What utter self-serv­ing dri­vel, Brad Delong!

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I can scarcely believe what Brad Delong has dared to pub­lish on Project Syn­di­cate today:

We econ­o­mists who are steeped in eco­nomic and finan­cial his­tory – and aware of the his­tory of eco­nomic thought con­cern­ing finan­cial crises and their effects – have rea­son to be proud of our analy­ses over the past five years. We under­stood where we were head­ing, because we knew where we had been.

In par­tic­u­lar, we under­stood that the rapid run-up of house prices, cou­pled with the exten­sion of lever­age, posed macro­eco­nomic dan­gers. We rec­og­nized that large bub­ble-dri­ven losses in assets held by lever­aged finan­cial insti­tu­tions would cause a pan­icked flight to safety, and that pre­vent­ing a deep depres­sion required active offi­cial inter­ven­tion as a lender of last resort.…

So the big les­son is sim­ple: trust those who work in the tra­di­tion of Wal­ter Bage­hot, Hyman Min­sky, and Charles Kindle­berger. That means trust­ing econ­o­mists like Paul Krug­man, Paul Romer, Gary Gor­ton, Car­men Rein­hart, Ken Rogoff, Raghu­ram Rajan, Larry Sum­mers, Barry Eichen­green, Olivier Blan­chard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the dis­tri­b­u­tion of pos­si­ble futures right.

What utter hubris and dri­vel!

Where to begin? For starters, “the last five years” includes June 2007–just before the com­mence­ment of the finan­cial cri­sis. But this time, peo­ple like Wynne God­ley, Ann Pet­ti­fors, Ran­dall Wray, Nouriel Roubini, Dean Baker, Peter Schiff and I had spent years warn­ing that a huge cri­sis was com­ing, and had a vari­ety of debt-based expla­na­tions as to why it was inevitable. By then, God­ley, Wray and I and many other Post Key­ne­sian econ­o­mists had spent decades imbib­ing and devel­op­ing the work of Hyman Min­sky.

To my knowl­edge, of Delong’s mot­ley crew, only Raghu­ram Rajan was in print with any warn­ings of an immi­nent cri­sis before it began. Blan­chard deserves to win an award for one of the world’s worst-timed papers when in August 12, 2008–one year after the cri­sis began–he pub­lished a work­ing paper which crowed that “the state of macro is good”. Krug­man, who Delong crowns as first amongst equals in those work­ing “in the tra­di­tion of Wal­ter Bage­hot, Hyman Min­sky, and Charles Kindle­berger” first read Min­sky in May 2009–and noted that he didn’t really see what all the fuss was about:

So I’m actu­ally read­ing Hyman Minsky’s mag­num opus, here in Seoul. … I have to say that the Pla­tonic ideal of Min­sky is a lot bet­ter than the real­ity.

There’s a deep insight in there; both the con­cept of finan­cial fragility and his insight, way ahead of any­one else, that as the mem­ory of the Depres­sion faded the sys­tem was in fact becom­ing more frag­ile. But that insight takes up part of Chap­ter 9. The rest is a long slog through turgid writ­ing, Kaleck­ian income dis­tri­b­u­tion the­ory (which I don’t think has any­thing to do with the fun­da­men­tal point), and more.

To be fair, it took me sev­eral decades before I learned to appre­ci­ate Keynes in the orig­i­nal. Maybe a reread will make me see the depths of Minsky’s insight across the board. Or maybe not.

This was hardly amaz­ing to those of us who had started to read Min­sky a bit ear­lier than 2009–such as me for exam­ple (I first read Minsky’s real mag­num opus, John May­nard Keynes, in 1987). Those of us with a bit more expo­sure to Min­sky knew that Sta­bi­liz­ing an Unsta­ble Econ­omy was not Minsky’s best book–and I com­mented on Krugman’s blog that he should put it aside and read Can “It” Hap­pen Again? when he got back from Seoul.

The only excuse for the cant Delong has spewed forth today is that, as with Krug­man and oth­ers in the self-described “New Key­ne­sian” camp, he per­ceives him­self as being at the left end of the eco­nomic spec­trum, with the only com­pe­ti­tion being from the far right rep­re­sented by the purist Chicago ver­sion of Neo­clas­si­cal eco­nom­ics. Since the Neo­clas­si­cal left sup­ports deficit spend­ing dur­ing a Depres­sion, while the right sup­ports aus­ter­ity, to Delong it’s game over, and the Neo­clas­si­cal left is right.

The real­ity is that there is an entire other dimen­sion of econ­o­mists who have known for decades that both extremes of the Neo­clas­si­cal eco­nomic axis were nei­ther left nor right, but plain bloody wrong. We also knew that our crit­i­cisms of the Neo­clas­si­cals had no chance of being lis­tened to by the pub­lic until a major cri­sis hit, and we also expected that this cri­sis would do noth­ing to alter their own beliefs. Delong’s delu­sional mut­ter­ings today con­firm it.

I some­times get accused of being harsh when I argue that eco­nom­ics will only progress from the delu­sion of Neo­clas­si­cal eco­nom­ics into a more empir­i­cally based and real­is­tic dis­ci­pline the way that Max Planck observed that physics made the move from Maxwell to Ein­stein: “one funeral at a time”. I doubt that I’ll cop that crit­i­cism any more after Brad’s effort today.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • Craig Tin­dale

    Maybe Brad us from an alter­nate real­ity . It was those guys that all talked about using hous­ing as a mon­e­tary trans­mis­sion mech­a­nism , so when assets appre­ci­ated then the peo­ple would feel wealth­ier and use their house as an ATM because credit is cheap,. .…or money financed tax cuts where you cut as a per­cent­age but increase quan­tity so the net impact on gov bud­gets is neu­tral .… .…the hous­ing bub­ble was a Fed inven­tion to reverse the threat defla­tion in 2002 .….and how about Larry’s his­tor­i­cally dri­ven views on reg­u­la­tion (lol) .….maybe there is some­thing in the water at Berke­ley ?

  • Paul Andrews


    I think Brad is doing a kind of pro­pa­gandic tri­an­gu­la­tion to try to get him­self and Krug­man to the cor­rect side from where they cur­rently sit — squarely in the wrong.

    He knows he has been wrong but now wants to plant some sto­ries that grad­u­ally paint him and Krug­man as hav­ing been right all along.

    His type is very wor­ried about their rep­u­ta­tion and “being right”. He will never admit to being wrong and nei­ther will Krug­man.

    You have done exactly the right thing to pull in quotes from past arti­cles. Just a calm ratio­nal air­ing of quotes from past sto­ries of theirs. The peo­ple who mat­ter will see right through peo­ple like DeLong and Krug­man, if shown the facts.

    More gen­er­ally, there is def­i­nitely a feel­ing in the air that many more are com­ing around to your view on things. I mean the descrip­tive parts, not your pre­scrip­tion (debt jubilee).

  • Steve Hum­mel

    Ortho­doxy is an extremely dif­fi­cult “nut to crack” as the say­ing goes. It infects both the mind and the will. The hur­dles of con­sis­tency, habit and self inter­est are bad enough, but when will gets involved its a 99.9999% chance that no men­tal change will take place before the per­son is planted.

    I had a mater­nal grand­mother who lived to be 96 with all of her wits and no small part of her secret of longevity was her incred­i­ble men­tal tenac­ity. She could latch onto an idea and you couldn’t con­vince her that it was in any­way wrong with a fully charged “Phaser” pressed to her tem­ple let alone with mere words. 

    About the only way a per­son whose will has engaged with a false­hood will ever change is if the vast major­ity of the rest of soci­ety has com­mand­ingly adopted some other idea. And short of cat­a­stro­phe that is exactly what will need to hap­pen in order to actu­ally get mean­ing­ful finan­cial, eco­nomic and mon­e­tary change accom­plished. A mass social move­ment that has engaged BOTH people’s gen­uine self inter­est AND their sense of a higher purpose/duty/honor.

    When a philosophy/economic/monetary the­ory runs counter to the inter­ests of the cur­rent the­o­ret­i­cal, finan­cial, polit­i­cal, eco­nomic, and labor i.e. the entire spec­trum of the elites such as was the case with C. H. Dou­glas start­ing in the 1920’s one will never get the true intent and actual par­tic­u­lars of such from indi­rect sources. There will be slan­ders, half truths, irrel­e­van­cies and ortho­dox deri­sion and pom­posi­ties that destroy almost any search for the actual think­ing. A read­ing, and in Douglas’s case par­tic­u­larly because of his oblique writ­ing style, re-read­ing is nec­es­sary. But there is much there to ingest and digest. Con­crete eco­nomic and mon­e­tary poli­cies that accu­rately reflect true wis­dom are damned hard to under­cut or refute with­out being self con­tra­dic­tory and/or appear­ing stu­pid.

    Real, lib­er­at­ing, morally non-puri­tan­i­cal and rig­or­ously eth­i­cal Wis­dom,.…. what moder­nity needs and lacks.

  • Tom McAlone

    Steve K — Keep the pres­sure on these intel­lec­tual phonies. You know what is really going on while they are con­fused and very fright­ened of the future. Get your mod­els fully func­tional and pro­vide the right eco­nomic lead­er­ship to guide us out of this increas­ingly dark and fore­bod­ing future.

  • Brad DeLong

    Why do I feel as though I have fallen into “Monty Python’s Life of Brian”?

    Go ahead: rant on some more about how it is **very** **impor­tant** to join the Judean People’s Lib­er­a­tion Front and not the People’s Lib­er­a­tion Front of Judea…


    Brad DeLong

  • Steve Hum­mel

    His­tor­i­cal chronolo­gies are very telling. 

    Neo-clas­si­cal econ­o­mists are the ones who are expert in “dis­tinc­tions with­out a dif­fer­ence” actu­ally. And Monty Python gen­er­ally expresses insight into neo-clas­si­cal eco­nomic the­ory in their episodes on Spam, spam, spam…so you might be care­ful how you allude to them.

  • Steve Hum­mel

    My men­tal dou­ble entry book keep­ing logs that post thusly:

    Het­ero­dox Truth
    ortho­dox deri­sion

    And it doesn’t sum to zero.

  • Esp Ghia

    You can add a host of Aus­trian econ­o­mists to the list who called the cri­sis years in advance. Though as far as I can tell they are not taken any more seri­ously than the MMTers. I think there is a lot that can be learned from these dis­parate groups. Great blog, albeit overly-angry at times.

  • Foppe

    Well it’s impor­tant to keep in mind that DeLong is not moti­vated just by ide­o­log­i­cal (or “the­o­ret­i­cal”) blind­ers.. The other issue is that he is heav­ily invested in his friend­ship with dereg­u­la­tor par excel­lence Larry Sum­mers, that he is a for­mer (Clin­ton admin­is­tra­tion) cab­i­net mem­ber, and that he is always wor­ried about cur­ry­ing favor with the demo­c­ra­tic party, espe­cially in high pro­file places such as Project Syn­di­cate, where “impor­tant peo­ple” dwell.

  • Foppe

    (In a way, your post reminds me of this ‘exchange’ between DeLong and David Har­vey, the read­ing of which, if noth­ing else, should serve to con­vince you that DeLong is lit­tle more than a bully or ortho­doxy enforcer, rather than an aca­d­e­mic.)

  • There were peo­ple who pre­dicted the cri­sis based on astrol­ogy I’m sure but that does not mean astrol­ogy was there­fore cor­rect — case closed.
    I think too much is being made of this Min­sky uncer­tainty stuff. You can crash an econ­omy by pay­ing peo­ple $100 (Costs) to make stuff and sell­ing it to them for $110 (Prices) to make $10 (Profit) which means they’ll have to go into Debt for $10; and do this year upon year until their debts build up to silly lev­els and it all falls down — You can then add ‘uncer­tainty’ and ‘irra­tional­ity’ into this mix and it might bring mat­ters to a head ear­lier but just being clev­erer than Krug­man (not so hard) does not mean you have the right answer.
    In Eng­lish foot­ball if Bob Smith passes the ball 40 yards to John Jones the com­men­ta­tor says “Smith passes to Jones” — and that’s it. If how­ever Roberto Vivaldi does the same pass to Juan Pablo or Car­los Kick-a-ball the com­men­ta­tors rave about the “great skill of the for­eign­ers” for hours.
    There is an assump­tion that to solve a prob­lem :
    1) The Per­son needs a for­eign name
    2) He has to be dead
    3) The solu­tion has to be dif­fi­cult to an extent and at least involve dif­fer­en­tial equa­tions.
    These are only assump­tions — the answer can be really sim­ple : the num­bers don’t add up — so that the way we add up num­bers in accoun­tancy leads to this equa­tion :
    Profit = Fixed Assets + Pri­vate Debt + Gov­ern­ment Debt + Debt of For­eign­ers.
    so for con­tin­ued Profit and busi­ness activ­ity you need some com­bi­na­tion of bub­ble from one of the 4 items on the right hand of the equa­tion — and then on day pop ! All with­out ‘uncer­tainty’ and the only irra­tional­ity about it is “why do ratio­nal beings use an accoun­tancy sys­tem that leads to crash after crash and they don’t change the sys­tem ?”

  • enor­lin

    I hope the above com­menter ‘Brad DeLong’ isn’t the real deal, that would just be sad.

    haha well of course we knew and under­stood Min­sky all along, sil­lies! [monty python joke]”

  • Craig Tin­dale

    Yes it is I checked the IP address before I approved it

  • Paul Vallejo

    Wow, that is quite shame­less. Mr. Delong must either lack a mod­icum of self aware­ness, or he knows he is being dis­hon­est. Either way, it doesn’t say much for him. Sad.

  • Why Brad?

    Because if we’re really allies, you should have cited me as one of the fol­low­ers of Min­sky etc. I’m sorry, but you pop­ping over here and call­ing me “split­ter” is hilar­i­ous.

    If you want to form alliances, then put out a revised arti­cle cit­ing me, Wray, etc., as “fel­low Min­sky fol­low­ers”. Then we might have a con­fer­ence together about what that actu­ally means.

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  • Craig Tin­dale

    You will have to excuse him he has belonged to the People’s Lib­er­a­tion Front of Judea for 30 years , they are the old priests who wor­ship the loan-able funds deity , Delongs neo clas­si­cal ver­sion of Min­sky (as I under­stand it) ignores endoge­nous money , con­tains no banks, nor does aggre­gate debt mat­ter and he attempts to posit that it can fit it into a DSGE model .….equi­lib­rium is absurd , even if it does ever exist Min­sky thought it was desta­bi­liz­ing .….yet these guys no his­tory and Min­sky ? 🙂

  • Foppe

    Like I said, he’s inter­ested not in argu­ment, but in seem­ing supe­rior and act­ing as though he’s got the moral high ground (because this works with cer­tain groups of peo­ple — how could he be so con­fi­dent unless he was right?).

    Remem­ber that this guy only last year (or so, in any case well after it was clear that we were in a huge bank­ing fraud cri­sis) defended Larry Summers’s jeering/sneering ‘response’ to Rajan when he pre­sented his paper at the “Maestro’s” 2005 Jack­son Hole anniver­sary. Do you really think such a per­son could be a use­ful ally, when his party is at least as neolib­eral and cor­po­ratist as the GOP? Every­thing is pol­i­tics to the guy.

  • LCTesla

    Krug­man makes a vague ref­er­ence to your cri­tique of him in his last blog post, Steve:

    (Some devo­tees of Keynes claim that peo­ple like me aren’t really Key­ne­sians – and while there are some seri­ous grounds for the charge, part of the rea­son is pre­cisely that we’ve treated Keynes as an inspi­ra­tion to be mod­i­fied in the face of evi­dence rather than as holy writ)”


    I sup­pose none of us were expect­ing his man­ners to have improved by this time, or his accep­tance of real­ity for that mat­ter.

  • Brad DeLong

    It’s not an exclu­sive list. “Econ­o­mists like…” f I am going to com­pile a list of names, I am going to include my teach­ers who taught me all the behav­ioral-finance asset-mar­ket-dis­e­qui­ib­rium manias-pan­ics-and-crashes stuff–Larry, Barry, and Olivier–and those from whom I have learned most over the past four years.

    Which of those should be dropped so that your name can be added to a list that I set at 9? Paul? Christy? Gary? Car­men? Ken? Raghu?


    Brad DeLong

  • Robert K

    Have you ever seen a pic­ture of Ein­stein in front of a black­board entirely
    filled with equa­tions? Well, if the equa­tions are in gen­eral true, but if
    one sign is wrong, one bracket is mis­ap­plied, of if one term is miss­ing,
    the whole thing fails to pre­dict the out­come it was designed to explain.
    I believe both Krug­man and DeLong are very smart peo­ple, but like
    Sher­rif Cleavon Lit­tle, if the gun is pointed the wrong way, the results
    will not be those expected. Never before in the his­tory of the world has
    the entire global econ­omy been based on a sin­gle national cur­rency which
    itself was backed only by its’ power to cre­ate debt. Under such a
    cir­cum­stance, his­tor­i­cal knowl­edge is valu­able only in its’ aware­ness of how
    human nature responds to events. That is Minsky’s strength, the under–
    stand­ing of human action in response to chang­ing cir­cum­stances, rather
    than the reen­act­ing of his­tor­i­cal events, and the place­ment of bank­ing at
    its’ cen­ter.

  • Foppe

    Ah, so it’s entirely acci­den­tal that you pick that lot? And that you weasel about talk­ing about how they got the “recent” past right? Who do you think you’re try­ing to fool, exactly?

  • Why just 9 names Brad? Was there a word limit that stopped you adding just 2 more “Steve Keen” and “Randy Wray”? And if there was, then yes, Blan­chard and Sum­mers could surely have been dropped.

    Now enough of that: if you want a real dia­logue on how Min­sky alters macro­eco­nom­ics, let me know. I have attended your sem­i­nars in the past (I was in the front row for your ses­sion at the last AEA chaired by John Quig­gin, and asked a ques­tion); what about a joint sem­i­nar where we bring together New Key­ne­sians and Post Key­ne­sians for a gen­uine dia­logue?

    I agree, of course, that we’re allies in sup­port­ing deficit spend­ing over aus­ter­ity. I signed the Krug­man man­i­festo for that rea­son (with a com­ment), despite my very pub­lic dis­agree­ments with him on the­ory.

  • Randy Wray has writ­ten a good piece on this as well:


    As noted casu­ally, Brad’s post should have at least included Randy and myself–both as long-term Min­skians and as inde­pen­dent pre­dic­tors of the cri­sis long before it hap­pened.

    Randy’s first pub­lished paper cit­ing Min­sky:

    Wray, L. R. (1988). “Profit Expec­ta­tions and the Invest­ment-Sav­ing Rela­tion.” Jour­nal of Post Key­ne­sian Eco­nom­ics 11(1): 131–147.


    Keen, S. (1995). “Finance and Eco­nomic Break­down: Mod­el­ing Minsky’s ‘Finan­cial Insta­bil­ity Hypoth­e­sis.’.” Jour­nal of Post Key­ne­sian Eco­nom­ics 17(4): 607–635.

  • RJ

    Another good arti­cle by Ran­dell

    Steve why does it mat­ter if he does not men­tion your name. Surely the aim should be to improve the lives of peo­ple who are suf­fer­ing due in large part to the fail­ings of the eco­nom­ics pro­fes­sion. Who is right or wrong in the past is not the key. The key is your pro­fes­sion has failed badly and still are. 

    In time every­one will be wise after the event hope­fully. Hope­fully because if not the future for many will be very bleak.