Life Imitates Annie Hall, Economics Edition

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There is a classic scene in Annie Hall in which Woody Allen is standing in a movie line, listening to an academic hold forth on Marshall McLuhan, when suddenly McLuhan appears to tell the blowhard that he has no idea what he is talking about.


This sort of fantasy comes to life more often than you’d think.

Not long ago, American Enterprise Institute blogger James Pethokoukis proclaimed “income inequality is a myth.” Pethokoukis’s first data point cited a paper by Northwestern economic Robert Gordon, which Pethokoukis conscripted to bolster his claim that “income gains have been shared fairly equally.” Ryan Chittum of Columbia Journalism Review reads the Gordon paper and finds that it does not actually say what Pethokoukis thinks it says. Gordon writes, “The evidence is incontrovertible that American income inequality has increased in the United States since the 1970s.”

But economic papers are long and boring. Couldn’t Gordon just draw a picture of how much he figures inequality has increased? It turns out he did, here:

And here:

I have not seen Pethokoukis reply to this rebuttal on his blog. Possibly he was too busy prepping for his big interview with Herman Cain.

In other life-imitates-Annie Hall news, David Henderson wrote a Wall Street Journal op-ed gloating over the Nobel prizes of Thomas Sargent and Christopher Sims. These, he exulted, show once more why Keynesian economics are false. The headline was, “A Nobel for Non-Keynesians”:

On Monday the Nobel Committee announced the winners of the 2011 Nobel Prize in economics: Thomas J. Sargent of New York University and Stanford University's Hoover Institution, and Christopher A. Sims of Princeton University. The award was given for "their empirical research on cause and effect in the macroeconomy."

The Swedish economists announcing the award emphasized, correctly, the importance of Messrs. Sargent's and Sims's thinking about the role people's expectations play in economic decision-making and the larger economy. But what they failed to mention is that their work has also offered empirical evidence that the school of thought known as Keynesian economics—which believes that government can turn a flagging economy around with the right combination of fiscal "stimulus" (generally government spending) and monetary policy—is fallible.

This weekend, Jeff Sommer brought out Marshall McLuhan Thomas Sargent and Christopher Sims. They say the Journal knows nothing of their work:

Professor Sims told me that some conservative commentators had gotten his views quite wrong. The Wall Street Journal editorial page, for example, implied that both professors opposed the interventionist economic policies of central banks and governments over the last few years.

Professor Sims said he actually approved of many of them — with qualifications, of course. An op-ed article, also in The Journal that day, called the pair “non-Keynesian,” a reference to the late British economist John Maynard Keynes. Professor Sims said he was not “non-Keynesian” at all. …

In telephone conversations last week, Professor Sargent said he felt insulted by people who call him “non-Keynesian” or “right wing,” terms that, he said, are based on a misunderstanding of his thinking. …

The “non-Keynesian” label irks him particularly. “That’s just off base,” he said. “Keynes was a very good economist. He was brilliant. He had wonderful insights. His work has inspired me many times.”
Professor Sargent’s own writings are sprinkled with pithy quotations from Keynes. In January 1986, the professor wrote a Wall Street Journal article, “An Open Letter to the Brazilian Finance Minister,” analyzing that nation’s fiscal crisis. In form and substance, it was explicitly modeled on a very similar letter written by Keynes to the French finance minister 60 years earlier. One point of this exercise, he said, “was to get people to actually read Keynes.”

To summarize, The Wall Street Journal op-ed page calls economists “non-Keynesian.” Economists reply that they are, too, Keynesian. We will await the Journal’s acknowledgement of this … never.

Woody Allen finishes the scene by musing, “Boy, if life were only like this.” It is! But the thing is, in real life, having Marshall McLuhan debunk some blowhard isn’t going to make the blowhard admit he’s wrong.