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The organizers of this new site, Obama for a Sound Economy, emailed some notable people for their views on Obama's economic program and then posted their responses. The most significant one is this from Jim Heckman, U of Chicago professor and Nobel laureate:
I do not think it's class warfare [Obama's economic policies], I think it's empirical economics. The real issue is the empirical content of the supply side economics dogma. It's pretty threadbare. The "real business cycle" theory is simply inconsistent with empirical evidence. That does not prevent it from being taught as gospel to students (it's really gospel not empirical evidence). I would first and foremost talk to Ray Fair (Yale) and Mark Watson (Princeton) about the evidence for the supply side model. What is ironic is that those who preach supply side practice a crude version of Keynesian economics that ignores all of those incentive effects claimed to be so important by the supply side theorists. The real question apart from the current turmoil is the longer run. Denying the value of investment in knowledge; in infrastructure; in basic science and education at all levels has been and will continue to be harmful to our long run health. In my mind Obama's eyes are fixed more on things that will improve the US economy in the next century. The basic data on the current crisis is still being revealed, but it's clear that the absence of serious regulatory oversight contributed mightily to the current problems. It's not class warfare; it's about a future-oriented society.This is interesting because Heckman is hard to pin down on a simple left-right scale. He is widely viewed as a conservative, but he has been convinced by the empirical evidence showing high returns to early childhood education and consequently become a prominent advocate of programs along the lines of Obama's Zero-to-Five proposal. (Here's a PDF with a more detailed description.)
5 comments:
I think the "organizers" of the site you reference here is the Obama campaign itself. That's not a major deal, as I think he should tout those who support his policies, but I think it is worthy of some note.
No, that's incorrect. The site was put together by three volunteers on their own. They describe themselves on this page:
http://www.obamaforeconomy.com/about.html
I'd find it hard to argue with Professor Heckman. It's ironic that many of the original "supply-siders" were supposedly focused on the long run, but today seem to ignore much of the empirical evidence on the determinants of long run growth. Frankly, they should spend less than listening to Hannity and Limbaugh and more time in the journals.
'The "real business cycle" theory is simply inconsistent with empirical evidence.'
It's just inconsistent with logic and the most basic realistic facts about the world we live in. You can't relax assumptions in any even vaguely realistic way for it to even come anywhere close to working; you have to assume we live in a fantasy land.
It's a perfect example of what's wrong with some economists who have turned off their high level thinking and just assume that we live exactly in the fantasy world of the model, or don't care about reality and their work actually doing good for society, and just look at economics as a game they compete in for prizes, or to advance an economic libertarian ideology they like.
Investing in basic human resources - education, health, infrastructure - is perhaps the most uncontroversial aspects of economics. I mean neo-classical economics. It is only due to the absurd and radical ideology that there are no marginal gains from any of these these investment due to (prohibitively strong) disincentive effects that led the modern incarnation of the Chicago school (and its orbits) to an indefensible position of complete shutdown of public policy. This is true in Macroeconomics (e.g. Real Business Cycle theory) as well as microeconomics (argument that any kind of attempt at progressive taxation or investment in human capital for disadvantaged is bound to be a complete failure).
Jim Heckman (who taught graduate econometrics when I was at UofC) simply reflects mainstream economics ideas. It's only in contrast to the "far out" Chicago doctrines of the past few decades that he seems out of place in the department. Even Stigler or Friedman would not have felt comfortable with some of those "far out" tenets.
- Arin D
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