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Thursday, April 18, 2013

The Death of Neoliberal Ideology Is Real

Posted by on Thu, Apr 18, 2013 at 8:43 AM

There was a time when the models and mathematics of neoliberal economists (who are not really economists in the first place) could not be contested. When they said such and such a number or curve was telling us the truth, it was accepted as nothing but the truth. But because we are now stuck in the post-neoliberal world (a world we entered in 2008), we can finally challenge the findings of neoclassical economists without fear of losing our jobs. An example: A paper by two economists (Carmen Reinhart, now a professor at Harvard Kennedy School, and Kenneth Rogoff, an economist at Harvard University) who came up with some number (90%) that showed such and such a thing was true (government debt at this point slows growth) has been debunked only two years after it was published. The Economist:

The new paper, by Thomas Herndon, Michael Ash and Robert Pollin of the University of Massachusetts, Amherst, sought to replicate the Reinhart-Rogoff result for the post-war period. They reckon that mistakes in the analysis led Ms Reinhart and Mr Rogoff to understate average growth at high debt levels...Taken together, the authors of the new paper reckon that average post-war growth above the 90% threshold ought to have been reported at 2.2% rather than -0.1%.

Ms. Reinhart and Mr. Rogoff have acknowledged the error in their paper. Neoliberalism, however, continues as if nothing has changed, continues as austerity in the United States, the UK, Greece, Ireland, and elsewhere. Neoliberalism is now a body without a head.


Comments (9) RSS

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Speaking of bodies w/o heads, good morning Charles.
Posted by Ken Mehlman on April 18, 2013 at 9:07 AM · Report this
You are the only person... I was going to make a further distinction, but you are the only person who talks about neoliberalism on a regular basis. Nobody else cares. Much less anybody who reads the Stranger.
Posted by The CHZA on April 18, 2013 at 9:11 AM · Report this
@2 Actually, I'm loving Charles' recent series of posts on neoliberalism and especially the posts on how economics has really become financial engineering.

America is a land of plenty and I sure as hell am living on its banked wealth instead of busting my ass for endless excess consumption. By traditional measures and against my own socioeconomic peers, I'm underemployed, but I love it. Why work when I don't have to? I sublet my apartment on AirBnB, I trade a little in the stock markets, and I "work" maybe 10 hours a week in real estate. I am living the life that Keynes predicted; a prediction that only Charles is posting about and explaining to me.

So thank you, Charles!
Posted by Charles' cheerleader on April 18, 2013 at 9:50 AM · Report this
rob! 4
Thus far I haven't seen any discussion of retracting Reinhart and Rogoff's paper, something responsible researchers do when their publications contain serious errors and/or fraud.

Retraction probably doesn't happen as often as it should even in relatively unforgiving disciplines like biomedicine because it means a complete loss of legitimacy for the conclusions proffered in the publication.

It will be interesting to see what the field of economics, a much squishier realm that is arguably not any kind of science, does with this disgraceful (but still widely cited) blunder.
Posted by rob! on April 18, 2013 at 9:53 AM · Report this
This should remind everyone of the time former Exec. VP at Federal Reserve Bank of NY (and held too many other positions at too many other places, supposedly attesting to his "veracity"), Frederic Mishkin, fraudulently changed his bogus report on Iceland on his CV (resume), originally reported as "Financial Stability in Iceland" --- later changed to "Financial Instability in Iceland" as the report was written just a month or so before their banking collapse.…

But the truly important fact is to realize that Rogoff is a complete and total jackhole, a long-time member of the lobbyist group for the international super-rich, the Bretton Woods Committee:…

To fully understand the power of this outfit, note that they only communicate with the Speaker of the House and Senate Majority Leader, and an example of their intent is illustrated at the sites below in a letter to them to kill the "Buy American" clause in the stimulus package.…

(A closer look at the letter itself:)…

[found at an archived site at]
Posted by sgt_doom on April 18, 2013 at 10:48 AM · Report this
ScrawnyKayaker 6
Wait, Charles, you think actual factual facts drive government policy or news reporting?

Can I interest you in a few shares of my pink unicorn ranch? Only $750 each and going fast, so I suggest you buy at least ten shares today!

I expect neoliberal pro-austerity policy and reportage to continue to be very well-loved within the Beltway, despite this little glitch and all the other evidence that it's a bad idea. See also "school reform," etc.
Posted by ScrawnyKayaker on April 18, 2013 at 11:03 AM · Report this
treacle 7
@2 speak for yourself CHZA.
Posted by treacle on April 18, 2013 at 12:08 PM · Report this
I think you give Neo-liberals way too much credit. From an economic standpoint, this battle has been going on between radical economists (on the right) along with their Republican friends versus mainstream economists. It is really hard to find anyone who feels that the U. S. or the U. K. should cut spending right now. The mainstream view is that we should increase spending until interest rates go above zero and unemployment goes way down. Even if the original paper was correct, then it is OK to increase our debt right now (since it isn't close to that magic 90%).

To make matters worse, Obama has done a poor job in expressing his economic strategy. It took Bill Clinton to explain it to the country (and he did a masterful job). In short, we should increase spending right now, then cut spending later. This is the mainstream economic view and the mainstream Democratic view. Unfortunately, Obama has been all to keen to compromise with the Republicans and their radical economic views while doing a very poor job of explaining why the economic strategy is stupid. A very high percentage of people believe that the economy will get better if we decrease our debt. Very few of those people understand basic economic principles, let alone call themselves economists.
Posted by Ross on April 18, 2013 at 12:42 PM · Report this
biffp 9
Notice on the economist site another reason Vancouver is so superior to Seattle: Vancouver International Airport #8 in the world's best airports. If you've ever waited the average 30+ minutes to get your bags or walked the 3+miles to the last gate, you'd certainly agree. Meanwhile Vancouver is efficient and has free wifi and kids playgrounds.
Posted by biffp on May 6, 2013 at 10:13 AM · Report this

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