The Mirage of Devaluation

The papers are full of the rupee crisis. India's worst economy in decades, supposedly.

The silver lining, according to this morning's FT, is that the fall in the rupee should eventually boost exports. After all, after the the 1997 Asian crisis, "countries like Thailand and Malaysia enjoyed export-led recoveries following wrenching devaluations." Is that so?

The devaluation part is right -- all these countries saw their currencies fall steeply when they abandoned their pegs in the second half of 1997, typically losing about half their value against the dollar. The supposed export-led recoveries are a different story.

Annual growth of export volumes and average rates for the decades before and after 1997, Malaysia and Thailand. Source: IMF.

The solid lines in the figure above are the annual growth rates of export volumes. The dotted lines are the average rates for the ten years prior to and following the 1997 crisis. As you can see, export growth was substantially slower after the crisis than before -- in both Malaysia and Thailand, export growth after devaluation was about half the previous pace. In Indonesia, whose currency fell even more, export growth essentially ceased -- from 8 percent annual rates before 1997 to less than 1 percent in the decade following. And these are volumes; given the devaluation, foreign exchange earnings did even worse. In Thailand, for instance, exports earnings in dollars were still lower in early in 2002 than they had been before the crisis, almost five years before. For Indonesia, export earnings were still at their pre-crisis levels as late as 2004. This is about as far from an export boom as you can get.

You can argue, I suppose, that without the devaluations export performance would have been even worse. But you cannot claim that faster export growth following the devaluations boosted demand, because no such faster growth occurred.

It's really remarkable how much the devaluation-export growth link is taken for granted in discussions of foreign trade. But in the real world, for whatever reason, the link is often weak or nonexistent.

Practical policymakers seem to have an easier time grasping this than economists. There's a reason why falling currencies are seen as major problems in much of the developing world, even though they supposedly should boost exports. And there's a reason, presumably, why the leaders of Syriza, hardly slaves to conventional wisdom, have ignored the advice from progressive American economists that Greece would be better off out of the Euro.

Marx's "On 'The Jewish Question'"

Over at Crooked Timber, Corey Robin has a very short post suggesting that "Islam is the 21st Century's Jewish Question," which has attracted a long and perhaps predictably heated comments thread. Some of the more agitated commenters at CT apparently think that such comparisons are inherently dishonest or immoral.  To me, it seems obvious that, however you weigh the similarities and differences in this particular case, the historical experience of anti-semitism is an important reference point for thinking about the way various Others are regarded today.

I don't want to relitigate that comment thread here -- except, again, to say that I don't see anything unreasonable or offensive about the comparison Corey is making. No, the reason I'm writing this is that Corey's mention of it reminded me of what a brilliant and profound, and profoundly misunderstood, essay Marx's "On 'The Jewish Question'" is.

The essay is a response to Bruno Bauer - note the additional quote marks in the title. Bauer is responding to demands for emancipation of Germany's Jews from the various legal restrictions they were subject to. Bauer has two objections. First, he says, there are no citizens in Germany, only different classes of subjects with their own distinct privileges and assigned roles. Jews have one set, Christians have another, but no one is free. Second, even if freedom were possible in Germany, Jews could only become citizens if they were willing to limit their Jewisness to private life -- no special accomodations for religious observance, no maintaining their own institutions. "The Jew must retreat behind the citizen."

Marx replies: All that is true as far as it goes. But that only shows the limitations of the liberal conception of freedom. It is true, as Bauer says, that political emancipation requires the Jews (like everyone else) to make their religion a purely private matter, but all that shows is how far short political emancipation falls of human emancipation.

Human emancipation would recognize that we exist only in relation to myriad other people, and in these relationships we are conscious, moral, rational beings, making choices about our collective lives. Political emancipation, by contrast, isolates our conscious collective life in the political sphere, leaving us disconnected egoists in our private life.

Where the political state has attained its true development, man ... leads a twofold life, a heavenly and an earthly life: life in the political community, in which he considers himself a communal being, and life in civil society, in which he acts as a private individual, regards other men as a means, degrades himself into a means, and becomes the plaything of alien powers. ... In his most immediate reality, in civil society, man is a secular being. Here, where he regards himself as a real individual, and is so regarded by others, he is a fictitious phenomenon. In the state, on the other hand, where man is regarded as a species-being, he is the imaginary member of an illusory sovereignty, is deprived of his real individual life and endowed with an unreal universality.

Political emancipation allows people to participate in collective decision-making but only on condition that they give up or deny any concrete, organic identity or connections they have beyond abstract citizenship. While in private life people are free to be really ourselves, but disconnected from the society we continue to depend on, we experience this freedom as being "the plaything of alien powers." 

This connects directly back to the Jewish Question: Judaism is the kind of community or collective identity that people must give up to become citizens in the liberal state. Or rather, pretend to give up:

Man, as the adherent of a particular religion, finds himself in conflict with his citizenship and with other men as members of the community. This conflict reduces itself to the secular division between the political state and civil society. For man as a bourgeois, “life in the state” is “only a semblance or a temporary exception to the essential and the rule.” Of course, the bourgeois, like the Jew, remains only sophistically in the sphere of political life, just as the citoyen only sophistically remains a Jew or a bourgeois. But, this sophistry is not personal. It is the sophistry of the political state itself. The difference between the merchant and the citizen, between the day-laborer and the citizen, between the landowner and the citizen, between the merchant and the citizen, between the living individual and the citizen. The contradiction in which the religious man finds himself with the political man is the same contradiction in which the bourgeois finds himself with the citoyen, and the member of civil society with his political lion’s skin.

While liberal political life is organized on the principle of reasoned debate between disinterested equals, it is not actually the case that inequality and particular interests disappear. One important thing to note in this passage: Here, as elsewhere, Jewishness is only one of various examples of a particular identity. Which should make clear: This is an essay about the limits of political freedom in the liberal state, not an essay about Jews. It's an essay about "The Jewish Question," not about the Jewish Question.

So: Under the bourgeois state (of which Marx already recognizes the northern US as offering the purest example) religion goes from being the most public question, to the most private. "Religion ... is no longer the essence of community, but ... the expression of man's separation from his community ... It is only the abstract avowal of specific perversity, private whimsy, and arbitrariness." It is, in short, now just a matter of taste. 

In the private sphere we are all just automatic pleasure-and-pain machines; our capacity for moral and rational action is limited to the political sphere. Just look at the distinction the French Revolution made between the "rights of the citizen" and the "rights of man":

The rights of man, ... as distinct from the rights of the citizen, are nothing but the rights of a member of civil society, the rights of egoistic man, separated from other men and from the community. ... It is the question of the liberty of man as an isolated monad. ... The rights of man appear as "natural" rights because conscious activity is concentrated on the political act. ... Political emancipation is the reduction of man, on the one hand, to a member of civil society, to an egoistic, independent individual, and on the other, to a citizen, a juridical person.

Economics, perhaps even more than other social sciences, has taken this distinction and made it doctrine. A core methodological assumption of economics is that private choices are purely arbitrary, they are given natural facts. We can't discuss them, debate them, subject them to reason: De gustibus non est disputandum. In private life, we are animals or not even, we are mechanical objects. Where economics poses a choice, it is invariably: What should the State do?

There is a more direct connection with economics, too. While individuals in civil society are conceived of as monads, they do still relate to each other, through the medium of property. Marx:

The practical application of man's right to liberty is man's right to private property ..., the right to enjoy one's property ... without regard to other men, independently of society, the right of self-interest. This individual liberty ... makes every man see in other men not the realization of his own freedom, but the barrier to it.

Social life, to take another tack, is a series of hugely complicated coordination problems. When these problems are solved through norms or tradition, or through rational debate, we experience their resolution as freedom. We see ourselves doing what is right, because it is right. When they are solved by markets or other forms of coercion, we experience unfreedom. One person decides and the rest of us comply.

At the start of the essay, Marx poses the question: "Does the standpoint of political emancipation give the right to demand from the Jew the abolition of Judaism?" Here towards the end, it's clear that Marx's answer is, No. A democratic politics that allows us to act as rational beings only by denying our particular identities is no true democracy. And a private life that allows us our individuality only as arbitrary personal tastes, and in which have no organic ties or moral duties to anyone else, offers no true freedom. Marx does hope and expect that Judaism, like all religions, will eventually disappear. But that's only possible once the separation of political life and civil society has been transcended. We will be able to dispense with religion only once we are able to act as moral agents in our daily lives. Or as he says:

Only when the real, individual man reabsorbs in himself the abstract citizen, and as an individual human being has become a species-being in his everyday life, and in his particular situation, only when man has recognized and organized his own powers and, consequently, no longer separates power from himself in the shape of political power, only then will human emancipation have been accomplished.

What Comes Before Capital?

"The wealth of those societies in which the capitalist mode of production prevails, presents itself as an immense accumulation of commodities.'"

Everyone knows that line. If your intellectual formation is like mine, it has approximately the same status as "In the beginning God created the heavens and the earth."

The rabbis, I'm told, used to like to point out that in Hebrew the first letter of "In the beginning..." looks like a box with three sides, and only one opening. This was to convey the message, don't ask what happened before, or what might be happening somewhere else. The only story we care about starts here.

We all have our rabbis. But we keep asking anyway, what comes before? What comes before that first sentence of Capital, what's happening elsewhere? What form does wealth (claims on the good life) take in societies where the capitalist mode of production doesn't prevail? And apart from how it appears, or presents itself, what can we say about what it really is?

I think the biggest problem with how people read Capital is, they don't take the subtitle seriously: It really is a "critique of political economy." There's an overarching irony, the whole thing is written under the sign of the hypothetical. (In general, I think this irony is one of the most important, and hardest, things that students have to learn in any field.) The whole book is written to show that even if everything Ricardo said was true, capitalism would still be an unjust and inhumane (and unstable, though that doesn't come til later) economic system. But that's not the same as saying that everything Ricardo says really is true. In my opinion -- people I respect disagree -- everything Marx says about the Labor Theory of Value is preceded by an implicit "even if..." It shouldn't be interpreted as a set of positive claims about the world.

So what does Marx positively believe? For this, I think we have to turn to the early writings. I know these are deep waters, on which I am innocently paddling about in my little water wings. But in my opinion, the Economic and Philosophic Manuscripts of 1844 are the essential "before" to Capital.

In Capital, exploitation is defined in terms of the share of the product (already quantifiable; the transformation of the infinitely heterogeneous content of human activity into a mass of commodities has already taken place) to which claims accrue as a result of wage labor. But in the Manuscripts, he says

A forcing-up of wages (disregarding all other difficulties, including the fact that it would only be by force, too, that the higher wages, being an anomaly, could be maintained) would ... be nothing but better payment for the slave, and would not conquer either for the worker or for labour their human status and dignity.

Or equivalently, “The alienation of the product of labour merely summarizes the alienation in the work activity itself.” What's important is exhausting one's creative powers on alien ends. How many channels you have on tv afterward doesn't matter.

Alienated labor means (to take various of Marx's definitions):  “the work is external to the worker”; the worker "does not fulfill himself in his work”; the worker “does not develop freely his mental and physical energies”; “work is not voluntary, but imposed, forced labour”; work “is not the satisfaction of a need, but a means for satisfying other needs”; the worker “does not belong to himself but to another person.” This is the non-quantifiable fact about life under life under capitalism for which questions about the distribution of commodities are a stand-in. Everything that happens in Capital, happens after this.

"The Labouring Classes Should Have a Taste for Comforts and Enjoyments"

McDonald's model budget for its minimum-wage employees -- along with the smug, fatuous, those-people-aren't-like-us-dear defenses of it -- has been the target of well-deserved scorn.

This kind of thing has been around forever (or at least as long as capitalism). Two hundred years ago, liberal reformers offered "Promoting Sobriety and Frugality, and an Abhorrence of Gaming"as the solution to the collapse of wages following the Napoleonic wars, and gave workers instruction on "the use of roasted wheat as a substitute for coffee." You could make an endless list of these helpful suggestions to the poor to better manage their poverty.

To be fair, liberals today do mostly see this stuff as, at best, an effort by low-wage employers to divert attention from their own compensation policies to the personal responsibility of their workers. And at worst, when the budget help includes assistance enrolling in Medicaid or the EITC, as a way of getting the public to subsidize low-wage employment.

But there's a nagging sense in these conversations that, disingenuous as McDonald's is here, still, at the end of the day, frugality, living within one's means, is a virtue; that the ability to prioritize expenses and make a budget is a useful skill to have. Against that view, here's Ricardo on wages:

It is not to be understood that the natural price of labour, estimated even in food and necessaries, is absolutely fixed and constant. ... It essentially depends on the habits and customs of the people. An English labourer would consider his wages under their natural rate, and too scanty to support a family, if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin; yet these moderate demands of nature are often deemed sufficient in countries where 'man's life is cheap', and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an earlier period of our history. 

The friends of humanity cannot but wish that in all countries the labouring classes should have a taste for comforts and enjoyments, and that they should be stimulated by all legal means in their exertions to procure them. ... In those countries, where the labouring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the greatest vicissitudes and miseries.

In a world where the price of labor power depends on its cost, there's no benefit to workers from budgeting responsibly, from learning to get by on less. The less people can live on, the lower wages will be. On the other hand, to the extent that former luxuries -- a decent car, some nice clothes, dinner out once in a while, whatever consumer electronics item the scolds are going on about now -- come to be seen as necessities, such that it's not worth putting up with the bullshit of a job if you still can't afford them, then wages will have to rise enough to cover that too.

For much of the 20th century, it seemed like we had left Ricardo's world behind. Among economists, it became a well-established stylized fact that it's the wage share, not the real wage that is relatively fixed. To even sympathetic critics of Marx, the failure of real wages to gravitate toward a (socially determined) subsistence level looked like a major departure of modern economies from the capitalism he described.

These days, though, the world is looking more Ricardian. For the majority of workers without credentials or other shelter from the logic of the labor market, real wages look less like a technologically-fixed share of output than the minimum necessary to keep people participating in wage labor at all. In the subsistence-wage world of industrializing Britain, workers' "frugality, discipline or acquisitive virtues brought profit to their masters rather than success to themselves."  Conversely, in that world, which may also be our world, profligacy, waste and irresponsibility could be a kind of solidarity.

I would never presume to tell someone surviving on a minimum-wage paycheck how to live their life. I know that being poor is incredibly hard work, in a way that those of us who haven't experienced it can hardly imagine.  But as a friend of humanity, I do worry that the biggest danger isn't that people can't live on the minimum wage, but that they can. In which case we're all better off if McDonald's employees throw the bosses' helpful budget advice away.

The Exception and the Rule

MERCHANT: To assume that the Coolie would not strike me down at the first opportunity would have been to assume he had lost his reason.

JUDGE: You mean you assumed with justification that the Coolie must have had something against you. You may, then, have killed a man who possibly was harmless -- because you couldn't know he was harmless.

MERCHANT: One must go by the rule, not by the exception.

JUDGE: Then I pronounce the verdict. The Court regards it as proven that the Coolie approached his mater not with a stone but with a water flask. But even when this is granted, it is more credible that the Coolie wished to kill his master than that he wished to give him something to drink. The Merchant did not belong to the same class as his carrier. He had therefore to expect the worst from him. The Merchant could not believe in an act of comradeship on the part of a carrier whom, as he has confessed, he had brutalized. Good sense told him he was threatened in the highest degree. The accused acted, therefore, in justifiable self-defense -- it being a mater of indifference whether he was threatened or must feel himself threatened. In the circumstances he had to feel himself threatened. The accused is therefore acquitted.

The Cash and I

Martin Wolf in the FT the other day:

The third challenge is over the longer-term sources of demand. I look at this issue in terms of the sectoral financial balances – the balances between income and spending – in the household, business, external and government sectors. The question, then, is where expansion will come from. In the first quarter of this year the principal offset to fiscal contraction was the declining household surplus. 

What is needed, as well, is a big swing towards surplus in the US current account or a jump in corporate investment, relative to retained profits. Neither seems imminent, though the second seems more likely than the first. The worry is that the only way to balance the economy will be via big new bubbles. If so, this is not the fault of the Fed. It is the fault of structural features of the domestic and global economies...

This is a good point, which should be made more. If we compare aggregate expenditure today to expenditure just before the recession, it is clear that the lower level of demand today is all about lower  consumption. But maybe that's not the best comparison, because during the housing boom period, consumption was historically high. If we take a somewhat longer view, what's unusually low today is not household consumption, but business investment. Weak demand is about I, not C.

This is especially clear when we compare investment by businesses to what they are receiving in the form of profits, or, better cashflow from operations -- after-tax profits plus depreciation. [1] Here is the relationship over the past 40 years:

Corporate Investment and Cashflow from Operations as Fraction of Total Assets, 1970-2012

The graph shows annualized corporate investment and cashflow, normalized by total assets. Each dot is data from one quarter; to keep the thing legible, I've only labeled the fourth quarter of each year. As you can see, there used to be a  clear relationship between corporate profitability and corporate investment. For every additional $150, more or less, that a corporation took in from operations, it would increase capital expenditures by $100. This relationship held consistently through the 1960s (not shown), the 1970s, the 1980s and 1990s.

But now look at the past ten years, the period after 2001Q4.  Corporate investment rates are substantially lower throughout this period than at any earlier time (averaging around 3.5% of total assets, compared with 5% of assets for 1960-2001). And the relationship between aggregate profit and investment rates has simply disappeared.

Some people might say that the problem is in the financial system, that even profitable businesses can't borrow because of a breakdown in intermediation, a shortage of liquidity, an unwillingness of risk-averse investors to hold their debt, etc. I don't buy this story for a number of reasons, some of which I've laid out in recent posts here. But it at least has some certain prima facie plausibility for the period following the great financial crisis. Not for for the whole decade-plus since 2001. Saying that investment is low today because businesses can't find anyone to buy their bonds is merely wrong. Saying that's why investment was low in 2005 is absurd.

(And remember, these are aggregates, so they mainly reflect the largest corporations, the ones that should have the least problems borrowing.)

So what's a better story?

I am going to save my full answer for another post. But regular readers will not be surprised that I think the key is a shift in the relationship between corporations and shareholders. I think there's a sense in which the binding constraint on investment has changed from the terms on which management can get funds into the corporation, from profits or borrowing, to the terms are on which they can keep them from going out, to investors. But the specific story doesn't matter so much here. You can certainly imagine other explanations. Like, "the China price" -- even additional capacity that would be profitable today won't be added if it there's a danger of lower-cost imports entering that market.

The point of this post is just that corporate investment is historically low, both in absolute terms and relative to profitability. And because this has been true for a decade, it is hard to attribute this weakness to credit constraints, or believe that it will be responsive to monetary policy. (This is even more true when you recall that the link between corporate borrowing and investment has also essentially disappeared.) By contrast, household consumption remains high. I have the highest respect for Steve Fazzari, and agree that high income inequality is a key metric of the fucked-upness of our economy. But I don't think it makes sense to think of the current situation in terms of a story where high inequality reduces demand by holding down consumption.

Consumption is red, on the right scale; investment is blue, on the left. Both as shares of GDP.

As I say, I'll come back in a future post to my on preferred explanation for why a comparably profitable firm, facing comparable credit conditions, will invest less today than 20 or 30 years ago.

In the meantime, one other thing. That first graph is a nice tool for showing how a Marxist thinks about business cycles.

If you look at the graph carefully, you'll see the points follow counterclockwise loops. It's natural to see this as cycles. Like this:

Start from the bottom of a cycle, at a point like 1992. A rise in profits from whatever source leads to higher investment, mainly as a source of funds and but also because it raises expectations of future profitability. That's the lower right segment of the cycle. High investment eventually runs into supply constraints, typically in the form of a rising wage share.[1] At that point profits begin to fall. Investment, however, continues high for a while, as the credit system allows firms to bridge a growing financing gap. That's the upper right segment of the cycle. Eventually, though, if profits don't recover, investment will follow them downward. This turning point often involves a financial crisis and/or abrupt fall in asset values, like the collapse of tech stocks in 2000. This is the upper left segment of the cycle.  Finally, in the  lower left, both profits and investment are low. But after some time the conditions for profitability are restored, and we move toward the right and begin a new cycle. This last step is less reliable than the others. It's quite possible for the economy to come to rest at the lower left and wobble there for a while without any sustained change in either profits or investment. We see this in 2002-2003 and in 1988-1991.

(I think the investment boom of the late 70s and the persistent slump of the early 1990s are two of the more neglected episodes in recent economic history. The period around 1990, in particular, seems to have all the features that are supposed to be distinctive to the current macroeconomic conjuncture. At the time, people even called it a balance-sheet recession!)

For now, though, we're not interested in the general properties of cycles. We're interested in how flat and low the most recent two are, compared with earlier ones. That is the structural feature that Martin Wolf is pointing to. And it's not a new feature of the post financial crisis period, it's been the case for a dozen years at least, only temporarily obscured by the housing bubble.



UPDATE: In comments, Seth Ackerman asks if maybe using total assets to normalize investment and profits is distorting the picture. It's a good question, but the answer is no. Here's the same thing, with trend GDP in the denominator instead:

As you can see, the picture is basically the same. Investment in the 200s is still visibly depressed compared with earlier decades, and the relationship between profits and investment is much weaker. Of course, it's always possible that current high profits will lead an investment boom in the next few years...



[1] Cash from operations is better than profits for at least two reasons. First, from the point of view of aggregate demand, we are interested in gross not net investment. A dollar of investment stimulates demand just as much whether it's replacing old equipment or adding new. So our measure of income should also be gross of depreciation. Second, there are major practical and conceptual issues with measuring depreciation. Changes in accounting standards may result in very different official depreciation numbers in economically identical situations. By combining depreciation and profits, we avoid the problem of the fuzzy and shifting line between them, making it more likely that we are comparing equivalent quantities.

[2] A rising wage share need not, and often does not, take the form of rising real wages. In recent cycles especially, it's more likely to combine flat real wages with a rising relative cost of wage goods.

New Keynesians Don't Believe Their Models

Here's the thing about about saltwater, New Keynesian economists: They don't believe their own theory.

Via John Cochrane, here is a great example. In the NBER Macroeconomics Annual a couple years ago, Gauti Eggertson laid out the canonical New Keynesian case for the effectiveness of fiscal policy when interest rates are at the Zero Lower Bound. In the model Eggertson describes there -- the model that is supposed to provide the intellectual underpinnings for fiscal stimulus -- the multiplier on government spending at the ZLB is indeed much larger than in normal conditions, 2.3 rather than 0.48. But the same model says that at the ZLB, cuts in taxes on labor are contractionary, with a multiplier of -1. Every dollar of "stimulus" from the Making Work Pay tax credit, in other words, actually reduced GDP by a dollar. Or as Eggertson puts it, "Cutting taxes on labor ... is contractionary under the circumstances the United States is experiencing today. "

Now, obviously there are reasons why one might believe this. For instance, maybe lower payroll taxes just allow employers to reduce wages by the same amount, and then in response to their lower costs they reduce prices, which is deflationary. There's nothing wrong with that story in principle. No, the point isn't that the New Keynesian claim that payroll tax cuts reduce demand is wrong -- though I think that it is. The point is that nobody actually believes it.

In the debates over the stimulus bill back at the beginning of 2009, everyone agreed that payroll tax cuts were stimulus just as much as spending increases. The CBO certainly did. There were plenty of "New Keynesian" economists involved in that debate, and while they may have said that tax cuts would boost demand less than direct government spending, I'm pretty sure that not one of them said that payroll tax cuts would actually reduce demand. And when the payroll tax cuts were allowed to expire at the end of 2012, did anyone make the case that this was actually expansionary? Of course not. The conventional wisdom was that the payroll tax cuts had a large, positive effect on demand, with a multiplier around positive 1. Regardless of good New Keynesian theory.

As a matter of fact, even Eggertson doesn't seem to believe that raising taxes on labor will boost demand, whether or not it's what the math says. The "natural result" of his model, he admits, is that any increase in government spending should be financed by higher taxes. But:

There may, however, be important reasons outside the model that suggest that an increase in labor and capital taxes may be unwise and/or impractical. For these reasons I am not ready to suggest, based on this analysis alone, that raising capital and labor taxes is a good idea at zero interest rates. Indeed, my conjecture is that a reasonable case can be made for a temporary budget deficit to finance a stimulus plan... 

Well, yeah. I think most of us can agree that raising payroll taxes in a recession is probably not the best idea. But at this point, what are we even doing here? If you're going to defer to arguments "outside the model" whenever the model says something inconvenient or surprising, why are you even doing it?


EDIT: I put this post up a few days ago, then took it down because it seemed a little thin and I thought I would add another example or two of the same kind of thing. But I'm feeling now that more criticism of mainstream economics is not a good use of my time. If that's what you want, you should check out this great post by Noah Smith. Noah is so effective here for the same reason that he's sometimes so irritatingly wrong -- he's writing from inside the mainstream. The truth is, to properly criticize these models, you have to have a deep knowledge of them, which he has and I do not.

Arjun and I have a piece in an upcoming Economics and Politics Weekly on how liberal, "saltwater" economists share the blame for creating an intellectual environment favorable to austerian arguments, however much they oppose them in particular cases. I feel pretty good about it -- will link here when it comes out -- I think for me, that's enough criticism of modern macro. In general, the problem with radical economists is they spend too much time on negative criticism of the economics profession, and not enough making a positive case for an alternative. This criticism applies to me too. My comparative advantage in econblogging is presenting interesting Keynesian and Marxist work.

One thing one learns working at a place like Working Families, the hard thing is not convincing people that shit is fucked up and bullshit, the hard thing is convincing them there's anything they can do about it.  Same deal here: The real challenge isn't showing the other guys are wrong, it's showing that we have something better.