Comments on: I’m with Dani

By: stephen bartos

stephen bartos — Mon, 17 Dec 2007 04:57:42 +0000

maybe I’m biased because I’ve met Joe but not Dani. but as I read Dani’s comments, he was saying under point 2 that poor countries in essence have a choice about IMF advice and they “choose to rely on their advice excessively”. Whereas Joe’s position is that often they don’t have such a choice – and this seems to more accurately describe reality. I’d tend to characterise the situation as that the leaders in these countries (for either good or bad motives) perceive that they have no such choice. I’d add WB to IMF under the heading of multilateral institutions, Joe is a bit too kind to his former employers in this regard.

By: Nicholas Gruen

Nicholas Gruen — Mon, 17 Dec 2007 01:07:08 +0000

Stephen,

You seem to agree with Dani – but add comments about who is to ‘blame’ in some sense.

By: stephen bartos

stephen bartos — Sun, 16 Dec 2007 23:05:27 +0000

I’m with Joe.

It seems from the outline of Dani’s commentary that it is based on the more polemical of Joe’s outputs (like Globalization and its Discontents) than the journal articles, which are more rigorous. Even so, I find the commentary somewhat naive.

objection 1 – poor countries’ domestic politics and policies are the main constraint, not the actions of the rich – ignores trade barriers and barriers to movement of people, and especially, the legacy of colonialism which has left many countries with dysfunctional political systems. Also ignores the problem that in many countries the population did not choose and would never choose their leadership: you can’t easily get rid of a corrupt dictatorship (many western countries went through a time when a populace actually could revolt meaningfully – US and Fr. revolutions, europe in 1848 etc. – it is a lot harder in the face of modern automatic weapons).

Similar problems with objection 2 – IMF and WB influence on leaders being their own choice – ignores the power of the threat of reduced loans or aid, especially where these have been propping up the selfsame leaders. Of course, much bad economic policy in poor countries is self imposed – however on my reading I think Joe recognises this.

objection 3 does have some validity, Joe has not done as much work on selectivity and adaption of interventions or policies; but you can’t do everything. re. 4, James has covered it excellently.

By: Nicholas Gruen

Nicholas Gruen — Sun, 16 Dec 2007 02:18:37 +0000

Yes, all fair enough James.

And perhaps my use of the word ‘vulgar’ was sloppy. Then again one can use words motivated to avoid one kind of misunderstanding, only to invite another kind. I think that’s what happened here. My motives for adding the word ‘vulgar’ were that I didn’t want to associate the word ‘Keynesian’ with the idea of being relaxed about inflation. It’s widely taken to be the case, but I don’t think it’s a true reflection of sensible Keynesianism. It’s certainly not true of Keynes.

Of course that too is a matter of degree. Keynes was keen on stable prices, but as on all matters, (like free trade for instance) didn’t think it was the only game in town.

By: James Farrell

James Farrell — Sat, 15 Dec 2007 13:45:17 +0000

My reference for Stiglitz’s views on inflation is his 1997 Journal of Econnomic Perspectives artyicle, which is a spirited defense of the NAIRU hypothesis. If that’s vulgar Keynesianism then your version must be awfully sophisticated. Rodrik is right that Stiglitz is not an inflation alarmist. He argued in that piece — cautiously and on the basis of a pretty thorough review of the empirical studies to hand — that the existence of an inflation slippery slope was overstated, and that the Fed could afford to experiment more boldly with the unemployment rate. This turned out to be right.

It’s possible that Rodrik is referring to differences with Stiglitz in the developing country context, but again, if there’s some problem with Stiglitz’s analysis I doubt that it arises from being a ‘vulgar Keynesian’.

By: Nicholas Gruen

Nicholas Gruen — Sat, 15 Dec 2007 06:10:25 +0000

James, I was referring to item 4 on Rodrik’s list.

By: James Farrell

James Farrell — Sat, 15 Dec 2007 04:49:50 +0000

Stiglitz is usually listed among the pioneers of ‘New Keynesian’ economics, which was supposed to deplace what they regarded as vulgar Keynesianism, so he’d be pretty surprised at this characterisation of himself.

What do you mean by it?