Here we go:
Today’s freshwater economists don’t believe in Friedman-type monetarism;First, "freshwater" is very passe. The descendants of Lucas, Prescott, Sargent, Wallace, etc., are everywhere in the world, and in some cases a couple of generations (maybe even 3 in some cases) removed from the source. Is Mike Woodford or Mark Gertler a freshwater or saltwater? Hard to tell. Second, I think we learned a lot from Friedman-type monetarism. The basic Friedman-rule idea (i.e. optimum quantity of money) is a powerful one, though there are good reasons why we think we should depart from it in practice. Targeting monetary aggregates seems a bad idea. 100% reserve requirements are unquestionably a bad idea. Some of Friedman works, and some doesn't, but you can't fault him for not being original.
The first post-Friedman generation bought into the Lucas-type argument that no anticipated shock to demand can have any real effect;Many people who have been taught by Ed Prescott or have talked to him, have bought into the idea that "demand" and "supply" are the wrong language to be using for organizing our thinking about macroeconomics. Lucas's "Expectations and the Neutrality of Money" wasn't about "demand shocks" but shocks to the stock of fiat money, engineered by the central bank. Lucas wanted to show how one could observe Phillips curve correlations, but this Phillips curve would not be exploitable by the monetary authority. That's a powerful idea, though the monetary nonneutrality in Lucas's model is not something we take seriously any more. Lucas's paper is also a watershed in terms of its methodological contribution.
...the next cohort turned to real business cycle theory, in which recessions are basically like bad weather that both reduces a farmer’s productivity and induces him to stay indoors.See this.
This is presumably the answer to my question about why Keynesians seem to understand New Classical models, while the New Classicals themselves apparently don’t: the Keynesians have thought long and hard about demand, the classical types have never done so, not even in the context of their own models.I think most macroeconomists you run into these days understand the full array of models in use out there. Obviously Krugman has not been hanging out at macro conferences (or macro seminars in his own department), so he would not know that. Further, if you look through some of my blog posts, you'll see instances where I have to explain Keynesian models (New and Old) to the Keynesians.
Probably the most painful thing in Brad’s notes is Robert Lucas’s sneering dismissal of Christy Romer, whom he ridicules as someone who just made stuff up on the fly — and who then makes up his own version of Ricardian equivalence on the fly, and gets it completely wrong.I wondered what this was all about, and looked at DeLong's notes. It's basically a lecture to Brad's undergrads, and he includes a slide with a quote from Lucas that seems to have been Bob's extemporaneous comments from a panel discussion, or some such. Funny thing to teach to your freshman class. I have a hard time imagining Bob sneering, but I'm sure it's possible. Maybe if Bob had Dick Cheney's face. In any event, Christina Romer richly deserves all the criticism she can get, if not outright ridicule. I supplied some here and here.
But while the likes of Olivier Blanchard are indeed reconsidering their views, the people who got things completely wrong are showing about as much self-awareness and remorse as, well, Wall Street.How can we have a discussion about this? There are some "people." Who exactly are these people? You can't debate anything if you don't name names. What is it that these people got completely wrong? What is right? What is wrong? Who is right and who is wrong, and why?
In Paul Krugman's mind lives a beast. The beast was born in his mind while he was a graduate student at MIT in the mid-1970s. The beast is Krugman's image of modern macroeconomics, and it bears no resemblance to any creature, living or dead. It certainly puts Paul in a foul mood. Maybe there is something he can take for that.
P.S.: Here's a project for an ambitious person. Take the students (i.e. completed supervised PhD dissertations) of Prescott's, the students of the students of Prescott, etc. Add up publications, citations, weight by quality, whatever (you can use REPEC for this). Now do the same for Krugman, and compare.