Wednesday, December 10, 2014

Krugman-Cochrane feud is getting out of hand

On one hand, a spectacular feud between two really smart academics is pretty entertaining. In biology there was Richard Dawkins vs. Stephen J. Gould. In nanotech there was Richard Smalley vs. Eric Drexler. In econ there have been a few - Keynes vs. Hayek, the Cambridge capital controversy, Summers vs. Prescott - but in terms of (academic cred) * (importance of issue) * (acrimony), I'm not sure any of them tops Paul Krugman vs. John Cochrane.

Both of these guys are top-flight economists, though interestingly neither one did his main work in business-cycle theory - Krugman is a trade guy, Cochrane a finance guy, each undeniably at the top of his field. Each one has written a paper about the macro of "liquidity traps" in the years since the crisis - Krugman's is here, Cochrane's is here. Their debate has been running for five years now. It began with this Krugman op-ed and this Cochrane response, The argument is over two main issues: A) whether academic macro has run off the rails over the last 30-35 years, and B) whether fiscal stimulus a good idea.

Here are some of Krugman's salvos, here are some of Cochrane's salvos. There are a lot of salvos.

One interesting feature of the dispute is that it has been carried out entirely over blogs. Debate between economists seems to be disappearing from the journals, so maybe blogs are stepping in to fill the void.

The latest salvo shows that the dispute has not really died down, either in the level of disagreement or the acrimonious tone. Here is Krugman, and here is Cochrane. These posts get quite aggro (a slang term my generation invented meaning "aggravated and aggressive"), so I won't quote excerpts.

Anyway, like I said, there is a certain fun in watching Godzilla and King Kong go at it...from a distance. But I think this particular feud is getting out of hand. The acrimony doesn't actually help get to the bottom of the issues at hand - it just provides spectacle.

The fact is, blogs are not that great a medium for resolving issues like this. There's a lot of pressure for rapid response, which means not many equations or data analysis gets put into the posts - that biases blog fights toward ambiguous rhetoric and fights over who-said-what. Additionally, everyone sounds meaner and more aggressive over the internet than they really are.

Having met both Krugman and Cochrane, I don't doubt that if they got in the same room with each other - with a whiteboard and internet access and some other profs in the room to provide comments - and talked about and debated this issue for a day or so, they could resolve a lot of their differences. They have different thinking styles - Krugman is more of the classic economist, thinking in terms of toy models and stylized facts, while Cochrane is more data-oriented and probably prefers a more fully-specified model. But both are reasonable people, and very smart people (duh), and although they wouldn't walk out of the room agreeing on everything, I bet a substantial chunk of the distance between the two would be removed, and - more importantly - a lot of the acrimony would be reduced.

Hopefully this can be arranged at some point. Titanic feuds are fun, but eventually the fun wears off and all that is left is the bitterness.


  1. Put it on youtube. I would watch.

  2. Cage match! Two Go In One Comes Out. . .Two Go In One Comes Out

  3. Aggro is Aussie slang - and a belligerent puppet tv host

    1. Phil Koop12:38 PM

      Sure, but it's seppo slang too. It's not like that's mutually exclusive.

  4. Anonymous6:40 PM

    What would be settled in this debate? Why not just make investments based on their recommendations and see who was right? Cochrane the finance guy -- short treasury because hyper inflation unless we cut all entitlement spending vs. Krugman the cat guy -- buy treasury because of deflation, short euro because they are morons.

    1. Second.

      Noah, you're falling for the standard academic idea that things like reality don't matter.

    2. Three years after you posted this, Krugman has won and Cochrane has lost.

      But that was the result when you posted your comment in 2014.

  5. Anonymous6:50 PM

    This gets my goat and shows how shallow Cochrane's thinking is on regulation, "Remember, the SEC couldn’t even find Bernie Madoff when he was handed to them on a silver platter."

    Decades of reduced funding of the SEC and regulatory capture has created an environment where the Madoff's of the world go on for's a feature not a bug!

    And Cochrane applauds the defunding.

    1. Anonymous7:44 PM

      (Different Anon)

      For me, in short: Cochrane has spent the last few years making things worse and being wrong when America needs it least, therefore Cochrane's reputation and influence should decline.

      He also didn't just do it over blogs. From my perspective he's just another glib econ asshole like Casey Mulligan.

  6. Looks like your guy is losing. You didn't have many qualms over the Keugman-Niall Ferguson debate.

    1. Anonymous10:34 AM

      Ferguson does not have influence in the profession. So there is nothing to lose. Neither Krugman or Cochrane is someone you want to get on the wrong side of you. For the same reason, no one will take on Lucas, Sargent or Prescott, despite how silly the stuff they do is and how obviously open to criticism it is, until they are dead or whether you already have a nobel prize.

    2. ?? Everyone takes on Prescott.

  7. Noah,

    On the issue of whether to do fiscal stimulus or not it is worth nothing that they both believe in similar mechanisms. That is, they both believe fiscal policy can pack a punch. In fact, as I noted recently, they have almost uncannily similar views on how to view the deflation in Japan. They both see excess fiscal credibility as a potential constraint preventing a swift recovery of aggregate demand growth.

    The differences between them is that Cochrane is worried (rightly in my view) that tinkering with this fiscal credibility can unleash the aggregate demand genie in an uncontrollable manner. Krugman is less concerned about it. A level target is a solution that would bridge the two views.

    I get the impression that Krugman hasn't read Cochrane's EER 'unpleasant fiscal arithmetic' paper. If he would, I think there would be a lot less misunderstanding.

    1. What is it you think Krugman is missing from that paper? He's written explicitly he doesn't think sovereign debt capacity is unlimited, and that expanded debt can lead to inflation through expectations of debt monetization, on more than one occasion.

      The difference is in whether a country like the US is anywhere close to that level. Cochrane seems to think it is, though he couches his claims in "this is a scenario not a prediction" type language most of the time.

      For his part, Krugman hasn't to my knowledge posited where the debt tipping point lies, but does point to bond markets as evidence we aren't there now.

      I'm reading through the paper you referenced. It's not clear to me what is in it that you think is important to see, or that resembles Krugman's views in any way.

  8. FWIW, as I have said exhaustively on Twitter, using almost ALL of my 140 chars, I just don't get the "acrimony" thing. I think K. shows frustration, citing C as an example. I think C devolves easily to idea-snark (not really personal snark). To me, watching from the peanut gallery, the discussions are interesting, fun, and enlightening (links!). I don't see that the main thing being done is acrimony-slinging, and thus, that it's out of hand.

    1. ^This.

      I believe academics, and some others, tend to believe that debate must be dry and impersonal to be optimally productive and informative, but that isn't always the case in real life.

      Sometimes people actually do make major analytical errors due to motivated reasoning (suprising, right?), and it is informative to observers to have this pointed out. It's also informative, when someone tells a whopper, to call it out using appropriately outsized language rather than dry passive voice.

    2. I'll add, debate CAN get out of hand with acrimony, but it isn't out of hand, IMO, until and unless it stops being substantive. Contrary to what many claim, a debate can absolutely be acrimonious and substantive.

  9. jackrousseau9:03 PM

    I don't care about personalities, I care about who's been right in the real world.

    No huge fan of Krugman - that Ode to Obama essay he wrote shows why better than anything else - but the last 6 years have shown that his ideas have been basically right. Cochrane, on the other hand... disaster.

    If these guys would just have taken large, career-endangering bets on their ideas in 2008 then we wouldn't be talking about Cochrane today, and it would be good riddance too.

  10. Anonymous9:52 PM

    I do not believe Krugman ever deals with the explicit argument raised by Cochrane and by Sumner and by Friedman - the atomic energy of economic policy lever is cold brutal credible threats.

    A level target, a computer running the Fed - these are more a credible threat, and forward guidance is a less credible threat.

    And fiscal is a FAR LESS credible threat.

    If a credible threat is strong enough - NGDP WILL STAY ON TRACK - you can gut GM, fail banks, kill subprime mortgage programs in 2004 - bc even the most political of actors will be terrified of getting on the wrong side of the monster that cannot be rhetorically massaged.

    And there's nothing obvious IMO that says past unwillingness to craft credible threats, means we can't have them in the future.

    As systems of credibility explode in use and value, we should endeavor to make greater and greater use of them, even if it kill Krugman's precious.


    1. Fiscal is not a threat, it is a deed. Level or anything else targetting by a clearing house (that's what the Fed is) is a joke in comparison.

    2. Anonymous1:59 PM

      Yep, you swing and miss. The point again is fiscal really = "whaaaa it wasn't big enough" "whaaaaa, no we don't want to just do tax cuts!" "whaaaa, there are other more powerful interests than us who will stymie our efforts!"

      So in your perfect world it is a deed.

      In the real world none of us think you are going to pass fiscal bc we are going to stop you - so there is no credible threat.

      Now if when you says Fiscal is a deed, I didn't chuckle at you, that would closer to a credible threat. And I and all of my peeps who prefer a rule based MP without any political discretion... we can deliver our truth by fait accompli.

      In short we can hold our breath underwater longer than you, so our reality is your best option.

      What you shouldn't do is poo-poo the half loaf we're offering, bc thats the only thing you have to chew on.


    3. I don't understand. Is central planning under Stalin credible enough threat? Yet that didn't turn out right in the long run.

      I believe fiscal stimulus works in the short run. But if you rely it in the long run, you run the risk of becoming a planned economy.

    4. It seems like most of you really don't understand fiscal policy. It's not meant to be long term. It's not meant to act through expectations channels. It's just a short term boost to demand to boost REAL output.

      It definitely has limitations, but the critics of fiscal policy lose credibility when they so vastly overstate their case and/or show they don't really understand what it does.

  11. Anonymous11:01 PM

    I don't think any one posted this from Krugman:

  12. I'll just split the difference: the left and right were both wrong on many things. The stimulus didn't do anything and there was no hyperinflation/dollar collapse. Bernanke is the only one who got it right.

    1. Derivs6:30 AM

      Nah, it would have taken a MASSIVE Delta M to hyperinflate, very hard to hyperinflate with low interest rates. Lowering rates strengthens your currency too.
      I really wish Noah would push harder on his Neo-Fisherite argument he opened up about having the sign wrong. It was great!
      Then he can open up why the hell Delta V gets no respect.

    2. Derivs7:18 AM

      oops.. left out word 'forward' before word 'currency'... big difference. Now on to more important questions.. like what angle to set my kite into the wind to surf today. Life is short.

    3. There was no net stimulus. The federal government stimulus (spending above normal) was about equal to the state governments' cuts. Dr. Krugman and others proposed block grants to states to prevent this. (Old news, but it seems some don't remember history.)

  13. I dunno... I find it hard to believe that people who associate themselves with the Cato Institute, the Hoover Institute, and the Wall Street Journal are "smart". Most of the people I see associating with those ideas rely on faith-based reasoning: they echo "facts" that other people just made up. Cochrane associates with people who support torture, and he does not communicate his ideas well. Take the neo-fisherite crap he spouts, where we have to find Nick Rowe's blog to get it decrypted and explained to us. As Mr. Rowe says "Oh God. Figuring out the intuition behind John Cochrane's paper, to see what was really going on in his model, really drained me."

    Some times I worry about who you hang out with, Noah.

    1. Well Nick Rowe currently hates my guts...

    2. Derivs6:22 AM

      What I don't like about Nicks example is that he has it targeting r that is the wrong r.
      Reality is that forward price targets
      Present Value(t)* (1+r)^{(T-t)}

      whereby r is the risk free rate (nominal rate) and thus an increase in r leads to an increase in future price and a lower r leads to a lower price.

    3. "Well Nick Rowe currently hates my guts..."

      Really? He comes across as so ... mild? Canadian? I have a hard time picturing him hating anybody.

    4. He was really really mad about me including that Robin Hanson quote in my "sexism" post. Not because he thinks I unfairly singled out Hanson (which may have been true), but because he is really, really offended by the idea that anyone would be offended by the idea that rape and cuckoldry are similar in the amount of harm they cause to human beings. It's really bizarre and kind of gross, actually.

  14. I think they kiss and make up should Mike Woodford join in to make out.

    But in seriousness, they knew what they signed in for. You don't go into the woods if you are afraid of bears and you don't attack Krugman if his blog makes you bitter.

  15. Asking Krugman not to be combative and acrimonious is like asking Craig Ferguson not to so zany. Krugman has built his public career on being an uncompromising crusader for Keynesian theory and left-liberal politics. Honestly I think he got the Nobel more for being a consistently harsh Bush critic than for pointing out that the Finns didn't really have any particular competitive advantage in making mobile phones. What I find annoying about Krugman is that he's become so much like a politician. Reading him review himself is like listening to a Congressional candidate talk about his resume. There's no room for human frailty, just utterly mechanical maximal self-congratulation.

    Cochrane is by comparison almost unknown outside the economics field and a corner of econbloggia. I've occasionally been sent to his blog, once by you, and was always disappointed. The neo-Fisherite thing is simply bad logic, totally unrelated to Fisher's position, I still have no clue why you give it credit. Perhaps for an academic economist this might seem like King Kong vs Godzilla, but for anyone else Cochrane is an unknown trying to engage a household name but struggling to speak sensibly, and Krugman is taking him way too seriously. The Cochrane post linked here though is generally reasonable throughout, maybe because he doesn't get into any specifics.

    1. Cochrane has an outsized influence on policy. He can actually have dinner with guys like Paul Ryan and get policy ideas into congressional budgets. Krugman might have influence with ordinary people, but not so much with powerful politicians.

    2. Well, I think you're obviously just talking up your team. There's no doubting that Krugman's liquidity trap and deflation trap theories have for better or worse (I think both) been hugely influential. Those stem from his work on Japan. I don't know or think it's very important whether he gets private meetings with White House or Fed people. I doubt Cochrane has been an influential voice against fiscal stimulus and I don't think you can come up with any specific idea of Cochrane's that has been politically influential.

    3. At least recently, Krugman has been pointing out various mistakes he has made in his career.

      Cochrane writes opinion pieces for the Wall Street Journal. Maybe not as often as Krugman writes for the New York Times, but enough to be known outside the economics field.

      Yes, Krugman is an uncompromising crusader for Keynesian theory and left-liberal politics. But because the evidence tells him those are the correct theory and policies. Cochrane is an uncompromising crusader for ... Friedmanism? .. and far-right-conservative politics because his faith tells him that ideology trumps evidence.

    4. Anonymous12:46 PM

      No, no, no! Krugman is neither an uncompromising Keynesian nor is he the slightest bit leftist. Only recently has the left, progressives, or even mainstream liberals stopped criticizing him (or even heaping hate on him): do a search of any of their websites 2000-2008. He is much closer to a DLC centrist liberal a la 1990s Clinton or Jimmy Carter in his political economy policy recommendations. And he is mild mannered, if exasperated at ignorance and illogic, in his TV news panel appearances.

      And he is only a Keynesian relative to the right-wing think tanker, Austrians and austerians, and fresh-water economists. He is a late and self-proclaimed reluctant converter to any modern-day relevance of liquidity trap (beginning in 1998). He repeatedly critiques Keynes' impossible-to-dissect writings (who even true Keynesians never read except via interpreters such as Alvin Hansen, Tobin, and Samuelson. I'd label Krugman a counter-reformation Post-Keynesian.

  16. Herpaderp4:13 AM

    ...Except for the fact that "acrimony" is a public service to readers, whose time and attention are limited and valuable. I don't want my information sources to waste time or muddy their message by playing ring-around-the-rosie. The information I take from each's article is intimately tied up in my understanding of who they are (a perfectly rational behavior under Bayesian logic), so why do you want them do a worse job of communicating that identity?

    If there were a branch of the social sciences that often analyzed real-world phenomena by assuming rational actors and seeing what followed, and we had a professor of that field to analyze why two public intellectuals might behave in an "acrimonious" manner, the analysis we would see is... exactly what I just read above.

    Huh, didn't see that last part coming.

  17. There are a series of "academic" debates that professors should see to realise how they look - google "Newman and Baddiel history today." Here's a sample:

  18. Anonymous4:56 AM

    How's about this - they're both full of sh*t.

    Cochrane is a right-wing hack, Krugman a left-wing hack. Both can be relied upon to be rational, as long as it doesn't have an impact on their political causes.

    When that happens, the obfuscations and the half-truths begin.

    Oh, and they're both wrong on monetary matters.

    1. Lemme guess, you're an Austrian.

    2. jackrousseau11:34 AM

      Anyone who thinks Krugman is particularly left-wing is typically on the "wingnut" side of things and lacks both historical perspective and common sense.

      PK marks the leftward edge of acceptable political discourse, things that are polite to discuss in DC or in nice dining rooms. It's actually rather centrist, from any sensible understanding of what "left-wing" is. Just beyond that is Dean Baker, who can yell all day about the strong dollar killing the current account and sapping much-needed demand from the economy and get relatively little mainstream traction. Further out you have actual socialists and Marxists, and goodness knows it would be a disaster for the elite if people started developing a class consciousness, so you don't hear from them much (at least relative to economists equally far to the right).

    3. Anonymous4:40 PM

      Noah - if anything, I'm in the Scott Sumner camp.

      But hey, good to know you're either Keynesian or Austrian. Because Zod knows there aren't any other ways of approaching macro.

      jackrousseau - let me know when you're done splitting hairs

    4. Anonymous11:39 PM

      Is there no room for the Distributists? :)

  19. It's like watching 2 brothers fight.

  20. sigh...

    Is there anything going on other than two economists stroking their own egos? If there is I missed it. I highly doubt that this feud is about actual economics, more like 5-year-old attention seeking.

    Any credit yet from Krugman that Fed policy might possibly have offset fiscal tightening, even while the economy has a lot of slack, even an eensy weensy bit?? Krugman seems to not grasp the concept of revealed preference in public policy- people in the U.S. think big government has a cost and at some point are not willing to pay it.

    On the other hand, Cochrane's work, especially this recent neo-fisherian stuff - may be academically interesting, exploring the limits of models, but is practically useless. Sometimes a cigar is just a cigar - if your model results in things you don't see in the real world, like indeterminate inflation or a Neo-Fisherian effect, maybe you've reached the limits of your model. Maybe when he asks what's wrong with macro, he should look in the mirror.

    One thing I will give to Cochrane is that at least he's willing to try new things.

    Both are shining examples of what's wrong with academic macro. More focus on egos than facts.

    Maybe attention-seeking behavior is a substitute for irrelevant research. I can't help notice that economists whose work *is* highly relevant (like Woodford) don't behave like this. They put their energy into producing good research.

    1. Exactly who are "people" in this sentence?
      "people in the U.S. think big government has a cost and at some point are not willing to pay it."

      As has been pointed out by Kevin Drum if you actually ask "people" - meaning the general population - they actually support populist positions. If by "people" you mean the rich, well yes they don't like high taxes on them.

    2. By the way your comment about "big government" is totally irrelevant to the issue of a Keynesian stimulus in a liquidity trap, but yes there are ideologues who will use any excuse to try and reduce the size of government.

    3. Anonymous4:59 PM

      I think dwb is missing the point. It is not just egos. As Krugman would say, "It (the battle over macro policy) is not a game." The fundamental; difference between Krugman and Cochran is that Krugman is more worried about unemployment than about inflation. Cochran can always blame unemployment on welfare programs.

      One consequence of supporting Cochran in the controversy is that it means an economist who cares primarily about the welfare of the rich is the good guy and Krugman, who cares about the welfare of the poor and middle class is the bad guy. Of course, Cochran would claim that he more than Krugman cares about the size of the pie, but Krugman certainly wouldn't buy that argument.

  21. Anonymous10:39 AM

    "I think they kiss and make up should Mike Woodford join in to make out. "

    A serious critique of Woodford based on historical and empirical observation, not grovel knowing he is at the top of the profession, now that would actually be brave and interesting.

    1. Not just because he's at the top, but because he's the median voter.

  22. Phil Koop12:47 PM

    "Cochrane a finance guy"

    Yes indeed, which makes it all the more amusing that the finance profession has received his 2014 paper promoting narrow banking with considerably less enthusiasm than his macro pronouncements.

  23. I wonder if it is an American thing - especially if it relates to public intellectuals in the public eye. They have got to have a dust up every so often to keep up the interest. because the repetitive nature of blogs may reflect currently topical subjects but after a while it just gets repetitive and not half boring.

    That it happens on blogs just shows the day. Massive Latin tomes, with triple column pages, bound in vellum and printed in Franneker, are beyond our generation. Now it is a 140 word rap or at most a two screen essay.

  24. Anonymous6:07 PM

    I think that the commentary provided in the above blog is, unfortunately, a relatively superficial analysis of a more complex situation.

    Somewhat understandably, one can understand the basis of the blog. After all, who wouldn't want people – and especially one's associates in the same general field - to just “get along.”

    Unfortunately, it just isn't going to happen, for a number of reasons.

    To start, I think no-one can/will argue (whether you agree with him, or not ) that Professor Krugman is the current “star” of the economic blogosphere.

    As noted, he is clearly the current star in the economic blogging firmanet.

    But why is that? With so much competition?

    The answer to that question is clear from his blogs:

    On a technical level, they indicate that he is:

    - very thoughtful
    - very knowledgeable
    well prepared
    very forceful
    very methodical, and
    very organized.

    Professor Krugman's blogs reveal several other attributes about himself:

    he sets high standards for himself,
    clearly, he expects others to meet his own high standards, and
    furthermore, he doesn't suffer fools gladly.

    In addition, his blogs reveal several other interesting facets about himself.

    Firstly, for an academic economist, he is an unusally good writer.

    He can take fairly serious topics and writes them in a manner that are of general interest to the interested layperson.

    His general writing style is generally short breezy, and confined to one point.

    Like many other successful commentators, he consciously uses controversy to “spice up” his writings. It is for good reason that his blog is the first one I access after firing up my computer in the morning.

    If I want quick, snappy, funny, witty, informative “sound bite” analysis, I go to the Krugman blog. If I want good, solid technical, plodding analysis, I go to Simon Wren-Lewis. ( I like him, too.)

    I also think that Professor Krugman understands that controversy is a useful and even necessary tool to keep himself at the top of the game. In the blogoshere, as in other areas, controversy sells. And I'm sure the New York Times is not going to argue with his success.

    So, that's why I think things are not going to change.

    I would now like to make a quick contrast if I could.

    I read Professor Cochrane's latest couple of blogs.

    I was subsequently confounded/astounded to read in the above blog that he is “ a really smart academic” and “a top flight economist”.

    I certainly did not get that impression from his writing: in fact, the exact opposite.

    Obviously, the man has significant problems with his writing style.

    That's why i think, in relation to Professor Krugman, he is an “unranked amateur”.

    And that's why he shouldn't be surprised to find himself on the losing side of the court.

    Finally, as a trivial issue, can anyone explain to me why he would shut off his comments section because a few individuals mildly challenged his commentary.

    Commentators are the “fan-equivalent” of the blogosphere, only, unlike the sports fan, they actually get to participate in the game.

    In addition, actually, much of the best commentary is found in the Comments Section.

    And, that's what makes this game so interesting/fascinating/compelling!

    To close, I quote and old - but still relevant – truism to Professor Cochrane: “If you can't stand the heat, perhaps you should stay out of the kitchen.”

    1. Anonymous8:21 PM

      Why is it that 10 seconds after hitting the “publish” button, another key thought pops into mind.

      One further point that i wanted to address about the above blog is the issue of “false equivalency”.

      The blog notes that both mens are “really smart academics” and both are “top flight economists”. These two comments imply, to me, an equivalency and equality of professional stature that, I believe, is no where near supported by the very differing quality of their two writings.

      The issue of false equivalency is currently a hot debate topic in some media.

      For example, a number of writers have complained about some of the commentary with respect to the on-going disagreement over global warming.

      I think we have all read articles that treat both sides as legitimate and equal, despite the depth of the one-side and the shallowness of the other.

      In this blog, suggesting that Professors Krugman and Cochrane are “equals” - thereby implying an equality to both sides of their arguments – is, in my opinion, yet another example of false equivalency.

      In reality, one professor is very serious, and the other, not-so-much. And that should be the primary (only?) basis upon which their continuing discussion back and forth should be measured.

      And if a head gets knocked (or an ego scorched) in the process ; well then, perhaps, that is as it should be.

      Welcome to the real world.

    2. "he sets high standards for himself,
      clearly, he expects others to meet his own high standards, and
      furthermore, he doesn't suffer fools gladly."

      Actually, he does suffer fools, and admits it when he's been wrong.

      What he doesn't suffer gladly are dishonest people who ignore facts and persist in being deliberately wrong.

    3. "One further point that i wanted to address about the above blog is the issue of “false equivalency”. "

      Seconding, and Noah - you're being very false equivalency here.

      Who has been right?


      Who has been dishonest?

  25. I know this is not the academically correct thing to say, but we should be realistic: How much of the disagreement is because Cochrane does not want to acknowledge things that make libertarian/right wing ideology look bad, that will make his ideology less attractive to, and supported by, the public, maybe much less.

    You might say the same thing about Krugman and his ideology, but liberals are by and large utilitarian, and thus inherently pragmatic. If the economics shows less government of some kind is better for societal utility, there’s no urge to hush it up, to deny it, to mislead people into thinking it’s not so. There’s the opposite, an urge to acknowledge it and use it. And as things that increase total societal utility are popular with voters, if they know the benefits, there’s not these incentives to hide things from the public and others, and mislead them, and deny the economic logic and evidence, that libertarians and plutocrats have.

    On many things Cochrane may know perfectly well Krugman is right, but he would not admit it for how it would hurt the support for his ideology and associated policies.

    1. It's interesting that some people operate on the premise that Krugman is already right because of "ideology," no matter the actual arguments or facts.

    2. Anonymous8:17 PM

      Lulz, the impenetrability of libertarians.

    3. "It's interesting that some people operate on the premise that Krugman is already right because of "ideology," no matter the actual arguments or facts."

      Except ... that wasn't the argument at all. That's a pretty blatant straw man.

      A more reasonable summary of the OP would be that he claimed Krugman is right because of the actual arguments and fact, and implies this is self-evident, and that ideology drove Cochrane to be wrong.

      One could certainly dispute that, but if you are going to talk about the premise upon which "some people operate", try to restate it faithfully.

    4. MEegs: "It's interesting that some people operate on the premise that Krugman is already right because of "ideology," no matter the actual arguments or facts."

      No, people have looked at the record. It's actually the arguments and the facts.

  26. Anonymous11:20 PM


    Why is Cochrane so esteemed in the profession? I took Cochrane's great MBA class (check out the notes!) but the only reseach of his own he taught (rates paper w/Piazzesi) wasn't too inspiring.

    1. Cochrane is the kind of guy that is not famous for one "big thing", but who has done an enormous amount of medium-sized things. For example, his paper on habit formation with John Cambpell was the first serious attempt that I know of to explain macro-finance puzzles in a CCAPM-type model:

      A lot of what he's done is in financial econometrics. For example, this is my favorite Cochrane paper:

  27. Seems like part of the problem is Cochrane said a few stupid things back in '09 that he clearly didn't think enough about (fiscal policy is "fairy tales that have been proved false"). If he would admit that was stupid and not representative of what he believes now (or even then), it could probably move forward... a little.

    1. I'd like Krugman to move forward and review his so-called test of market monetarism last year.

    2. I'd love for market monetarists to review how they've consistently failed to come up with testable hypotheses. Actually, I mean that sincerely. I think by and large they are right about how much power central banks wield, but they do a terrible job of validating those ideas or understanding the limitations that still exist.

    3. Anonymous6:10 AM

      From my uneducated perspective, it's unclear that anyone understands what QE can or did accomplish, other than acting on some channels of interest rates. The costs don't seem to be clear, and the power of that action don't seem to be clear.

      It doesn't seem to be particularly powerful, so I have no idea why they are essentially claiming victory because it had a non-zero effect (that part seems fairly clear).

      Also, thank you for your excellent comments in this thread, ST, they have been educational.

    4. Anonymous7:14 AM

      Well said 6.07. The debates in the blogs are very important. It is a fascinating medium and plays an important role, not just for economics, but for democracy. Top economists engaging the General Public is good. WHen they debate in public and with the gloves off it is very good. I take my hat off to both Cochrane and Krugman for doing this.Let's hope Sargent does the same and defend his rational expectations in public.

      Let's not let the blogs go the way the staid and irrelevant economics profession in general which has succumbed to ideology dressed up as science and and does not even realise it.

    5. Anonymous10:33 PM

      6.7 replies:

      Well put, 7.14.

      Nice to see you “get it”.

      Imagine a sport like tennis, where the first half belongs to the experts. Then, in the second half, the spectators get a chance to flood onto the court and get in on the play.

      Now wouldn't that be a hoot.....

      Although you understand that your last paragraph is a subtle-but-still-cheap shot at Messr. Noah himself.

      For the subtext of the blog is that the Professor Krugman in particular needs to revert himself to the “...staid and irreverent economics profession in general.”

      Fortunately or unfortunately for his fellow economists (depending upon how they see it), Professor Krugman - by his oversized presence - has let the genie out of the bottle, and is unlikely to accept others wishes to wind back the clock, so to speak (multiple metaphors, here).

      In fact, the whole premise that Professor Krugman needs to “dial down” almost smacks of socialism. Or heaven forbid, even anti-Americanism.

      The whole American legend is represented by the strong, principled, righteous and pure individual standing fearless and tall, astride his (her?) magnificent and trusty steed, poised for battle with all and sundry foe.

      Like, think any sport.

      And yet, in his blog, Noah is subtly suggesting (however inadvertently) a gentilism, i.e., “Go-Along-To-Get-Along”, that truly flies in the face of that great American legend.

      To conclude, I would assert that economic blogging has more in common with, say, tennis, than it does with the old fashioned economic journal system.

      So the time is new: ring the bell, let the discourse begin, and shall the best man (person?) be left standing at the end.

  28. Anonymous9:16 AM

    This is an unhelpful intervention. The stakes are large here; we are not talking about professional reputations, but the issues. If there is a debate or disagreement we need to know, and the more explicitly claims are revealed the better. What we do not want is a return to the pre-2008 chummy consensus where "Keynesians" were even accepting ideas from the rational expectations school. Such groupthink must be avoided, especially if there is not a sound basis for it. Blogs have largely destroyed this groupthink which was largely driven by hierarchies in journals, it is a welcome development, please do not put it to waste.

    1. Bill Ellis7:44 PM

      I don't think that there would be any compromise for the sake of compromise from these two.
      I think Noah believes that they would find common ground without compromising anything either believes.

    2. Anonymous3:27 AM

      I think Krugman believes Keynesians sold out in the 1980s - with major consequences. He is not, and should not, going to give up this fight easily. But it is not an easy job. He (and just a few others like Stiglitz) are not just taking on Cochrane. They are taking on the bigger part of the modern profession.

  29. It should occur in whatever forum reveals that the disagreement is irresolvable. There's no actual method at the bottom of it all. No method means no right answer.

    There is nothing in economics, at bottom, that Krugman got right. His prejudices and preferences lined up with reality. Cochrane's preferences and prejudices did not.

    When Krugman says "reality has a well known liberal bias" he's not announcing the result of his economic analysis. He's telling you why his hand-waving produces correct answers.

    1. Funny, because Krugman's liquidity trap model of indeterminacy of monetary velocity at the zero bound looks pretty spot on to me, and here you are saying that Krugman got nothing in economics right, "at bottom."

      It's extra funny because the ZLB is kind of a "bottom."

    2. When your theory aligns with reality, it's not based on prejudices and preferences. Liberals hold the positions they hold because reality and evidence support those positions. Conservatives take the opposite tack, starting with prejudices and positions and then holding them regardless of available evidence.

      Conservatives frequently try to project their faith-based reasoning on liberals, but it really doesn't work that way.

  30. Bill Ellis7:40 PM

    Krugman and Cochrane in the same room thrashing things out and Noah Smith live blogging it... You'd have the wonkiest audience ever.

    Noah, If you can get them to do this... maybe you can save the world !

  31. Is anyone is arguing that Cochrane's catastrophe could not happen. It is very unlikely to happen. Cochrane's scenario is built on an elitist fears. The great unwashed gain control of fiscal policy, vote themselves free lunch in perpetuity and .... "Zimbabwe!!".

    The far greater danger is that our out of touch ruling elites continue to refuse to address festering economic and social problems, focusing instead on protecting the special interests of their wealthy friends to the detriment of we the people. Marie Antoinette did not live to write about the consequences of corrupt elitism based on fear of the people.

    1. The world will always run by elites, period, no matter official ideology adopted. It's true of Stalinist Russia, Nazi Germany, Maoist China, and western "democracy-moneto-cracy", even though everyone claims to serve "the people".

      Elites are usually the most ruthless, narcissistic people. The western democracy seemed to have put some constraints on the elites. But whether those constraints will last is an open question. At some point the Republic might turn into the Empire, just like the movie Star Wars, no one can predict the "force".

    2. Over the vast majority of history, humans were ruled by ruthless "leaders". If history is any guide, the post WWII relative mildness of oppression is but a temporary aberration from the norm. All it takes is a catastrophe, like extreme climate event, or global pandemic, or global war, to return the history to normal ruthless phase.

  32. I've witnessed this feud from day one. I know what it has become so bitter, and there is good reason for it. However, I do hope that our economic profession can get its act together before the next collapse, so that when it happens we have some ready solutions.

    It is unfathomable that we have a subject of such importance to so many people's lives and no standardization over the way it should and should not affect public policy.

    I'm not going to draw any false equivalences here, but I will say that both sides have made mistakes. From the very beginning I believed those mistakes to be honest mistakes, regardless of how simple or complex the mistakes appear on the outside. Sometimes it takes an incredibly smart person to make the simplest mistakes. If we can all agree that we should be more careful about weighing in on public debates of importance, I think there can be a discussion about the differences.

    I think the politics of this are pretty severe and important. It is going to be very difficult to make headway out of the eye of politics. We're talking about a guy who talks to presidents and a guy who talks to the chairman of an important house subcommittee.

    It would be nice to have a nonpolitical debate on this, but that is going to be very, very difficult if it is even possible at all.

    1. Anonymous6:23 PM

      Like Noah's article above, again, I find this assessment a bit superficial.

      There IS a false equivalency in “...both sides have made mistakes”.

      Also, “sometimes it takes an incredibly smart person to make the simplest mistake.”

      Everyone makes mistakes, so we're not really talking about mistakes as such, but how a person reacts when an error is subsequently identified.

      We know that Professor Krugman will generally acknowledge his errors (however difficult that may be for him). In fact, he has done so (however hesitantly) on a couple of occasions lately.

      So, therefore, I believe he can occupy some moral high ground by pummelling those who, rather than accepting reality, only dig themselves deeper into a hole, thereby winding up making matters only worse for themselves.

      The statement, “If we can all agree that we should be more careful about weighing in on public debates...” is, I believe, yet another example of false equivalency.

      This implies, for example, that Professor Krugman is not careful about his side of the public debate.

      If there's one thing that I've learned from reading Professor Krugman is that he is very, VERY careful and deliberate about his commentary. In fact, in my estimation his writing is a prime example of due care and attention. That's one reason why I like reading his columns so much.

      And why he is so successful – and popular - (and influential) as both a columnist and as a blogger.

      I believe his frustration arises from his perception that the other side isn't (or doesn't want to - or can't) play at the same level.

      I guess what I'm really trying to say is that despite Noah's equivalency of the two individuals as “really smart academics” and “top flight economists”, these attributes will never be particularly important to their relationship.

      In reality, it is the very significant differences between the two professors that define their relationship, and the obvious chasm between them would make any kind of reconciliation difficult, to say the least.

    2. Anonymous11:06 AM

      "It is unfathomable that we have a subject of such importance to so many people's lives and no standardization over the way it should and should not affect public policy."

      It is more dangerous to have such a standardization. We need debate. Not a patched up consensus.The debate between Smith vs Keynes vs Marx can never be standardized. They will keep on being debated.They are all valid but irreconcilable views of reality. There will just be a shift in the pendulum over time with respect to whose views predominate. It is important though to have an accurate if not a detailed understanding of the classics.

    3. It is not a debate between Smith vs Keynes vs Marx. It is a debate between evidence-based reasoning and faith-based reasoning. And there can be no resolution between those two camps.

  33. Anonymous11:44 PM

    I'm starting to think I'm beating a dead horse here, but I have one further comment to offer.

    In looking at the Professors Krugman and Cochrane interchange, one can seen one of two things.

    Firstly, a small, internal battle between smart economists over economic minutiae.

    Or, a much larger battle over the future direction of America itself.

    Anyone at all familiar with the latest trends in the economy, as well as in society itself, will note that the pendulum is swinging backwards in time and place, e.g.:

    - attacks upon unions,
    - attacks upon wages,
    - attacks upon the environment
    - attacks upon all levels of government
    - attacks upon science,
    - attacks upon the middle class itself.

    As has occurred throughout history, big money (and its power) is slowly, but inexorably, on the rise once again.

    Those of us concerned/worried/frustrated with the change in direction have few heroes to look to for guidance and direction. The two that come quickest to mind are Senator Warren and Professor Krugman.

    They lead the good fight on behalf all of us who, although not so well off, still wish the best opportunity for those who will follow in our footsteps.

    So, we NEED for Professor Krugman to continue his strenuous efforts on our behalf.

    And without him - and Senator Warren - and a few others, we are doomed, for they are our voice.

    So if the economics profession suffers internally from the conversation somewhat, then perhaps it needs to suck it up for a while, for the benefit of the rest of us.

    After all, bitterness is, in the big scheme of things, a small price to pay in the gigantic battle now going on for the heart and soul of America (and many other democracies – e.g., see Wren-Lewis).

    1. I completely agree with you. Mordor is rising. Who will be our Gandalf?

  34. Dave: "I'm not going to draw any false equivalences here, but I will say that both sides have made mistakes."

    That sentence is false equivalency.

    'Both sides have made mistakes' means nothing, since we're talking about human beings here. The only reason that people say that about Krugman is that they don't want to discuss who has made more, and who has persisted even after the facts roll in.

  35. Noah: "One interesting feature of the dispute is that it has been carried out entirely over blogs. Debate between economists seems to be disappearing from the journals, so maybe blogs are stepping in to fill the void."

    Noah, you're part of this movement, and you can't see it? People are routing around the gatekeepers (both for good and for bad).

    "The latest salvo shows that the dispute has not really died down, either in the level of disagreement or the acrimonious tone. Here is Krugman, and here is Cochrane. These posts get quite aggro (a slang term my generation invented meaning "aggravated and aggressive"), so I won't quote excerpts."

    BTW, has Krugman *ever* been as acrimonious as the Chicago people?

    "Anyway, like I said, there is a certain fun in watching Godzilla and King Kong go at it...from a distance. But I think this particular feud is getting out of hand. The acrimony doesn't actually help get to the bottom of the issues at hand - it just provides spectacle.""

    Actually, it has - Cochrane is wrong, Krugman is right. It's just that the profession doesn't want to admit it.

  36. Wow, many many thoughts here. The meta-debate is fascinating.

    First, from my own experience at attempting a little mathematical model (in a completely different field). In this case it's a series where only the first 11 data points are currently known (absolutely). What is also known is that the series is absolutely asymptotic (upwardly bounded) because what it is measuring is finite (although very large). Funny thing though, an exponential (unbounded) function is a much better fit to the known data than an asymptotic function. If one were ideologically fixated on data (Cochrane), one might mistakenly dismiss the finiteness proof as "airy fairy" stuff and (stupidly) insist that the underlying feature is most likely not finite after all. This is the type of "thinking" that I think Krugman is referring to.

    Interestingly and ironically, I just yesterday heard part of a talk on NPR about how all of modern economics is based on hidden presumptions that infinite growth is possible. The stand seemed to be that this was myth (I haven't listened to the whole thing yet). But if "growth" in economics is not limited to "physical things", perhaps there is in fact no boundedness there...

    I do agree with other commenters who accuse of a type of "false equivalence" going on in the meta-debate.

  37. While I'm kind of skeptical about this proposed cumbaya moment-I mean if it's so easy outside of the blogs to get agreement then why are NKers even now treated as suspect at the journals controlled by RBC-I was struck seeing Stephen Williamson give a speech once. He couldn't have been more mild-mannered an agreeable in person.

    Again, though I think you're overestimating the power of the academic world to fairly arbitrate things. Even before the blogs they weren't able to do it.

    I would argue that the blogs have been a net positive overall for informing the average guy about econ theory, etc.

  38. I don't really see the blogs as the in any way proximate cause of Cochrane-Krugman's rift. The whole point of NK was to get past the acrimonious war between Keynesians and New Classicals over the previous 10 years-again, obviously a pre-blog era.