Claudia Sahm: "We should have a recession,” John H. Cochrane said in November [2008], speaking to students and investors. “People who spend their lives pounding nails in Nevada need something else to do.” #yikes...

Scott Gosnell: I was there... 1/
.... I may even have a recording down in the archives and may have sprained my eyes I rolled them so hard.

...Brad DeLong: What! Really? Tell me more… I mean, private housing construction as a share of GDP had crashed from its peak of 5.0% of GDP in 2005Q4 through its... 2/
...historical average of 3.4% in 2007Q2, and had bottomed all the way down to 2.1% by 2008Q4, when Cochrane was opining about too many people pounding nails in Nevada. How was it possible to say such a thing? How could he avoid looking at graphs like this one... 3/ Image
...How was it possible to avoid noticing that residential construction employment had already fallen from 150% to 60% of its normal share even as he spoke? And how did the audience react?

Joe Marshall: Holy hell. What the f—- was wrong with these people?... 4/
Scott Gosnell: I went to all of those econ talks at Gleacher.... Faculty could say all kinds of things without getting much skepticism. Being a Mellon-style liquidationist was sort of edgy and cool among the Republican-leaning economists at the time... 5/
Brad DeLong: Touché... One question I always ask Paul Krugman and company is: what happened to the influence of Milton Friedman? No one was a stronger anti-liquidationist than Milton Friedman.… The shift to "liquidationism" as the default policy view of a Republican... 6/
...economist (when Republicans were out of power, at least), seems to have happened remarkably quickly in one decade, the 2000s, and without analysis and without argument. How and why did this happen, that being a full-fledged Mellonian became "edgy" and "cool"?... 7/
...Krugman's explanations <>... [seem to me] (a) right, (b) much too compressed, but (c) ignores the problem of “where do you stop?”.... Why is police & courts acceptable, while police & courts & demand management is not?

I think it has something... 8/ do with Schumpeter, von Hayek, and von Mises; the context of early–20th center Vienna; the idea that humans are individuals for whom private property and one-shot exchange are “natural” (as opposed to creatures that establish and cement societal bonds via ongoing... 9/
...reciprocal gift-exchange relationships); the philosophical position that all is for the best in this the best of all possible worlds; and the resulting theological belief that:

>the market giveth; the market taketh away; blessed be the name of the market…

In short... 10/
...I think [Paul Krugman is] right, but I do not understand why. And here I know I am out of my depth, and I want to call for people like Emma Rothschild and Glory Liu who are trained professionals to help here, for they she might be able to teacheth me the lesson… 11/END

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More from @delong

23 May…

First: An ur-text for the doctrines of Dark Satanic Millian Liberalism. Here George Stigler writing back in 1949 seeks to assimilate the classical economists Smith, Senior, and Mill to his claim that a good economic system does not produce... 1/
... prosperity but rather builds character: George Stigler (1949): Five Lectures on Economic Problems: ‘Why encourage men to work and save ? The customary answer is to maximize output…. One might defend the goal of maximum output by arguing that the ultimate utilitarian... 2/
... goal was maximum satisfaction, and that greater output will lead to larger increases of satisfaction than will greater equality. This interpretation is plausible, but I believe it is mistaken.... Why, then, did the classical economists display such great and persistent... 3/
Read 9 tweets
22 May
@paulkrugman But, as you note, Bernanke in 2002 and Mankiw in 2006 still saw Friedman as "the economist of the century" <…> <…>. They were fine with the "government should not interfere with the economy" and "whatever is the monetary policy that 1/
@paulkrugman ...happens to stabilize aggregate demand is the true non-interfering 'neutral' monetary policy". It was a con, yes, but it was a successful con. And it is not clear that it was wrong as a practical policy position. It was, after all, Keynes's as well: "the result of... 2/
@paulkrugman ... filling in the gaps in the classical theory is not to dispose of the ‘Manchester System’, but to indicate the nature of the environment which the free play of economic forces requires..." <…>. Friedman's insistence that you could do it with... 3/
Read 13 tweets
22 May
@infinite_me @Claudia_Sahm Touché...

One question I always ask @paulkrugman and company is: what happened to the influence of Milton Friedman? No one was a stronger anti-liquidationist than Milton Friedman...

Milton Friedman <…>: 'A debate on Keynes between Abba P. Lerner and... 1/
@infinite_me @Claudia_Sahm @paulkrugman ...myself... in the late 1940s.... 1930s, pre-General Theory; we have a somewhat similar Talmudic cast of mind and a similar willingness to follow our analysis to its logical conclusion.... [We] agree[d] on a large number of issues-from flexible exchange rates to the... 2/
@infinite_me @Claudia_Sahm @paulkrugman ... volunteer army. Yet we were affected very differently by the Keynesian Revolution-Lerner becoming an enthusiastic convert... I... somewhat hostile.... Lerner was trained at the London School of Economics, where the dominant view was that the depression was an inevitable... 3/
Read 14 tweets
22 May…

FIRST: You can think of the labor market as being in one of three different modes. In the first mode there is chronic over supply of labor at the prevailing wage. In the second mode the labor market is in balance, and in order for employment as a... 1/
... whole to rise firms need to offer higher real wages. In the third mode the labor market is at full employment and even increasing wages will not increase employment in the economy as a whole. The labor market has been in the first mood for so long the employers regard... 2/
...the second as grossly irrational, and talk about "labor shortage" whenever we get into it. But mode two is not “labor shortage”. Mode three is when you can talk about "labor shortage":

Anne Laurie: Fruits of Their Labor: The Secret Is Leaking Out: ‘The Wall Street Journal 3/
Read 6 tweets
20 May…

This is NUTS. & GENIUS. GENIUS-NUTS: On startup, the Apple Silicon M1 notices that it has lots of background and housekeeping work to do—mds_stores, bird, cloudd, kernel_task, & c.—and so it starts doing it. It immediately full-throttles all four... 1/
...of its IceStorm efficiency cores. Then I start working. And it responds, giving me FireStorm core #5, with occasional spillover to FireStorm core #6, holding FireStorm cores #7 & #8 in reserve, just so if I ask it to do anything heavy, it can respond instantaneously... 2/
..., rather than get caught up on its background and housekeeping by letting those processes onto the performance cores. Let’s see if I can get it in gear… Here I have an unconverted terabyte zoom session lying around… PEDAL to the METAL, Commander! Zoom & MacOS are not... 3/
Read 13 tweets
20 May…

No. There is neither a transcript nor a video nor an audio of John Cochrane's 2008 CRISP Forum keynote at the Gleacher Center. It appears to have been deep-sixed. All we have of it appears to be Cochrane’s declaration—made at a time when the share... 1/
... of the U.S. labor force in construction was below its long-run average and had been below its long-run average for fifteen months—that: “we should have a recession. People who spend their lives pounding nails in Nevada need something else to do.” No recognition at all... 2/
...that the structural-adjustment climb-down from the housing boom had already taken place. No recognition that structural adjustment takes place by pulling people into high-value jobs, not by pushing them out of low-value jobs into zero-value non-jobs. No recognition at... 3/
Read 9 tweets

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