Tuesday, January 21, 2014

Freshwater economics gone stagnant

RMIT economics professor Sinclair Davidson runs the blog Catallaxy Files - self-styled as "Australia's leading libertarian and centre-right blog" - where I spend a bit of time trolling the various Christianists, libertarians and other wingnut denizens. While admittedly I get away with a lot, I am currently in moderation over there for taking up an old battle with him. I am not so much posting this entry to whinge, but to set it all down somewhere while I'm remembering, and for future reference once this topic inevitably resurfaces.

In 2011, Sinclair posted an article at The Drum entitled 'Stagflation' looms for Australia's economy predicting a rise in inflation to dangerous levels concurrent with a precipitous stall in growth, with an attendant Cat thread and then a follow-up thread a fortnight later (presenting a Zero Hedge graph of questionable construction).

Since that point, and contrary to Sinclair's predictions, growth in Australia has recovered to historical trend levels, while inflation has plumbed new depths - the latter so much so that there is now talk of deflation, which occasioned not just one Deflation risk thread on the Cat but a sequel as well. As is my wont, I immediately waded into Sinclair in the comments with hard economic numbers, plus a reference to Art Laffer's recent capitulation in the face of economic data which refuted his previous pronouncements on inflation. By the time the sequel thread came around the stoush was in full session, leading to the moderation. As Homer Paxton points out, it's hard to fathom why Sinclair can not admit he got it wrong, when the facts are staring at him in the face.

Denial is a distinguishing feature of many economists of the freshwater school, which is one of the many reanimations of right-wing supply side economic thought in the last century or so. Paul Krugman is the best prosecutor of the case against neoclassical economics - led by Milton Friedman of the University of Chicago -  after it failed to predict the Global Financial Crisis. Sinclair is part of an even older, less creditable sect: that of the classical economists. Classicists were embarrassed out of the profession, for the most part, by the Great Depression in the 1930s which saw the rise of Keynesianism as voters in recently enfranchised demographics realised they didn't like mass poverty and long-term unemployment. Empirical data which scientists did not expect tends to shake up scientific theory, or at least should do if said scientists are actually using the scientific method.

Despite several such fact-based setbacks to supply side economics, Catallaxy Files is the gathering point of a self-styled "Australian school" of economics, which takes its cues from the Austrian school headed by Ludwig von Mises. Chief hunter of the classicists is John Quiggin, economics professor at the University of Queensland. His characterisation of classicists as zombies in his popular book defined the battle.

Economists like Sinclair now sit in fetid, dried up billabongs, not having changed since the time of the dinosaurs, like freshwater crocodiles in a drought. The climate has changed for freshwater proponents, and they are not able to evolve to adapt to the new environment. This is why Sinclair can not accept reality. He will continue to bare his teeth and wallow in the dust, until the dry wind comes to pick his bones clean.


  1. Sinclair an economist?

    Not only did he get his big call on Stagflation wrong he thought the largest contractionary budget in our lifetime was expansionary ( along with his mate Samuel J).
    This is priceless as is this.

  2. sorry I didn't pick up that Catallaxy has not allowed to comment. And they are great supporters of 'free speech'.

    Hypocrisy is certainly ripe large there!

  3. I support Sinclair's right to deny me publishing rights on his site from time to time. I ban people on my site occasionally. People can draw their own conclusions as to the timing of this one, nevertheless.

  4. The obvious problem with "the Australian School's" economics is that it is effectively faith based: the answer to any economic problem has always been, and forever will be "smaller government, less government spending, less regulation, less taxes".

    The faith based approach is also clear in their reluctance to accept science on climate change.

  5. just to help those fools at Catallaxy.
    Here is the costs of austerity.

    The problem with Catallaxy clowns they always deny austerity has ever been implemented,
    Quite typical they missed the very austere budget of Swan. The most austere we have ever seen

  6. I see the troika of meatheadism is commenting here. Nice to see them all in one place these days.

    Homer, you have absolutely no idea about economics in the slightest. In fact you have no idea about anything really.

    Stepford, you need to get your head around the fact that the climate models are totally fucked and that you're likely to lose your disability pension.

    Fatboy, you have no business wading into economic subjects as you failed first year economics.

  7. Homer

    Tell the other two geniuses here what Skank ho means to you? Go on. You moron homer.

  8. Good effort monster. You're now banned. Great work.

  9. And this is why, you bozo! you admitted to being a pure troll: "- where I spend a bit of time trolling the various Christianists, libertarians and other wingnut denizens. While admittedly I get away with a lot,"

    So it's entirely self-inflicted.

  10. Great work Monster. You're now in the Homer and Bird category.

  11. the first anonymous has no idea about climate models and climate change as we have seen before.
    If I have no ideas of economics then what does that mean for Davidson. I have demolished one presentation he has made and shown him up on this topic as has M0nty not to mention his wonderful understanding of fiscal policy
    now he is so thinskinned he has banned M0nty.

    Repeat after me Catallaxians are hypocrites!

  12. My view on trolling is that everyone is a troll, in the sense that trolling is defined in my mind as posting to elicit a response. Everyone wants a response of some kind to their communication. Trolling is a spectrum, like autism (not the only connection!). I realise this definition is different to the normal one, which is probably what Sinclair was using. But he would have found some other flimsy pretext on which to permaban me whatever I said, since the real reason is that I had nailed him on the stagflation call and he had no comeback at all.

  13. M0nty,
    We forgot to mention Sinclair provides a new definition of Stagflation into the bargain. most associate it with the 70's experience of double digit inflation and double digit unemployment or reasonably close to that but not our Sinclair.

    He thinks 4% inflation and 6% unemployment is good enough.

    Even on this basis he missed out!

    What a clown,

  14. Perhaps we should label his new definition as "sincflation". It's stagflation, but there's no stagnancy or CPI spikes, so the inflation is only in Sinclair's head.

  15. I guess that is why he is losing his hair!! He clearly is losing his marbles like the rest of them.