Thoughts on Marco Rubio and the Age of the Earth

Hold on to your hats, kids, I think I will alienate 95% of the blogosphere with this one (and without even cursing)…

Marco Rubio has been getting hammered in the blogosphere from both right and left for his coy answer when a GQ interviewer asked him about the age of the Earth. The irony is, the people I’ve seen complaining the loudest, don’t realize that they themselves don’t adhere to their commentary on the Rubio affair.

First, let’s set the context for those who didn’t see the exchange. Here’s the relevant excerpt from the December 2012 GQ:

GQ: How old do you think the Earth is?
Marco Rubio: I’m not a scientist, man. I can tell you what recorded history says, I can tell you what the Bible says, but I think that’s a dispute amongst theologians and I think it has nothing to do with the gross domestic product or economic growth of the United States. I think the age of the universe has zero to do with how our economy is going to grow. I’m not a scientist. I don’t think I’m qualified to answer a question like that. At the end of the day, I think there are multiple theories out there on how the universe was created and I think this is a country where people should have the opportunity to teach them all. I think parents should be able to teach their kids what their faith says, what science says. Whether the Earth was created in 7 days, or 7 actual eras, I’m not sure we’ll ever be able to answer that. It’s one of the great mysteries.

Now clearly, Rubio is giving a non-answer here: He’s skillfully acknowledging the controversy without trying to appear like a Bible-thumping hick, but also without offending fundamentalist Christians. After reading Rubio’s response, I know very little about his actual views except, “I would like to continue winning elections.”

Even so, I think much of the hysteria following the interview is misguided. For example, let’s look at Paul Krugman’s reaction. It should not surprise anyone to learn that he quickly pounced:

As I like to say, the GOP doesn’t just want to roll back the New Deal; it wants to roll back the Enlightenment.

But here’s what you should realize: when Rubio says that the question of the Earth’s age “has zero to do with how our economy is going to grow”, he’s dead wrong. For one thing, science and technology education has a lot to do with our future productivity — and how are you going to have effective science education if schools have to give equal time to the views of fundamentalist Christians?

More broadly, the attitude that discounts any amount of evidence — and boy, do we have lots of evidence on the age of the planet! — if it conflicts with prejudices is not an attitude consistent with effective policy. If you’re going to ignore what geologists say if you don’t like its implications, what are the chances that you’ll take sensible advice on monetary and fiscal policy? After all, we’ve just seen how Republicans deal with research reports that undermine their faith in the magic of tax cuts: they try to suppress the reports.

Beyond Krugman’s annoying haughtiness, is the more serious problem that this is what we do in economics education all the time, including Paul Krugman. When I was a professor at Hillsdale College, I spent an inordinate amount of time lecturing on the virtues of free trade. Now I could’ve just said, “This is a topic where economists from across the political spectrum agree. Lowering trade barriers raises just about everybody’s standard of living, in all countries.”

But I didn’t merely do that. Instead, I gave several different arguments to demonstrate how unfettered trade raises all boats, and I walked through several different critiques of standard “protectionist” arguments. I had the class read Bastiat’s famous “Petition of the Candlemakers,” I walked through a simple numerical example of trade flows and wages in the U.S. and Mexico, and I relayed Henry George’s famous quip that in wartime we blockade our enemies and do to them what we do to ourselves with tariffs in peacetime. I pointed out that as an employee of Hillsdale College, I had a massive trade surplus with the state of Michigan, but a massive trade deficit with Florida whenever I went on vacation. So did this mean my money was eventually going to all end up in the hands of Floridians? And so forth.

Now why did I spend so much time on this topic? Because I knew it was the single hardest thing for the layperson to grasp. Indeed, even after all of my efforts, I would still have students writing on tests that a trade deficit with Japan “sucked!” Even though the vast majority of economists for more than a century has thought it silly for governments to institute tariffs in order to “save domestic jobs,” nonetheless the general public endorses the idea. So it’s important for economists to try to educate their students on what is wrong with this notion, if that’s what the economists believe.

By the same token then, if a large segment of the U.S. population—so large that major politicians are afraid to cross them—doesn’t believe the standard neo-Darwinian synthesis on the origin of species, then it’s important for teachers to teach about these issues. Hardly anybody is suggesting that if someone wants to get a Ph.D. in microbiology from Harvard, that he should use Genesis as a text. Rather, what many parents are saying is that if their kids are going to be taught the general principles of biology, chemistry, and so forth, because these are supposedly important subjects for a well-rounded citizen, then teachers should at least acknowledge the fact that many of these kids grow up in households where they have strongly held views against some of the conclusions of these disciplines.

If Krugman wants to say this is a waste of scarce classroom time, on a topic on which the experts have little disagreement, then by the same token he should recommend that intro college courses on economics drop all mention of protectionism. Furthermore, I have to wonder why he spends so much time on his own blog, in his popular books, and on the Sunday talk shows, knocking down “zombie ideas” and other views advanced by his opponents. One almost gets the sense that Krugman feels it’s important for even a Nobel laureate to disabuse the general public of widely held economics fallacies.

Yet turning back to Rubio, there was another strand of criticism I saw, this time coming from atheist libertarians and Austrian economists. The complaint here was that if the Republican Party keeps catering to these nutjob Christians, then their message of smaller government and economic freedoms will get drowned out by the crazy social and religious dogmas.

These complaints were particularly amusing, because Austrian economists are the analog of the “Intelligent Design” scholars. Contrary to the aspersions of Krugman and others, there really are PhDs in various, relevant fields who challenge the “consensus” views on speciation, the origin of life, and the age of the earth. The fundamentalist Christians who believe in a Young Earth don’t merely say, “Well sure, all them pointy heads with their fancy equipment and big brains say one thing, but I’ve got my Bible so they must be wrong.” No, the fundamentalist Christian thinks the secular scientists have overrated the powers of their reason and are misapplying their scientific tools. The works of the academics in the Intelligent Design and Creationist fields (those are distinct concepts, by the way) are full of secular arguments. They give logical objections to carbon dating and geological evidence of an Old Earth. It’s not simply quoting Scripture.

In conclusion, it is entirely understandable that Paul Krugman and other icons in the economics establishment can laugh at the outcasts in both economics and other disciplines. But it is ironic indeed when Austrian economists—who think that the New Keynesian orthodoxy is rubbish—join suit.

Of course the two disciplines are different; it’s possible that the Austrians are right in their criticism of the mainstream “consensus,” while the Intelligent Design and/or Young Earth scientists are wrong in their criticism of their mainstream peers. But from a cultural or sociological perspective, the two situations are quite similar. Unless a particular Austrian economist also has an advanced degree in biology or geology, I don’t think he or she should be complaining too loudly about conservatives paying attention to “crank” scientists in other disciplines. If the conservatives heeded such advice, then they’d tune out the Austrian economists too.

Krugman Ignores His Own Theory and Misses An Important Piece of European History

This whole “what danger is there for a country issuing its own currency?” argument is really slippery. First of all, what these people really mean is, “What danger is there for a country issuing its own currency and in which most of its debts are denominated in this currency?” I.e., even on their own terms, it’s not enough for a country to issue its own currency. I believe this extra hoop is how they rule out things like Russia defaulting on its bonds and causing a bit of a ruckus, as you may recall.

When you think about it, there are only a handful of countries for which this concept even applies, and even then it only really works from 1971 onward. But anyway, let’s put aside that objection and consider Krugman’s latest:

What [a critic of the fiscal scaremongers] doesn’t note, however, is that the problem with bond vigilante scare tactics runs even deeper than that — because it’s actually quite hard to tell a story in which a loss of confidence in U.S. bonds hurts the real economy. Why wouldn’t it just drive down the dollar, and thereby have an expansionaryeffect?

Yes, I know, Greece — but Greece doesn’t have its own currency. What’s the model under which a country that does have its own currency and borrows in that currency can experience a slump due to an attack by bond vigilantes? Or failing that, where are the historical examples?

This is really amazing. Krugman is acting like it’s not even theoretically possible to imagine this kind of thing. But sure it is. Here’s a theory of it:

So suppose that we eventually go back to a situation in which interest rates are positive….with the government still running deficits of more than $1 trillion a year, say around $100 billion a month. And now suppose that for whatever reason, we’re suddenly faced with a strike of bond buyers — nobody is willing to buy U.S. debt except at exorbitant rates.

So then what? The Fed could directly finance the government by buying debt, or it could launder the process by having banks buy debt and then sell that debt via open-market operations; either way, the government would in effect be financing itself through creation of base money. So? …

Does this mean 400 percent inflation? No, it means more — because people would find ways to avoid holding green pieces of paper, raising prices still further.

I could go on, but you get the point: once we’re no longer in a liquidity trap, running large deficits without access to bond markets is a recipe for very high inflation, perhaps even hyperinflation…

At this point I have to say that I DON’T EXPECT THIS TO HAPPEN — America is a very long way from losing access to bond markets, and in any case we’re still in liquidity trap territory and likely to stay there for a while. But the idea that deficits can never matter, that our possession of an independent national currency makes the whole issue go away, is something I just don’t understand.

So there you have Paul Krugman himself, explaining how a bond strike on Treasuries would either force the government to balance its budget, or risk hyperinflation itself. If Krugman is now admitting that he can’t even come up for a theoretical basis for his objections to the MMT guys (that was the context of the above quotation), then he should send an apology to James Galbraith.

But let’s go back to Krugman’s recent post. It gets better:

The closest I can come to anything resembling the danger supposedly lurking for America is the tale of France in the 1920s, which emerged from World War I burdened by large debt, and which did in fact face an attack by speculators as a result. Yet the French story does not, if you look at it closely, offer any support to the deficit scare talk we keep hearing.

So Krugman walks through, and shows how France followed Krugmanian advice and let the franc depreciate, inflating away the real value of its post-war debt. Krugman claims that everything was great, and points to a table showing French unemployment. Only thing is, in 1927 it jumps up to 11 percent. Yikes! That’s pretty bad. So does it prove that running up a humongous debt can lead to bad consequences? Of course not! Krugman explains:

But what about the brief but nasty slump in 1927? That wasn’t caused by spiking interest rates; it was, instead, caused by fiscal austerity, by the measures taken to stabilize the franc.

So even when we look at the closest thing I can find to the scenario the deficit scolds want us to fear, it doesn’t play out at all as described.

Everyone see what’s going on here? Krugman points to France as the only example of a bond vigilante attack he can think of, on a nation issuing its own currency. (I guess he’s not counting the gold standard as being binding here; I’m not sure when France went back on. Remember in those 1930s charts of industrial output that the Keynesians like to point to the idiot French as hurting their economy by clinging to gold far longer than other countries.)

So here’s the progression:

(1) The French emerge from World War I with a debt of about 240% of GDP. (That was its value in 1921, which was a big jump from 1920. I’m not sure what was going on there.) Of course the reason the French government has such a massive debt, is that it ran massive budget deficits during the war years (and went off gold).

(2) What did the French do in the early and mid-1920s to deal with the problem? Did they run massive budget surpluses? Nope, Krugman himself says, “How did France achieve that big drop in debt after 1925? Basically by inflating it away.”

(3) Krugman admits that the bond vigilantes saw this depreciation coming, and so interest rates spiked.

(4) The French authorities eventually reversed course to stop the plunge of the franc. Krugman acknowledges that this led to 11% unemployment in 1927.

(5) Krugman says this pain was avoidable, because the French authorities shouldn’t have tightened in 1927.

So, it seems to me we need to think of an historical example of a country that did just what Krugman suggests, in order to test out his recommendations. So let’s see: Can anybody think of a major industrial power that emerged from World War I with a huge debt, but that issued its own national currency the way the French issue francs, and that turned to the printing press but without looking back? In other words, can anybody think of a European power that followed the French pattern, except stuck to Krugman’s advice by continually depreciating rather than a foolish move to stabilize its currency?

(Don’t worry Keynesians, there’s no danger here. Even when an Austrian in the crowd thinks of the answer, Krugman will just point out, “Ah, but they ate a lot of sauerkraut. Hardly relevant for the US today.”)


==> Nick Rowe agrees with me that Steve Landsburg’s analysis of paying down government debt is only true if we assume perfect certainty. (Steve I think would totally agree, and that’s why I said in my original post that this was an argument over specifying assumptions for the reader, not about the implications of those assumptions.) Incidentally, if you have never seen Rowe in action, just skim the comments section, only reading his posts. You literally could learn a lot of economics just reading him patiently arguing with people. (In contrast, I am so sarcastic in my comments section that even my allies aren’t quite sure what my point is.) The other good thing about Nick is, he’s pretty humble. So you walk away thinking, “It’s not that this Canadian guy is all that smart, it’s just he’s been studying this stuff longer than I’ve been alive.”

==> Speaking of debt, I’m pleased to announce that for once, I agree with Daniel Kuehn on the government debt stuff! I don’t think Arnold Kling’s response to Krugman’s “we owe it to ourselves” position really got at the fundamental problem. To be clear, it’s not that Kling said anything wrong, and in fact he is highlighting one of the serious, real-world problems with deficit finance. But Krugman really did handle this type of thing by admitting upfront that government debt could have distributional implications for future generations. The stuff Kling is talking about doesn’t really show that Krugman is just flat out wrong for focusing on “we owe it to ourselves,” the way Buchanan/Boudreaux/Rowe did.

==> Poor Ron Paul gets ambushed at 13:30 by this host asking about the Murphy-Krugman Debate.

==> It’s kind of interesting: Someone in the comments of my post about Keynesians and consumption pointed to this Krugman article, where he definitely talks about the limitations of the “paradox of thrift” etc. But if I wanted to be a jerk, I would say, “So you prove to me that Keynesians don’t focus much on consumption, by pointing to Paul Krugman chiding Keynesians for focusing too much on consumption?” Anyway in the interest of holiday charity let me say that actual Keynesian economists are not quite the mindless champions of “consume consume consume!” that their critics sometimes attack, but there is no doubt that the caricature is based on a germ of truth: Even Krugman admits as much in the opening paragraphs of that linked article. So it’s not this right-wing myth the way Gene Callahan and Daniel Kuehn are suggesting.

Yes Gene, Keynesians *Do* Focus on Consumption More Than Investment

Gene Callahan is mystified:

So, I’m teaching Keynesian economics for the second time. And once again, I’m telling my students that, per Keynesians, recessions occur when intended investment falls short of savings. And the best way to fix this, per Keynesians, is for the government to invest in roads, bridges, parks, education, etc.

I’m fine with explaining all that. What I can’t figure out how to explain is why there are people saying Keynesianism is all about consumption and takes no account of investment.

Jonathan Finegold has some gentle remarks at his blog. Let me point out that Keynesians do stress the “paradox of thrift”–meaning it screws things up in a depression if people try to “be responsible” by consuming less and saving more–and of course there’s the “Marginal Propensity to Consume.”

If you’ll permit me, I suggest this article is relevant:

When Consumers Capitulate
Published: October 31, 2008

The long-feared capitulation of American consumers has arrived. According to Thursday’s G.D.P. report, real consumer spending fell at an annual rate of 3.1 percent in the third quarter; real spending on durable goods (stuff like cars and TVs) fell at an annual rate of 14 percent.

To appreciate the significance of these numbers, you need to know that American consumers almost never cut spending. Consumer demand kept rising right through the 2001 recession; the last time it fell even for a single quarter was in 1991, and there hasn’t been a decline this steep since 1980, when the economy was suffering from a severe recession combined with double-digit inflation.

So this looks like the beginning of a very big change in consumer behavior. And it couldn’t have come at a worse time.

It’s true that American consumers have long been living beyond their means. In the mid-1980s Americans saved about 10 percent of their income. Lately, however, the savings rate has generally been below 2 percent — sometimes it has even been negative — and consumer debt has risen to 98 percent of G.D.P., twice its level a quarter-century ago.

Some economists told us not to worry because Americans were offsetting their growing debt with the ever-rising values of their homes and stock portfolios. Somehow, though, we’re not hearing that argument much lately.

Sooner or later, then, consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine’s plea: “Grant me chastity and continence, but not yet.” For consumers are cutting back just as the U.S. economy has fallen into a liquidity trap — a situation in which the Federal Reserve has lost its grip on the economy.

Some background: one of the high points of the semester, if you’re a teacher of introductory macroeconomics, comes when you explain how individual virtue can be public vice, how attempts by consumers to do the right thing by saving more can leave everyone worse off. The point is that if consumers cut their spending, and nothing else takes the place of that spending, the economy will slide into a recession, reducing everyone’s income.

In fact, consumers’ income may actually fall more than their spending, so that their attempt to save more backfires — a possibility known as the paradox of thrift.

At this point, however, the instructor hastens to explain that virtue isn’t really vice: in practice, if consumers were to cut back, the Fed would respond by slashing interest rates, which would help the economy avoid recession and lead to a rise in investment. So virtue is virtue after all, unless for some reason the Fed can’t offset the fall in consumer spending.

I’ll bet you can guess what’s coming next.

For the fact is that we are in a liquidity trap right now…

The capitulation of the American consumer, then, is coming at a particularly bad time. But it’s no use whining. What we need is a policy response.

The ongoing efforts to bail out the financial system, even if they work, won’t do more than slightly mitigate the problem. Maybe some consumers will be able to keep their credit cards, but as we’ve seen, Americans were overextended even before banks started cutting them off.

No, what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.

Let’s hope, then, that Congress gets to work on a package to rescue the economy as soon as the election is behind us. And let’s also hope that the lame-duck Bush administration doesn’t get in the way.

If you put that article under a microscope, you get the faintest whiff of Krugman focusing on consumption as being really important for the US economy to not sputter.