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Tuesday, June 19, 2012

commenting on Salmon commenting on Bishop commenting on Krugman

Felix Salmon is not favorably impressed by Matthew Bishop's review of Krugman's new book. Read his review review. Then maybe return here for my comment (which is also there).

Please, I'd rather read about Krugman than about art valuation. Excellent post about a review which is "is not merely stylistically irritating; it is flawed in substance" as quoted anyway (I haven't read it). By substance Bishop appears to refer to irritating powerful people. His efforts (as critiqued by Berstein to criticize Krugman were all of the type "both sides must have a point -- I mean these are highly respected very serious people. Well you already wrote it better than I can.

I have three thoughts. First and not totally pointless, even within a discussion of political effectiveness, that is influencing policy makers, Bishop's argument makes no sense. He claims that if Krugman is rude to the powerful he will have no influence just as Grover Norquist and Rush Limbaugh have no influence. Krugman's view is clearly "I don't care if they hate me so long as they fear me." He has considerable ability to make trouble for any Democratic politician. His choir is large and, by writing for us, he keeps it that way. This is the source of his ability to influence politicians who are flattered by many and fear few. This paragraph is cynical, but that it because Bishop cynically suggests Krugman be less frank so that he can be more influential. I think this shows that Bishop understands politics as little as he understands economics.

second, and very much in passing (update oops not at all in passing sorry) I flinched when I read "most liquid and efficient." I have long had the sense that you assume that higher trading volume implies closer to efficient markets. I think the time series evidence tends to support the opposite view. I sure don't suggest paying attention to the price of gold, but people who reject the efficient markets hypothesis should not argue that the market for US treasuries is efficient. I think they are grossly over priced compared to corporate bonds. Since market efficiency is a statement about relative prices, I assert there is no way for one market to be more efficient than all the others. I am using efficient as in the semi strong form efficient markets hypothesis. Since that is the meaning related to the social desirability of policy makers following market signals, I think it is the only reasonable way to use the term in the context of the policy debate.

Finally very quickly and repeating. Bishop is speaking power to truth "Maybe his case ... would be taken more seriously by those in power if" means "I can't argue with you evidence or your logic, but we have the power so kneel." I note that Krugman is vastly more powerful than Bishop.

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