Atlas Shrugged: The Mocking

Wednesday, January 4, 2012

For The Greater Good

Poor Megan McArdle. Always a bridesmaid and never a bride, intellectually speaking.

The economist equivalent of a brawl is going on between Paul Krugman and the guys at Marginal Revolution. I'm not going to pile into the dispute directly--I prefer both the style and substance of Marginal Revolution, but am well aware that Paul Krugman has forgotten more economics than I will ever know.

Of course McArdle will not address an actual argument; that takes effort.

However, I will note that the commenters Paul Krugman sends to other sites harbor a very strange faith in his predictive powers. When other economists dispute something that Paul Krugman has said, they tend to rejoinder that the reason Paul Krugman is obviously a more reliable source than this crappy ideological hack they're speaking to is that, unlike YOU, Paul Krugman has gotten things right over and over.

But it takes no effort to accuse Mr. Krugman of sending commenters to other sites. Or to say that if you ever get anything wrong then obviously you're not reliable. McArdle gets almost everything wrong and is very unreliable but almost everyone has different standards for the other side than they have for themselves.

What is so strange about this belief--aside from the collective hyperlocal amnesia that prevents them from remembering that yes, even the great Paul Krugman has made some bloomers in his time--is that the examples of his Nostradamus-like powers are not, in fact, at all special. Chief among them--the sort of Ur prediction upon which he has apparently made his reputation--is "calling" the housing bubble in 2003.

This is chief to McArdle because it is one of the few things she did not get wrong, and since she free rides off the intellectual efforts of others (in this case Pam Woodall, as she mentions below), that's not exactly a brilliant achievement. This is the woman who said that the US would not have a recession, after all.

Contra the fuzzy recollections of his readers, this is not an example of unusual foresight unparalleled in the world of journalism. I called the housing bubble a full year earlier than he did, in 2002. The Economist was writing about the global housing bubble even earlier than that, thanks to Pam Woodall's fearsome analytic talents.

This is obviously not a sign that I am possessed of near-superhuman foresight, because while I foresaw the collapse, I did not foresee it leading to a run on the money markets, or any of the other specific events of 2008. Neither, as far as I am aware, did Paul Krugman. Nor, for that matter, Nouriel Roubini, who was predicting a crisis, to be sure, but a completely different crisis from the one we actually got, one that would be triggered by America's persistent current account deficits and dollar devaluation.

McArdle believed what she was told. Krugman based his analysis on the information he had at the time. To compare the two is the worst sort of preening.

So far, none of the people who have urged me to recognize Krugman's superior analytic abilities on the grounds that he called the housing bubble, have changed their minds and agreed with me when I informed them that I "called" it even earlier than their sage. Nor have they switched their allegiance to The Economist, which has been quite sharp about Krugman in its time.

I get the feeling that Krugman himself rather encourages this touching faith in his unusual forecasting abilities, and more generally, the notion that the only reason he is such a flaming jerk to economists he disagrees with is that they really are, every one of them, too stupid to count to twenty with their shoes on. His latest response to Marginal Revolution is a case in point:

I plead innocent. I only treat people as mendacious idiots if they are mendacious idiots.

Seriously: I have some big disagreements with Ken Rogoff, but if you use the little search box up there on the upper right and enter "Rogoff" I think you'll find that I have always treated him with respect. On the other hand, enter "Heritage" and you'll find me pretty scornful -- but with very good reason! And I always document what I'm saying.

This is true, as far as it goes: in my recollection, he always has been pretty respectful to Ken Rogoff.

But allow me to suggest--gently, gently!--that this might not be quite the whole story. For those of Krugman's readers who are not familiar with Ken Rogoff's oeuvre beyond what they have read of it on Paul Krugman's blog, it's worth noting that Ken Rogoff has not, in the past, been shy about shredding Nobel Prizewinners who made the mistake of going all Defcon 1 in Professor Rogoff's vicinity. And that it's generally agreed that the last time this happened, he got by far the better of the argument.

Paul Krugman is a brilliant man with a very fine memory. Though this angle probably eludes most of his readers, I doubt it's eluded him.

It's all about austerity and Keynesian economics. McArdle believes that a consumer spending-based economy will recover by slashing spending and Krugman does not. It should be obvious who is right but McArdle doesn't care about right or wrong. It might be wrong to lie and obfuscate but she has no choice--if liberals control the direction of the economy the entire financial industry will collapse.

She just chose the lesser evil.


Lurking Canadian said...

Yeah, I'm going to appeal to authority again:

In this corner, we have a Nobel laureate.

And in this corner, we have an English degree and a really, really nice stand mixer.

You make the call.

Susan of Texas said...


Anonymous said...

mcmegtard has been champing at the bit to get a krugman. she does not have the chops to do it directly. this proxy war is exceedingly weak. i'm only surprised she kept the scare quotes off of great in her title.

Anonymous said...

wait, in that last bit, is she saying Krugman is afraid of being powned by Rogoff?!?

Susan of Texas said...

She is saying he should be. I haven't read much of their debates but I suspect that McArdle is wrong as usual.

Narya said...

To quote Charles Pierce: Fk the deficit. People got no jobs. People got no money.

Of course, Meggers doesn't see that, for all of the reasons that Susan has documented.

ifthethunderdontgetya™³²®© said...

The supply-side boys have had their way for 30 years.

Unless their only goal was to make the plutocrats richer and everyone else poorer, they've failed.

My comment at McMeegan's.

Downpuppy said...

She answered me.


Substance McGravitas said...

For those of Krugman's readers who are not familiar with Ken Rogoff's oeuvre beyond what they have read of it on Paul Krugman's blog, it's worth noting that Ken Rogoff has not, in the past, been shy about shredding Nobel Prizewinners who made the mistake of going all Defcon 1 in Professor Rogoff's vicinity. And that it's generally agreed that the last time this happened, he got by far the better of the argument.

Ha ha! These two guys talked about stuff I don't understand and I am positive that the one guy would totally nail the other guy! So I am told.

Janus Daniels said...
This comment has been removed by the author.
Janus Daniels said...

"... It might be wrong to lie and obfuscate but she has no choice--if liberals control the direction of the economy the entire financial industry will collapse..."
You need to bracket that with snark tags now!
Or, you can expect to see yourself quoted as McMegan's defender. ; )

Kathy said...

This is obviously not a sign that I am possessed of near-superhuman foresight, because while I foresaw the collapse...

Everyone foresaw the collapse, just as they/we foresaw the deflating of the Internet Bubble of the 90's.

But Krugman backed up his foresight with well researched (tho not "superhuman"), intelligent math and analysis... which is way beyond ArgleBargle's ken.

Batocchio said...

Oh, good lord.

I read Krugman's blog and column regularly, and have read a couple of his books. Not that it's news to anyone here, but the man is very, very sharp and an excellent writer to boot, and that's especially valuable when explaining economics to a lay audience.

Krugman's batting average is amazingly good, and he was rated one of the most accurate in predictions in some study or other; it's hardly his claim alone. Plus, he 'fesses up to his mistakes, as he did again recently. As said upthread, Megan doesn't begin to have the chops to engage him on substance. Rarely has there been such a stark contrast between a true scholar/wonk and an inept hack. Krugman, Delong, Taibbi, Levenson and Susan drink McMegan's milkshake on a regular basis.

Batocchio said...

Oh, and folks here probably know this, but regarding ifthethunderdontgetya's point, bad faith has always been central to supply-side economics. From the epic 1981 William Greider feature when The Atlantic was good, "The Education of David Stockman":

Stockman himself had been a late convert to supply-side theology, and now he was beginning to leave the church. The theory of "expectations" wasn't working. He could see that. And Stockman's institutional role as budget director forced him to look constantly at aspects of the political economy that the other supply-siders tended to dismiss. Whatever the reason, Stockman was creating some distance between himself and the supply-side purists; eventually, he would become the target of their nasty barbs. For his part, Stockman began to disparage the grand theory as a kind of convenient illusion—new rhetoric to cover old Republican doctrine.

"The hard part of the supply-side tax cut is dropping the top rate from 70 to 50 percent—the rest of it is a secondary matter," Stockman explained. "The original argument was that the top bracket was too high, and that's having the most devastating effect on the economy. Then, the general argument was that, in order to make this palatable as a political matter, you had to bring down all the brackets. But, I mean, Kemp-Roth was always a Trojan horse to bring down the top rate."

A Trojan horse? This seemed a cynical concession for Stockman to make in private conversation while the Reagan Administration was still selling the supply-side doctrine to Congress. Yet he was conceding what the liberal Keynesian critics had argued from the outset—the supply-side theory was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects "trickle down" through the economy to reach everyone else. Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. "It's kind of hard to sell 'trickle down,'" he explained, "so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."

Stockman was taken to the woodshed for admitting it, and there's plenty of other evidence of bad faith in conservative economics. (Meanwhile, alas for The Atlantic. From Greider to McArdle. Sigh.)

Kevin Donoghue said...

The Rogoff critique of Stiglitz wasn't as impressive as all that. And "as an academic, you are a towering genius" isn't the sort of criticism that would intimidate Krugman. But it's worth a look (sadly I can't find Stiglitz's reply online):

Ken Houghton said...

"I called the housing bubble a full year earlier than he did, in 2002. The Economist was writing about the global housing bubble even earlier than that, thanks to Pam Woodall's fearsome analytic talents."

Uh, if you look at Case-Shiller, 2002 and earlier is rather soon to be "call[ing] the housing bubble." There are good and right reasons for the ratio to be higher than 100, and even 2002's ca. 120 is more "if this goes on" (which it did) than "OMG, It's Here!"

By the time Dean Baker sells his condo in 2004, the ratio is around 160, which--while absurd on the face of it--is also around when David Malpass is writing editorials for the WSJ talking about the glories of housing prices and using that "Equity" piggy bank as if it were a Quick Asset.

In the I Know Which Way to Bet Category, for someone willing to go through McMegan's archives: (1) find that or those 2002 piece(s) about the housing bubble and (2) find what she's saying about housing in general and Malpass et al's pieces in particular while Baker sells and Krugman (not to mention Bill McBride/Tanta) continues to warn.

If you find consistency, let me know.

Ken Houghton said...

Just checked Kevin Donohue's link. Can understand why Rogoff's slimy, condescending tone goes over well with McArdle, but it's basically a "Rally the Troops" speech. ("The IMF isn't staffed with third-raters. The rest of you may be second-raters, but Joe is wrong to see our goals as antithetical to growth--this is a feature, not a bug.")

But Rogoff has to be right, because Argentina is still in a depression and there was no Debt Relief from the onerous IMF/IBRD conditions that never produced enough domestic growth to justify their terms. The "Washington Consensus" was and is correct, even though the only countries that have grown reasonably well since The Great Recession started are the ones (Germany, China, the US) that did the opposite of what it demanded of Those Other Countries.

Anonymous said...

Lurking Canadian with the first round KO. Very nice.

One can't help but note, yet again, that in matters more important than economics--the Iraq Invasion for example--well, Kruggs got that one very right, while Our Lady of the Painfully Lame British Affectations was wrong wrong wrong wrong (a lot).

Downpuppy said...

Ken - the housing bubble piece from July 2002 -

Basically, she read Stephen Roach & decided that the bubble was about to burst. Since she has studiously avoided knowing what went on in 2003-2007, this might still seem to make sense to her.

Anonymous said...

For all her output, it must be said that McA just can't write. In all those words, she has only half-claims supported by no evidence, and a smoke-mirror apparatus to produce pseudofacts that are meant to support claims she never makes.

Shorter McTwaddle: That guy, over there! And the other one, here! If they fought, I would have said things in 2002, so take that, interlopers in the comments section! Look over there! [melts away into a trail of slime]

Anonymous said...

The 2002 housing bubble is the thing Megan cites frequently because it's possibly one of the only things she claim to be right about (though it's not particularly interesting since other people also declared there was a bubble). She clings to it like a life raft when she tries to bludgeon everyone else.

This is just another false equivalency tactic however. Megan being right once DNE Paul Krugman being right once.

Downpuppy said...

And she wasn't even right in 2002, in a market call sense. Anyone who acted on her advice and shorted - What Roach is saying is that this is the last piling standing in the flood -- and it's about to come down. So it may be time to get out on the roof and holler for help.

would have gone bust long before the bubble popped.

Anonymous said...

The trouble is, that history has PROVED Krugman to be right. What does McMegan think the Gilded Age, the Crash of 1929, the New Deal, and Reaganomics (read: Gilded Age 2.0) show?

But I guess in the Republican universe, facts don't matter if they get in the way of theory...

nate said...

She implies that Krugman is only nice to Rogoff because he's afraid of the competition-- I guess Krugman has humiliated her enough times that she's not willing to insult him overtly.

On top of all of her other mental, emotional, and intellectual failings, she's chickenshit to boot.

Jane Galt, indeed.

Anonymous said...

Elizabeth Warren Smackdown, an Ongoing Series

Anonymous said...

But isn't it for the greater good for gay marriage to not be legal according to Megan?

Because there may be societal reasons that she chooses not to espouse in her post saying that maybe gay marriage shouldn't be legal but she won't take a stance on the topic despite having taken a stance in the same post.

Ufotofu9 said...

McArdle vs. Paul Krugman on economics? Why am I reminded of the scene in Jurassic Park where the cow is dropped into the T-Rex's pen?

I'm also interested in what Megan McArdle think sabot Quantum Physics. Perhaps she can argue with Brian Greene while she's at it. Haha.

blivet said...

I'm still somewhat baffled as to why, exactly, anyone is supposed to care what Megan McArdle has to say about economics.

She doesn't have the academic standing; an MBA is not a "real" degree for this purpose. That wouldn't matter if she had demonstrated a grasp of the subject, but she hasn't done that in the far too many years I've been reading her stuff, albeit less and less attentively.

Instead she's publicly made a fool of herself time and again. Her mistakes aren't matters of differing approaches to the data, or nuance; they are just plain stupid or lazy. She drops zeroes, she makes up examples instead of using a search engine, and on and on.

I understand that her real function is, as others have so succinctly put it, to muddy the waters, but for God's sake , couldn't the Atlantic have found someone who could at least bullshit convincingly?

Susan of Texas said...

The Atlantic must like her snide tone and fondness for petty squabbling.

pseudonymous in nc said...

McMuggins is desperate to get a response from Krugman, as that would somehow validate her credentials. Whoever's collating the stats at the Krugman blog page on is going to see refresh-refresh-refresh from a DC IP.

She ain't gonna get one. Krugman's calling out idiot economists, not idiot kitchenware obsessives.

Downpuppy said...

I got 34 likes - most popular thing I ever wrote - for calling Megan an anklebiter.

Gotta love the internets.

Anonymous said...

McArdle gets almost everything wrong and is very unreliable...

In fact, she's quite reliable. She's mostly wrong, but she's quite reliably so. Like a compass with the wrong end of the needle painted red.