#robert barro

'Centre funéraire des Rois', chapel and cemetery Plainpalais, Geneva, Switzerland; 1952-56

Robert R. Barro

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Well, it did. I did the study, and I’m revealing it. In fact, I already revealed it last week, with my takedown of right-wing Harvard douchebag N. Gregory Mankiw for trying to make us feel sorry for trust-fund babies. Well, now I have a new study, and it seems that there’s a goddamn outbreak of right-wing douchebaggery in Cambridge, to wit the following: an article by Harvard prof Robert Barro in the Wall Street Journal titled “The Reasons Behind the Obama Non-Recovery It wasn’t the severity of the Great Recession that caused the weak recovery, but government policies..

According to Barro, “The Obama administration and some economists argue that the recovery since the Great Recession ended in 2009 has been unusually weak because of the recession’s severity and the fact that it was accompanied by a major financial crisis. Yet in a recent study of economic downturns in the U.S. and elsewhere since 1870, economist Tao Jin and I found that historically the opposite has been true. Empirically, the growth rate during a recovery relates positively to the magnitude of decline during the downturn.”

You can access Barro and Jin’s paper, “Rare Events and Long-Run Risks”, here, though if you’re a commoner like me, you’ll have to pay $5 to read it. Since I am, among other things, a sport, I did pay $5 to read it, making me perhaps unique in all the world. In his lead, Barro misstates the topic of his study—it’s not about “economic downturns” but rather “rare events”, aka “rare macroeconomic disasters”—“short-run cumulative declines in real per capita GDP or consumption of magnitude greater than a threshold size, such as 10%.” The thing is, the Great Recession doesn’t make the cut for Barro and Jin’s definition. Since the Great Recession is not a “rare event” as Barro and Jin define them, rules of thumb derived from the study of rare events don’t apply to it.

Since the Wall Street collapse and ensuing global panic that began in the summer of 2008 was easily the worst in living memory, an obvious question to ask, though Barro does not ask it, is “Why wasn’t it a ‘rare event’?” And the obvious answer is, “Because the steps taken by the Bush and Obama administrations prevented the crash from becoming a true “macroeconomic disaster.” It was the Bush administration that bailed out Wall Street and Detroit—policies that the Obama administration faithfully followed once in office.

Barro tries to shame Obama by comparing the average growth of the U.S. economy after the Great Depression—that is, from 1933 to 1940—with the Obama years (6.5% versus 1.5%), but, again, that’s comparing apples to oranges, because when Obama took over the collapse was just beginning, while Roosevelt took over in the fourth year of unprecedented economic havoc According to these data, U.S. gross domestic product declined for two years during the Great Recession, by -0.3% in 2008 and -2.8% in 2009. By contrast, the Great Depression began with three straight years of steep decline—down by -8.5% in 1930, -6.4% in 31, -12.9% in 32, followed by -1.3% in 33. During the Great Depression, GDP didn’t return to 1929 levels until 1936—seven long years. Under Obama, GDP was back to 2007 levels by 2011, and, of course, economic suffering hadn’t been nearly as intense.

Barro does acknowledge that the unemployment rate has declined to 5% under Obama (though he doesn’t mentioned that it remained at 10% under Roosevelt in 1940), but explains that away as follows:

“What accounts for the strong recovery in the labor market combined with the non-recovery in GDP? Mainly weak growth of labor productivity. The growth rate of GDP per worker from 2010-15 was 0.5% per year, compared with 1.5% from 1949 to 2009. The recent productivity slowdown is clear since 2011 but may have started as early as 2004.”

There’s nothing in Barro’s paper to prove this claim, nor does he cite any sources to substantiate either his claim or his data, and there seems to be a fairly serious difference of opinion regarding productivity. Robert J. Gordon’s new, “magisterial” (I guess) tome, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, as reviewed by William Nordhaus in the New York Review of Books, gives very different data—growth of about 1.5% from 1950-1970, about 0.5% from 1970-1980, and about 0.8%-0.6% since then. Nordhaus supplies his own “alternative” data, showing a rate of about 1% since 1970. This 2013 paper by Robert Shackleton of the Congressional Budget Office shows a rate of less than 1% from 1973 to 1990, with modest increases since then, rising to about 1.5% at the present time. The “recent productivity slowdown” is perhaps more likely to be found in Dr. Barro’s manifest bias against the president than in the data.

“What could have promoted a faster recovery by enhancing productivity growth?” asks Dr. Barro, answering his question as follows: “Variables that encourage economic growth include strong rule of law and property rights, free trade, rolling back inefficient regulations and other constraints on market activity, public infrastructure such as highways and airports, strong institutions for education and health, fiscal discipline (including a moderate ratio of public debt to GDP), efficient taxation, and sound monetary policy as reflected in low and stable inflation.”

As a list of fresh-water1 nostrums for economic growth, that’s unexceptionable, but the question was, not how do you enhance economic growth but how do you enhance productivity, and it is the widely discussed thesis of Dr. Gordon's book that the magic ingredient is not any of Dr. Barro’s recommendations but rather “science” and, according to Dr. Gordon, we have exhausted Mother Nature’s bag of tricks, and we will never see the big jumps in productivity that we’ve enjoyed ever since James Hargreaves started crankin’ his spinning jenny,2 an argument that Dr. Barro entirely ignores, because it doesn’t tell him what he wants to hear.

Dr. Barro’s “answer” is a deliberate non-answer to the question asked, but as a set of economic principles they’re admirable—admirable though incomplete. Furthermore, I wonder if the professor could explain which of them has not been maintained and indeed fortified by the Obama administration? The professor and I are surely one in thinking that the president’s beloved environmental initiatives have been counter-productive and ill-advised. The professor also surely believes that the ratio of public debt to GDP is too high (though I do not), but otherwise, I think the administration has fulfilled the professor’s requirements. He surely seeks to imply that they haven’t been fulfilled, but prefers the implicit to the explicit lie, as well he might.

One could also note that, while the Obama administration very largely complied with Dr. Barro’s wish list, the Republican Party has not. Ever since the 1994 election, the Republican Party has sought to undermine the rule of law, beginning with Newt Gingrich’s plan to use “the power of the purse” to short-circuit the elaborate set of legislative procedures set forth in the U.S. Constitution and expanded upon by two centuries of congressional practice. During the Obama administration, congressional Republicans doubled and redoubled, and then doubled again, Gingrich’s nihilistic efforts to wreck the American economy in order to sabotage the Democratic Party.3 One might in particular note Dr. Barro’s call for “efficient taxation”. Has the Republican Party any real goal except to destroy the IRS and thus ensure the most inefficient tax collection possible?

With the nomination of Donald Trump, of course, corruption has made her masterpiece. Trump has built his campaign on a platform of utter and explicit contempt for law and morality. This is a man who promises to rob and murder and torture as a matter of state policy. But Dr. Barro has no tongue, and no name, for this atrocity.

Afterwords Dr. Barro is all too correct in denouncing Hillary Clinton’s economic “proposals”, which are uniformly nonsense, forced and foisted upon her by the painful success of Bernie Sanders’ banal populism. But the choice between “Clinton’s stale, liberal, centralized view of politics”, as Thomas Friedman put it4 and Trump’s vicious tribalism should be obvious even to a Harvard professor.

“Fresh-water” is salt-water economist Paul Krugman’s epithet of choice for the “Chicago school” of free-market absolutists associated with Milton Friedman. (Krugman, like both Gordon and Neuhaus, is an MIT boy—not exactly ocean-front property, but close.) ↩︎

For what it’s worth, I disagree with this thesis, but that’s a rant for another time. ↩︎

Over at Daily Kos, Jon Perr has a long, but necessarily incomplete take on the Republican Party’s abysmal record. ↩︎

Is unemployment voluntary or involuntary?

Robert Lucas in a famous 1978 paper argued that all unemployment was voluntary because involuntary unemployment was a meaningless concept. He said as follows:

The worker who loses a good job in prosperous time does not volunteer to be in this situation: he has suffered a capital loss. Similarly, the firm which loses an experienced employee in depressed times suffers an undesirable capital loss.

What did fiscal policy do in World War II?

It is ironic that both camps use World War II as evidence that the fiscal policy might work (Keynesian macroeconomics) or it does not work (Barro and Ohanian).

The nature of the new spending and how it was financed both matter, as does whether the new spending was a public good, a private good or a general or contingent income transfer matter, and whether the new spending was tax or bond…

The voter as a fiscal conservative

Now that every election policy must be fully costed, and every major party promises a return to surplus in a few years, the Ricardian theory of budget deficits is now an optimistic view of the power of fiscal policy.

By running a budget deficit, it shifts from collecting taxes today to collecting them tomorrow and fund the intervening shortfall was selling government bonds to the private sector.…

Old macroeconomic fallacies never die, they just wait for the next recession

Thomas Kuhn’s Structure of Scientific Revolutions showed that sciences do not march onwards and upwards towards the light.

Kuhn found that once a central paradigm is selected, there is no testing or sifting, and tests of basic assumptions only take place after accumulated failures and anomalies in the ruling paradigm plunge the science into a crisis.

Scientists do not give up the failing paradigm…

The coming crises of governments By Robert Barro

President Barack Obama’s administration has consistently overestimated the benefits of stimulus, by using an unrealistically high spending multiplier. According to this Keynesian logic, government expenditure is more than a free lunch. This idea, if correct, would be more brilliant than the creation of triple A paper out of garbage. In any event, the elimination of the temporary spending is now contractionary and, more importantly, the resulting expansion of public debt eventually requires higher taxes, retarding growth.