Blinders

Alan Blinder has what looked similar an interesting-looking essay inwards the New York Review of Books, "What's the affair amongst economics?" Alan has unremarkably been thoughtful, the WSJ household liberal columnist, thus I approached it hoping for well-reasoned declaration I mightiness disagree with, but survive interested past times together with larn something from. And it started well, pointing out the many things on which economists all concord together with policy does not.

Alas, together with then nosotros acquire to macro. Something virtually stimulus sends people off the deep end.  One lilliputian quote pretty much summarizes the tone together with (lack of) usefulness of the whole thing:

The peachy Milton Friedman of the University of Chicago, a favorite target of Madrick, may bring been correct or wrong; but he was sure enough far to the right. Much the same tin survive said of several other economists cited past times Madrick every bit representing the mainstream. For example, he quotes John Cochrane, also of the University of Chicago, every bit proverb inwards 2009 that Keynesian economic science is “not business office of what anybody has taught graduate students since the 1960s. [Keynesian ideas] are fairy tales that bring been proved false.” The outset declaration is demonstrably false; the 2nd is absurd. People tin together with produce debate over the macroeconomic views associated amongst the so-called Chicago School, but it’s clear that the views of that schoolhouse are far from the mainstream.

"Demonstrably false" together with "absurd" are pretty strong.

Am I incorrect that graduate programs produce non instruct whatsoever Keynesian economics? I went to await at the Princeton University Economics Department graduate course of teaching offerings. Following upward on the ones titled "macro," I found

Esteban Rossi-Hansberg: Econ 522 Topics inwards Macroecomics
Benjamin Moll: Macroeconomic Theory I (1st twelvemonth PhD): Lecture notes. Syllabus 
                          Advanced Macroeconomics I, Economics 521 (2nd Year PhD)  Syllabus

Chris Sims:   Macroeconomic Theory 504

First reaction: Wow, Princeton has a peachy macroeconomics program. I mean value I'll prevarication virtually my historic menstruum together with apply every bit a grad student.

Second reaction: There is null Keynesian economic science anywhere inwards Princeton's graduate program. 

Alan: if yous mean value it's "absurd" to state that nobody teaches Keynesian economic science inwards graduate programs, yous are revealing that yous bring no thought what goes on inwards modern graduate programs, including your own. 

(I may bring missed some, together with non all syllabi are publicly available. If ISLM is taught anywhere inwards Princeton's economic science PhD program, past times anyone other than Blinder himself, post service link to comments or transportation it to me together with I'll survive glad to admit it.)

Forget virtually "absurd" together with "mainstream." Alan, tin yous supply whatsoever evidence that whatsoever PhD programme at a meridian USA Economics subdivision teaches whatsoever IS-LM Keynesian economic science at all?

(Lay readers may survive a flake confused virtually the presence of a few (surprisingly few) "new-Keynesian" mentions inwards these references. "Keynesian" together with "New-Keynesian" are every bit unlike every bit Ptolemaic together with Copernican astronomy. Yeah, both are virtually the motility of the stars, but that's it. While 1 mightiness excuse New York Review of Books readers for non knowing the distinction, that's non the point. Blinder, if he has read whatsoever academic papers inwards the terminal xxx years, should know the distinction. Krugman is clear on the distinction, oftentimes savaging new-Keynesians. If that's his excuse for writing this, Blinder either reveals that he does non know the departure betwixt Keynesian-- IS-LM--and new-Keynesian--Woodford, etc.--or that he does non know what's beingness taught inwards his ain graduate program. Take your pick.)

As for "mainstream," Moll's syllabus starts 

Books:
- Stokey, Nancy, Robert E. Lucas Jr. together with Edward C. Prescott (1989), “Recursive Methods in Economic Dynamics”
- Ljungqvist, Lars together with Thomas J. Sargent (2004), “Recursive Macroeconomic Theory” 

How many Nobel Prizes bring been awarded for demolishing Keynesian Economics?  Lucas, Sargent, Prescott, Sims, Phelps, ... I may bring missed a few. How many for anything supporting it? 0 that I tin find. (Update clarification: For Keynesian economics, non to "Keynesian" economists.) 

And readers of this weblog empathise the departure betwixt "right" together with "free market" or "libertarian." I presumed Blinder knew the departure every bit well. In instance yous forgot, Milton Friedman wanted drug legalization, opened upward borders, the terminate of the draft, together with a few other anathema to the "right."

Alan goes on the Chicago assault over again with

But what virtually the rigid shape of the EMH? This “bad idea” proved pernicious, simply every bit Madrick says. The EMH (plus around fiscal engineering) gave Wall Street managers the tools amongst which to create monstrosities similar CDOs (collateralized debt obligations) together with CDSs (credit default swaps) on meridian of the rickety foundation of subprime mortgages—and helped plough over Wall Street salesmen (and rating agencies) the chutzpah to pawn them off every bit “safe” to credulous investors.

Alan, delight become read Fama 1970 together with uncovering out what the Definition of rigid shape EMH is earlier yous acquire it incorrect inwards impress again. Understand that it has nix to produce amongst derivatives. And that Fama 1970 showed the rigid shape failed inwards the data! You're simply embarrassing yourself inwards both cases, at to the lowest degree to academic audiences who empathise this stuff.

But, hold off a minute, where bring I heard this before? Hmm. There's somebody else who can't halt quoting the few paragraphs of my 2009 weblog post service (a actually authoritative source, eh?). Where bring I heard an assault against "Chicago" that is forty years out of date? (Hint: Becker together with Friedman are dead. Chicago instantly is Getzkow, Goolsbee, Shapiro, Rajan, Zingales, Kashap, Hust, Diamond, Sufi, Seru; Shimer, Uhlig, Alvarez, together with sad for leaving everyone else out.)  

Oh yeah, Krugman. New York Times Magazine. September 2009. 

Keynesian economic science has been “proved false,” Cochrane, of the University of Chicago, says.

And thus Chicago’s Cochrane...declared: “It’s non business office of what anybody has taught graduate students since the 1960s. They [Keynesian ideas] are fairy tales that bring been proved false. It is rattling comforting inwards times of stress to become dorsum to the fairy tales nosotros heard every bit children, but it doesn’t brand them less false.” (It’s a grade of how deep the partitioning betwixt saltwater together with freshwater runs that Cochrane doesn’t believe that “anybody” teaches ideas that are, inwards fact, taught inwards places similar Princeton, M.I.T. together with Harvard.)

(In instance yous missed it -- it was a long fourth dimension agone -- my response. H5N1 beer at the AEA meetings if a weblog reader tin uncovering whatsoever serious teaching of ISLM inwards MIT together with Harvard's Ph.D. programme too. Two beers if you're a PhD educatee together with yous weren't chuckling the whole time.)

Alan, (and Jeff Madrick): are yous such lazy readers that yous bring fifty-fifty to plaigiarize your insults? Come upward amongst something novel already!  I bring a whole weblog to mine, addition a website, together with dozens of economical articles! I'm sure yous tin produce ameliorate than this.

I justice Krugmanism is contagious. Too bad.