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Wednesday, July 08, 2015

The "Structural Problems" Ideology is not Superstructure.

Brad DeLong notes that Friedman has few disciples and that Hayek has many in spite of the utter failure of Hayekian macro theory to fit any fact. He blames US hegemony

At the level of economists' nationality it is equally clear what is going on: German (and French) economists grew up and lived in a world where somebody else--the benevolent Kindlebergian hegemon of the United States--took on the task of maintaining a stable level of aggregate demand in the North Atlantic as a whole. With the possibility of large hemisphere-wide demand shortfalls ruled out, it made intellectual, pragmatic, and policy sense to focus on the "structural".

I think that this is both patronizing and too kind. First, most US economists have never worked at the Fed or the Treasury -- they are spectators just like Germans and Frenchmen. But more importantly, there was a massive prolonged European demand shortfall from the late 70s through the early 90s. Enormous unemployment rates are not new.

The focus on the structural is free floating ideology not a superstructure carried on the patient back of any hegemon. In 1985-6, the UK was the prime example of Eurosclerosis in "Hysteresis and the European Unemployment Problem" Blanchard & Summers (1986). Then the stock market crashed in 1987 and the lady who was not for turning turned to monetary stimulus. This caused increased inflation and an actual shortage of skilled labour (I type the u as it was in the UK -- I read papers about how firms couldn't fill vacancies).

Then the border of the stagnating swamp of structural stupidity shifted from the Atlantic to the English channel. The good tough rigorous market based structure became anglophone not American. The case of an inadvertant shift to excess aggregate demand and the long lasting consequences had no effect on the conviction that Europes problems were structural.

French and German technocrats can ignore aggregate demand, because they have learned to ignore double digit unemployment, not because the USA benevolently hegemonically prevented it. A German wrote "only the rational is real" before a German wrote "only the real is rational". Both were fact resistant ideologues. Neither Hegel nor Marx has many more disciples than Friedman, but Brad DeLong won't quite give up on the Marxist faith that ideology must have some basis in someone's material interests somehow.

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