It's Impossible for Elvis to Hurt Our Kids
Bob is having troubles grasping the point people like me and Landsburg have been making about his OLG model of government debt, as shown by his bad analogy for our argument.
So let's look at another analogy, one with both a factor that plays the role that Bob is saying government debt has in his model, and another factor that plays the role Landsburg and I are claiming government debt has in his model:
It was a dark and stormy night when a driver, in a speeding, 1957, black Chevy, with fuzzy dice hanging from the rearview mirror and a "Elvis Is King" bumpersticker on the rear bumper, ran a red light, killing both an old lady, the Boy Scout helping her across the street, and a chicken.Bob is claiming that (with running the red light = transfer payments, and speeding = government debt), because Landsburg and I think running the red light was the major factor causing these tragic deaths, we are totally (and incorrectly) rejecting any causal role for the speeding. But what we are saying (we, at least in that I have understood Landsburg correctly) is that the government debt is analogous to the "Elvis Is King" bumper sticker: it played no part in the crash at all, and just happened to be along for the ride.
Now, it is one thing to argue that we are incorrect in our analogy: Bob could counter-argue that the debt actually played a causal role we missed, and then demonstrate what that role is. (And now the fuzzy dice and black Chevy reveal their hands: maybe the dice are relevant, because they distracted the driver? Perhaps the dark color is important: the pedestrians could not see the car in the dark? The point being, one has to show that these factors played a role, and not simply point to the fact they existed.)
But to keep arguing that, just because the debt happens to be along for the ride, therefore it is like the speeding, and simply must have a causal role in the story, is to just miss what we are saying.
Sigh. Interested readers can scroll back on my blog (kenBlogic.blogspot.com) for a series of posts, on this issue. Murphy is wrong. Bad analogies won't fix the errors in his argument.
ReplyDeleteI have two separate responses. If possible please number your replies because these are completely separate trains of argument.
ReplyDelete(1) Let's stipulate that you are right, and I'm totally missing the point you (and Steve) are making about the irrelevance of government debt per se. Even in that framework, do you agree that Dean Baker and Krugman were also horribly confused? In your analogy, it's as if they were telling Americans, "Elvis can only hurt our grandkids if the bumper sticker were on the front of the car. But since the bumper stick, empirically, is just about always on the back of cars, Elvis can't hurt our grandkids."
So, again, even if we stipulate that I'm totally missing *your* point, do you agree with me that Dean Baker and Krugman were also totally wrong? (This isn't me simply saying, "They did it too! Waaa!" My overall point was to challenge their argument, so it's kind of a big deal what your answer is here.)
(2) I think you are arguing, "Bob, the fact that the government in the year 2050 taxes taxpayers $500 billion to make interest payments to people holding Treasuries, doesn't really have much to do with the fact that people are holding Treasuries." You really think that works as much as saying, "A bumper sticker has little to do with a car crash"?
1) Trying to repair your analogy won't repair your argument. It's a distraction
ReplyDelete1) Initially you and Rowe had a model with apples. I assume you have abandoned the claim that apples can be teleported through time.
2) Krugman argued that all the direct effects could be replicated by a tax, which (for googlers) he called the Santorum tax. That is and was correct.
2) As far as "we owe it to ourselves", that is correct but incomplete. The actual argument, as articulated by Landsburg and by me in the letter you and I jointly wrote to Landsburg (and published on my blog) is that it does not matter that the debt holds are domestic if the debt was traded for other assets. This is a more general argument than Krugman's, with weaker not stronger preconditions. Hence it does not refute Krugmen, it is pointing out his argument is stronger than he realized. (So if you want to count coup here on PK because he could have refuted you even more completely I guess you are entitled.)
Readers are encouraged to look at models, a summary, and the joint note Murphy and I sent to Landsburg and his replu, which are on my blog kenBlogic.blogspot,com. Scroll back.