Ricardianoid, Say's Law or Over-the-Top Sexism?
Alright, I've been biting my tongue on this for some time, but since it's been everywhere....
Here's the set up: Robert Lucas - macroeconomic demi-god - infamously said the following about the Obama stimulus:
If the government builds a bridge, and then the Fed prints up some money to pay the bridge builders, thatís just a monetary policy. We donít need the bridge to do that. We can print up the same amount of money and buy anything with it. So, the only part of the stimulus package thatís stimulating is the monetary part.
But, if we do build the bridge by taking tax money away from somebody else, and using that to pay the bridge builder ó the guys who work on the bridge ó then itís just a wash. It has no first-starter effect. Thereís no reason to expect any stimulation. And, in some sense, thereís nothing to apply a multiplier to. (Laughs.) You apply a multiplier to the bridge builders, then youíve got to apply the same multiplier with a minus sign to the people you taxed to build the bridge. And then taxing them later isnít going to help, we know that.
Much less discussed is the statement that immediately followed, about esteemed economist and co-architect (with Jared Bernstein) of the Obama stimulus, Christina Romer:
Christina Romer ó hereís what I think happened. Itís her first day on the job and somebody says, youíve got to come up with a solution to this ó in defense of this fiscal stimulus, which no one told her what it was going to be, and have it by Monday morning.
So she scrambled and came up with these multipliers and now theyíre kind of ó I donít know. So I donít think anyone really believes. These models have never been discussed or debated in a way that that say ó Ellen McGrattan was talking about the way economists use models this morning. These are kind of schlock economics.
Maybe there is some multiplier out there that we could measure well but thatís not what that paper does. I think itís a very naked rationalization for policies that were already, you know, decided on for other reasons.
The econoblogosphere's reaction - on the Left! - has been a debate over whether Lucas misapplied Ricardian equivalence. Krugman said he did and cited the sexist passage (although he fails to call a spade a spade); Mark Thoma weighed in addressing the Ricardian equivalence, with no mention of the Romer smear; Noah Smith claimed Lucas was actually applying Say's Law (also no mention of the Romer smear); and Brad Delong rejected Smith's Say's Law theory (Romer smear completely whitewashed by this point).
Since no one has pointed out that Lucas's comments were sexist, I feel compelled to justify what should be obvious: In fact, Lucas's claim that Christina Romer was new to her job and panicked echoes a classic sexist criticism for excluding women from power - namely, that women lack the steeliness to handle the pressure of high-stakes politics. So, it's not just a mildly insensitive comment about women generally (the kind of thing that happens all the time) - it is a comment about a high-ranking female member of the Obama administration that reinforces a sexist stereotype that has been repeatedly relied upon to deny women access to power.
Think about how Lucas's mind is working here. He thinks stimulus is ineffective and that everyone agrees. So, what it must have been is that Christina Romer was new and panicked? He could have said she was just following orders or a million other things that didn't imply weakness. But no, Lucas imagined Christina Romer as weak (an assumption that is completely belied by the evidence, by the way). Imagine, for example, it had been an African-American economist and Lucas had said the economist probably just didn't do his homework (lazy, you see) and thus, relied on stimulus to justify predetermined policies.
I realize the technical Ricardian-equivalence debate is interesting, but it would be like reading Ron Paul's racist newsletters and debating about his comments on monetary policy without even mentioning the blatant, over-the-top racism. So, since no one else has said it, I will: Lucas's imagined scenario of Christina Romer panicking is sexist (and Lucas also appears to have misapplied Ricardian equivalence, while Christina Romer's analysis has been repeatedly vindicated).