacity to fool and mislead people systematically and structurally in an manner that isn’t immediately revealed, but can make itself felt — and unavoidably so — after the passage of an economically significant length of time.
What Stephen Williamson is giving us is excuse making for a research program (whatever other achievements it may claim) which has utterly failed at the one task that is non-optional: as a causal / explanatory enterprise.
UPDATE: Even more perversely, Stephen Williamson claims there is “no evidence” for “market failure” during a recession or depression.
We cannot observe a market failure? Take a drive, Stephen, outside of Bakersfield, CA or South of Olympia, WA or on the road to Joseph, OR or south of Corvallis, OR, and what you will see is mile after mile after mile of mothballed lumber hauling rail cars, given non-economic status by the artificial boom and inevitable bust of the 2002-2011 period. Or watch the nearly completely houses bulldozed in Victorville, CA in the wake of the housing boom & bust. And banks are still bulldozing homes all across the country.
But attempting to get Williamson to admit there are “market failures” in our midst is much like getting a philosopher teaching Descartes to admit there really is a white board in the room. Both are entranced by a perverse philosophical picture of “knowledge” and neither one of them wish to talk sense.
UPDATE: More than twenty-five percent of construction workers in America are unemployed in the post-boom phase, and construction unemployment by region systematically tracks the geography of the housing & commercial construction boom. You can see systematic patterns in the data — or you can get in a car and go look at the neighborhoods with “house for sale” signs everywhere, or you can get out of our car and go to the neighborhoods with huge numbers of unemployed construction workers and you can shake their hand and talk to them about it. All phenomena just as real as the philosophy professor’s white board …
UPDATE: The pathology of Stephen Williamson in a nutshell: “I tend not to think about the problem of people forecasting in different ways, as things are hard enough already and I want to focus on other things.”
George Selgin’s case for Hayek & Robert Skidelsky’s case for Keynes — from last week’s L.S.E. / BBCRadio4 debate.
The LSE and BBC Radio 4 are hosting a Hayek vs Keynes public debate, Tuesday July 26, 6:30 – 8 pm at the Old Theatre, Old Building, the London School of Economics featuring George Selgin, Robert Skidelsky, Duncan Weldon & Jamie Whyte, with BBC Radio host Paul Mason in the chair.
The debate will be broadcast twice on BBC Radio 4: Wed. Aug. 3 at 8 pm & Sat. Aug. 6 at 10:15 pm.
More details on the debate and the debaters here.
Jamie Whyte has been tapped represent the ideas of F. A. Hayek in a debate with famed Keynes scholar Robert Skidelsky, advancing the economics and political agenda of Mr. Keynes. The debate will be moderated by leftist Paul Mason of the leftist BBC.
David Glasner — an excellent monetary economist — has launched a new blog. Please check out the Uneasy Money blog.