Saturday, January 5, 2013

Murphy Smacksdown Krugman and DeLong

Bob Murphy responds to Paul Krugman and Brad DeLong in a massive smackdown, here.

My own take on the attack on Murphy is here.

Although, I am in general agreement with Murphy's response, I was surprised to see that he considers himself an "austerian." From my perspective, an austerian is someone who wants to insure that sovereign debt is paid off by seeing to it that taxes are raised near the breaking point and that "social services" are cut. This is what is going on in eurozone countries, such as, Greece and Spain.

NYT reports on the Greek austerity steps taken in November 2012:
The measures — including sharp cuts to pensions, salaries and social services, as well as tax increases and increases in the retirement age to 67 from 65.

In July 2012, ABC News reported on austerity measures in Spain:
 Spain announced a 65 billion euro ($79.85 billion) austerity package that includes tax hikes and spending cuts on Wednesday...
Now, I am all for cutting government spending and the shrinking of government, but I am not in favor of increasing taxes---especially given the money goes into the Greek treasury to be then be immediately paid out to banksters in the form of payments on Greek debt. Thus, I would never call myself an austerian. In my view, governments that have over-spent should declare bankruptcy, which would result in the pain being placed on those who propped up the government by buying government debt---as opposed to the people of a country, who had little to do with these crony deals.

Thus, my surprise when Murphy seemed to indicate he was an austerian. In fact, I emailed Murphy to see if I was somehow miss reading him. He replied:
Well it's a tricky point. You are obviously correct that I don't want to have anything to do with the crap that is actually being done in the name of austerity; let the bankers go down, and default on the government debt while we're at it.
But what's hilarious is that the actual peer-reviewed literature makes a compelling case--with lots of historical examples--of governments that were in a fiscal crisis, and got out of it by slashing spending (not relying on tax hikes, though some of them raised taxes a bit too).
So I have written stuff in that spirit, for more mainstream circles. 
So I guess what I'm saying is, I have written a lot saying, "Hey, don't let these Keynesians fool you, there is a lot of 'scientific' support for austerity, if that means cutting government spending and running budget surpluses. It doesn't wreck the economy like they claim. Rather, it's the tax hikes that do it."
In a follow up email, Murphy writes:

  Please acknowledge that it's more an issue of branding, not a disagreement about policy.

I agree with Murphy that it's a "branding issue." Murphy is really not in favor of higher taxes. However, I just don't see how you can be comfortable adopting the word "austerian," to identify oneself, given the way the term generally means cutting spending, raising taxes, and passing the booty along to banksters. It would require major clarifications every time the word is used.

Murphy is going to be my guest on the Robert Wenzel Show next week, so between major league Krugman bashing, I imagine we will discuss this point further.


  1. Murphy often gets himself in trouble by framing things from the other side's point of view. It's the same thing when in a speech that he gave a while back he made a reference to "conspiracy theorists", and a few youtube commenters were all up in arms about how Murphy is cracking on conspiracy theorists. He did no such thing, he just framed what he said as if the other side was saying it. In fact, he was joking in that case.

    I don't think that he considers himself an "austerian", only that he is acknowledging the he is one of the guys being called an "austerian" by the other side, and then he proceeds to run with that assumption.

    1. Agreed, and maybe I'll go one step further- and I've noticed this with him and commented about it to my friend who introduced me to austrian economics BEFORE this happened- I think Robert Murphy concedes too much of the argument by the way he will often start with the opponents frameworks and definitions of the matter at hand. So he automatically starts with a HUGE handicap and the other guy plays it (pretends) as if it was a fair fight. So Murphy maybe squeaks a win when he should have creamed and the opponent leaves with more pride and bragging rights than they deserve. He is too generous to the opposition, and they never acknowledge this (they actually disregard it, unreciprocate, and make b.s. proclamations as a result) so why not play aggressive from the start and fight the framing of the argument before it starts?

      And if one doesn't think definitions matter, then let your opponents define assault weapon, or freedom, or democracy, or capitalism....

      "Every battle is won long before it is ever fought." Sun Tzu, Art of War

    2. You apparently don't understand how argumentation works. One always wants to start within their opponent's framework in order to form their arguments, that's the only way to truly refute the original proposition. To stray from that can easily lead to a fallacy. My qualm is more with the fact that most people don't realize this.

      Many libertarians complain that our opponents don't frame their arguments relevant to our propositions (I can attest to this). Murphy, in contrast, does frame his arguments in the language and construct of his opposition (in order to refute them), yet many supposed libertarians fault him for this, and then challenge him on intellectual purity. This is ridiculous!

      IMO, Murphy is engaging in correct argumentation, but the flow and stock of information (and its respective participants) on the internet is such that most people don't know correct argumentation from their asshole.

  2. All this may have to do with how academics respond to arguments. People who have spent some time in academia sort of learn to do that i.e. start from the opponents' framework and build their case. However on the internet, in the blogosphere people have little patience to go through everything so he may appear as losing to many. Some academics are able to forget they are academics when they interact with the world like Krugman, and some maintain the same style in all their dealings within and outside academic journals.

    1. then start by tearing doen the framework, define the terms and show why the original definition is incorrect.

  3. Robert, Your view on austerian is incorrect in my view. As in 1921, cutting government services and expenditures basically allowed for people to keep more of their money. Irrespective of how they chose to use it (i.e. paying off debts, investing or consuming) in the end it will be more beneficial than anything government could do. Also I note Philip Bagus, recently penned a poignant article at pointing out that in no way can what european governments are doing be called austerity. At best it is just another form of wealth transfer to the banking elite.