I forgot to congratulate Mark Thoma on his tenth blogoversary, so let me do that now. It’s hard to imagine what current economic debate would look like without the incredible job Mark does in assembling and discussing the most important new work, every day; for sure it would be vastly impoverished. Live long and prosper, Mark.

Today Mark includes a link to one of his own columns, a characteristically polite and cool-headed response to the latest salvo from David K. Levine. Brad DeLong has also weighed in, less politely.

I’d like to weigh in with a more general piece of impoliteness, and note a strong empirical regularity in this whole area. Namely, whenever someone steps up to declare that Keynesian economics is logically and empirically flawed, has been proved wrong and refuted, you know what comes next: a series of logical and empirical howlers — crude errors of reasoning, assertions of fact that can be checked and rejected in a minute or two.

Levine doesn’t disappoint. Right at the beginning of the example he claims refutes Keynesian thinking, he says,

Now suppose that the phone guy suddenly decides he doesn’t like tattoos enough to be bothered building a phone.

OK, stop right there. That’s an adverse supply shock, and no Keynesian claims that demand-side policies can cure the economy from the effects of such shocks. If you have a harvest failure, deficit spending can’t put the crops back in the fields. But that’s not what happened to the world economy in 2008, or in 1930; productive capacity was unimpaired, as was the willingness to work, so what we were looking at was something quite different — a demand shock, according to most economists, and everything we’ve seen is consistent with this view.

Actually, it’s even funnier than that: as Nick Rowe points out, Levine has in effect made phones the medium of exchange, so that he’s actually modeling something like a contractionary monetary policy!

And by the way: if you want a simple, homely example of how demand shocks can happen and cause unemployment, there is the baby-sitting coop.

So it’s the usual.

Meanwhile, on the empirical side: Anti-Keynesians like Levine are actually anti-monetarists too, although they may not realize it; their whole beef is with the idea that demand shortfalls can ever be a problem, and that pumping up demand in any way, monetary or fiscal, can ever be helpful. And they invariably live under a strange delusion: that the empirical evidence supports their position. This was never really true, and in fact the opposite has been the case for more than 30 years.

I could give you a lot of direct evidence, but let me instead just cite a guy named Chris Sims, who I think got some kind of prize for statistical work on economic fluctuations. Here’s his prize lecture, in which he describes his results:

The effects of monetary policy identified this way were quite plausible: a monetary contraction raised interest rates, reduced output and investment, reduced the money stock, and slowly decreased prices … This pattern of results turned out to be robust in a great deal of subse- quent research by others that considered data from other countries and time periods and used a variety of other approaches

Here’s how I see it: by any normal set of intellectual criteria, this debate should have been over 25 years ago. The evidence that monetary shocks have real effects was and is overwhelming, and it’s very difficult to write down a model in which this is true but in which fiscal policy is never effective at least on some occasions. The spectacular success of liquidity-trap predictions these past 6 years is just icing on the cake.

To understand why anti-Keynesian delusions persist, then, we need to turn to other social sciences, and try to make sense of the sociological forces that keep these delusions alive.