Democracy and Development

Xavier Marquez has a very interesting series of posts on the relationship between democracy and economic growth since the end of WWII:

The basics of this relationship in the post-WWII era seem pretty well understood: basically, the richer the country, the more “democratic” it appears to be (in the sense I’ve discussed here and here, where democracy is conceived as a system of normatively regulated competition for control of states including the usual paraphernalia of elections, freedoms of speech and assembly, etc.), though the reasons for why this is the case remain disputed, and there are obvious and significant exceptions to this pattern. Conversely, the academic literature suggests that democratic regimes have a slight and indirect long-term development advantage, though the evidence for this claim is much more controversial, and there is no consensus on how this particular advantage operates, if it exists at all

There are links to literature describing all of these assertions in the original post. Marquez then runs down some simple data (and presents it very well) and notes:

The median income of democratic regimes has been higher than the median income of both hybrid and fully authoritarian regimes since at least the 1950s, and the gap has in general widened, not narrowed, even as the number of democratic countries has increased. (From this graph we cannot tell, however, whether the gap has widened because democratic countries have grown faster, or because non-democratic countries that grew fast turned into democracies; from the graphs below, we may infer that it was a mixture of both). The gap was highest during “peak authoritarianism” in the late 1970s and early 1980s, when most poor and newly independent countries were either hybrid regimes or dictatorships, but it stopped growing after the end of the cold war, when a number of relatively poor countries became democratic. ...

What about growth? Is any particular regime type consistently associated with economic growth? ...

The answer is "not really" or at least "not very much". Dictatorships and hybrid regimes have more variability -- some grow very quickly, at least for awhile, but also go bust more frequently -- but averaging across regime types shows very little difference in central tendency:

To the extent that we can ignore these confidence intervals and focus only on the trend performance, democracies have not always done better than these other regimes. In the early post-war era it seems that dictatorships did better (though most did about as well as democracies), but then decolonization came along and the growth performance of dictatorships basically cratered. Indeed, the 80s, when the so-called “third wave” of democratization began, was also (not coincidentally perhaps?) the time when the “growth gap” between democracies and hybrid and dictatorial regimes was at its widest. Ominously, the last decade has seen a reversal of this pattern, which explains much of the (not very well thought out) commentary about the rise of the “Chinese model.”

He has a very cool motion chart at his blog (that I can't find the embed code for) that maps out the null effect, so click through to watch it.

More on Cowen on Europe

In his op-ed, Tyler Cowen raises a concern about a euro-collapse that I haven't much seen previously:

We thus face the danger that the euro, the world’s No. 2 reserve currency, could implode. Such an event wouldn’t be just another depreciation or collapse of a currency peg; instead, it would mean that one of the world’s major economic units doesn’t work as currently constituted.

There are a lot of claims -- some implicit -- in here. I'll take them in turn.

1. Does an exit of several peripheral countries from the eurozone constitue an implosion of a reserve currency? I don't think so. The status of the euro as a reserve currency does not depend on Greece's membership, it depends on Germany's management of it. If the alternatives are to jettison Greece -- or even several of the GIPSIs -- or to devalue the currency to keep them in, the euro's status as a reserve currency might actually be improved by a smaller membership of weak countries.

2. How important is the euro as a reserve currency? Roughly as important as the German mark was pre-euro, perhaps in combination with the the franc. The euro has not advanced much above the mark+franc status as a global reserve currency, if any at all, since its introduction in 1999. So the global economy as a whole does not appear to be very dependent on the euro; it is dependent on the US and, to a lesser extent, Germany, Britain, and Japan.

3. Would a euro-exit be more severe than a collapse of a currency peg? It conceivably could, but again: what matters most is Germany, and markets' belief in Germany's credibility to maintain a valuable currency. Germany's economy is not on the verge of collapse, nor does it depend on Greece, and German policymakers have repeatedly chosen to maintain policy credibility over possibly saving peripheral members. How much do markets care about Greece? I'll return to that below.

4. Would a euro-exit signal that one of the world's major economic units doesn't work? No. Greece is not one of the world's major economic units. A euro-exit would signal that one of the world's major political units doesn't work, but I'm not sure that this is new information nor am I sure that markets care all that much. The the extent that markets prefer stability over instability any resolution may be preferable to continued uncertainty.

Let's look at some data. Has the euro has significantly weakened as the crisis has grown more severe?

A bit. But if we zoom out and look at a longer time series we see that the euro is now trading at historical levels:

If Greece leaves will the value of the euro hold? Considering that Greece is by far its weakest link I would think so. Indeed, the fewer non-German members in the euro the more credibility it has! Germany does not need to devalue.

Anyway, just how important is the euro? At the end of last year global dollar holdings were nearly 250% higher than euro holdings. Or consider the exchange market. The introduction of the euro did nothing to reduce the world's reliance on the dollar, as I discuss (and graph) here. The euro is used in roughly the same percentage of the world's Forex as was the mark + franc. The global economy survived the end of those currencies.

There is only one truly important global currency -- the dollar.

Perhaps most distressingly, Cowen seemingly misunderstands the arguments of Kindleberger that he references in the paragraph immediately following the quoted one above:

We are realizing just how much international economic order depends on the role of a dominant country — sometimes known as a hegemon — that sets clear rules and accepts some responsibility for the consequences. For historical reasons, Germany isn’t up to playing the role formerly held by Britain and, to some extent, still held today by the United States. (But when it comes to the euro zone, the United States is on the sidelines.)

I said a bit about that in my post yesterday, and I'll say more about it in another post (this is plenty long already), but if the hegemon is most important than we should really only be concerned about the US (the global hegemon) and Germany (the regional hegemon), not Europe's southern periphery. And the role of the hegemon is to stabilize the system, not necessarily to guarantee good outcomes for every constituent within it.

Think about it this way: if Germany left the euro and re-issued the mark, do you think it would be stronger or weaker than the Germany-less euro? Do you think the new mark would be used more as a reserve currency than the euro or less?

So why should we think that a Greek exit would be much worse than "another depreciation or collapse of a currency peg"?

The World's Central Banker, Yet Again

Tyler Cowen summons his inner Kindleberger and gets pessimistic:

We are realizing just how much international economic order depends on the role of a dominant country — sometimes known as a hegemon — that sets clear rules and accepts some responsibility for the consequences. For historical reasons, Germany isn’t up to playing the role formerly held by Britain and, to some extent, still held today by the United States. (But when it comes to the euro zone, the United States is on the sidelines.)

It depends on what he means by "on the sidelines". The US Congress is certainly not doing anything about Europe. Short of a Marshall Plan for the GIPSIs I'm not sure what they could do, and there's no way that's happening. But that doesn't mean that the US government as a whole is showing no hegemonic leadership. I've written a number of posts arguing that Bernanke has been acting as the world's central banker during the crisis -- opening swap lines with every major central bank in the world, extending liquidity financing to foreign firms, not provoking currency wars that lead to competitive devaluations, etc. -- and that this has stabilized the core of the global financial system.

I'm not going to re-write all those posts here, but please click through and read them. The Fed has been engaged in hegemonic leadership, and has done pretty well so far. Its job is not to put out every fire everywhere; its job is to keep the center of the system intact. So far, at least, its actions have been sufficient.

Note that in the op-ed Cowen more than once sounds a lot like an IPE scholar who has read no IPE literature. That is, he's asking the right questions but fumbles for answers to them. I have other things to write about the piece, but I'm going to break them up into pieces over the next day or two. Consider this a teaser.

When Did the Dollar Become the World's Reserve Currency?

New research from Livia Chitu, Barry Eichengreen, Arnaud J. Mehl. The abstract:

This paper offers new evidence on the emergence of the dollar as the leading international currency, focusing on its role as currency of denomination in global bond markets. We show that the dollar overtook sterling much earlier than commonly supposed, as early as in 1929. Financial market development appears to have been the main factor helping the dollar to surmount sterling’s head start. The finding that a shift from a unipolar to a multipolar international monetary and financial system has happened before suggests that it can happen again. That the shift occurred earlier than commonly believed suggests that the advantages of incumbency are not all they are cracked up to be. And that financial deepening was a key determinant of the dollar’s emergence points to the challenges facing currencies aspiring to international status.

I haven't read it yet, but I'm predisposed to disagree with the conclusion.

Asymmetry in Global Markets

Some argue that we understate the significance of the Asian crisis. So, here are three graphs of equity market correlations in moments of rather severe crisis. The unit in each is 12 month percent change.

1. Black Monday, October 1987. Biggest Single Day Correction in US History. Notice that the FTSE and Hang Seng follow the US down. Notice the correlation 10 years prior to the 1997 Asian crisis.

2. The Asian Crisis, 1997. Notice the separation. Hong Kong falls sharply. The US and UK give back a few gains but then recover very quickly. No banks failed in the US as a result of this crisis. And I note that this Asian crisis was probably the most severe to occur prior to 2008. And yet

3. US Subprime, 2007-09. The rest of the world follows the US down.

So, is Greece more like Thailand, or is Greece more like the United States? We think Greece is more like Thailand.

Being Relatively Unconcerned About Concerning Things

Blogging has been non-existent the past few days because more pressing work has taken precedence. One such thing was an essay (with Thomas) for ForeignPolicy.com on why we should all be more blase about the Greek situation. It's very counter to the sort of convention wisdom that you can find here (other examples cited in our article).You can read it here. Our central claim:

Further economic and financial deterioration in Greece would certainly have negative impacts there and might adversely affect Greece's southern European neighbors, who are facing similar circumstances. But financial weakness in Greece is unlikely to spark a global crisis analogous to the one triggered by Lehman Brothers' collapse in September 2008 -- even if economic woes eventually force Greece to exit the monetary union. Instead, the global consequences of southern Europe's debt crisis are more likely to resemble the Latin American sovereign debt crises of the early 1980s, the East Asian crises of 1997-1998, and Argentina's crisis at the turn of the millennium. Each of these had significant local effects -- widespread bank failures, sharp increases in unemployment, large exchange-rate devaluations, deep recessions -- that were not transmitted globally. Indeed, in each of these cases the global economy continued to grow, major world equity markets held their value, and world trade expanded. None had the dramatic global consequences sparked by Lehman's collapse.

We're already getting some pushback -- as we have from the underlying research that informed this piece -- such as this from Dan Drezner:

I think you understated the global impact of the 1997 East Asian crisis. I'd rather avoid another one of those.

On the one hand, I agree: I'd rather avoid another one of those, although I don't know how that's possible. On the other, I don't think we understate the global impact of the E. Asia crisis. I think many people dramatically overstate it. The period during which the E. Asian crisis occurred -- the late 1990s -- is associated with one of the largest periods of global economic growth ever. These days we look back on it with nostalgia, and wonder how we can do it again. The E. Asian crisis was a crisis for E. Asia, but not so much for everyone else. I think it's likely that the S. European crisis will be the same. Actually, given the slow-motion nature of the thing, I think it's likely that the S. European crisis will be even less of an event.

We may soon see. I hope we don't. 

Brinksmanship and Grexit

Henry Farrell re-ups his view of the eurozone as being a game of brinksmanship between Germany and Greece. I objected to this characterization back in February, and I still don't think it's the best. Take this:

If there weren’t any possible resolution, there wouldn’t be any incentive to engage in crisis bargaining. What we’re seeing suggests that the players on both sides think that there is a real chance of catastrophe, but also a real chance of a deal.

Whether or not there is a possible resolution is most likely private information. (Or, more accurately, neither side knows the truth.) Let's look at this from Germany's perspective. Who are they negotiating with? For all intents and purposes Greece does not have a government that is capable of negotiating. Any future Greek government also has an inability to make a credible commitment to uphold any negotiated settlement in the future, which is why Germany had previously asked for all political parties in Greece -- whether in the government or not -- to approve of the previous bailout program. It is not clear right now who "Greece" is, much less what it is willing to accept.

Nor is it necessarily clear (to me) that Germany believes that there is a real chance of catastrophe for them if Greece exits. Perhaps there is, but it's probably not an economic catastrophe. At this point it might be cheaper to shore up the banks than to keep funding Greece indefinitely. Remember that Greece's creditors have already taken very large haircuts. Remember that European banks have had years to prepare for this, and European regulators have (presumably) been forcing them to do so. Euro governments, the ECB, and the EFSF would lose something on the order of €200bn from a full Greek default, of which €75bn would come from Germany. This is not nothing -- about 3% of Germany's GDP -- but it isn't enough to sink Germany either.

More likely Germany is worried about the political ramifications of a break-up of the eurozone, but in that case they should be interested in ensuring that they are not blamed when that happens. This implies that they will engage in negotiations right up until the end, and perhaps even after it, to demonstrate that they made a good faith effort to keep the monetary union intact even if they believe that there is no possible resolution that actually keeps the monetary union intact.

Farrell:

At a guess, Greece has considerably more bargaining leverage than it might seem to at first. One useful index of bargaining strength is relative levels of sensitivity to breakdown/catastrophe/failure to reach a deal. It’s plausible that Greece is relatively indifferent to breakdown at this point – years of grinding austerity inside EMU seem barely preferable to the costs of exiting the euro. In contrast, Germany could see the collapse of the euro (and consequent very serious economic costs) if a Greek exit leads to the collapse of confidence in Spanish, Irish, and worst of all, Italian banks. If I were to lay a bet on which side is likely to fold first, I’d be putting my money on the Germans.

Again, it's not clear who "Greece" is or what their bargaining position is. As Daniel Davies says in comments on Farrell's post, there is no reason to think that Greece is indifferent between staying in or getting out. Something like 80% of Greeks say that they want to stay in. Even Tsipras has stated no intention to exit. The best case scenario of leaving -- probably Argentina -- is not very good, and I wouldn't be optimistic about the best case scenario obtaining in this case. So how much leverage does that really give Greek leadership? If their citizens want to stay in, and the costs of leaving are extreme, then Germany can demand quite a lot.

Nor is it clear that a Greek exit would lead to a collapse in Spain, much less Italy, or that such a thing could be avoided even if Greece stays in. The fundamentals are crap either way. It's not clear that a collapse in these countries would be devastating for Germany. They've maintained economic growth thus far, and capital flight from the GIPSIs would likely move into Germany, giving them further fiscal flexibility to deal with their banks and macroeconomy.

Right now the political dynamic in Europe is about who gets the blame for a Greek exit. If blame cannot be assigned in a politically satisfying way then they will continue to muddle through. However the greater the costs associated with keeping Greece in, the more likely the blame will shift away from Germany and the more likely that Germany will refuse to pay on any terms that are acceptable to Greek leaders.

Edward Hugh writes of the choices:

Right now there are two, and only two, options on the table: help Greece with an orderly exit from the Euro (and crystallise the losses in Berlin, Washington, etc), or print money at the ECB to send a monthly paycheck to all those Greek unemployed. This latter suggestion may seem ridiculous (then go for the former), but so is talk of printing to fuel inflation in Germany (go tell that old wives tale to the marines). If Greece isn’t allowed to devalue, then some device must be found to subsidise Greek labour costs and encourage inbound investment – and remember, given the reputational damage inflicted on the country this is going to be hard, very hard, work.

The second of those is not palatable. It would wreck what remains of the political integrity of the Euro project, which has already been corrupted by the less-than-democratic approach to the bailout. Political integrity is not about keeping Greece in on whatever terms... moral hazard is a real risk and the original institutions designed to combat moral hazard (eg Stability and Growth Pact) have been obliterated as has the independence of the ECB. In other words, it's not clear what political integrity Germany would really be fighting for. The entire EU social contract has to be re-written anyway, at least implicitly.

Given that, Germany may wish to re-write it on more stable terms.

There is a very real chance that over a medium term time horizon Germany would be better off with Greece out of the eurozone. If that's the case then this isn't a brinksmanship game.

Good Sense and Critical Intelligence

Following up on my post below, here's how our elected leaders view social science:

“We’re spending $70 per person to fill out [The American Community Survey]. That’s just not cost effective,” [Rep. Daniel Webster] continued, “especially since in the end this is not a scientific survey. It’s a random survey.”

I hope you can spot the egregious error at the end.

We've been doing the American Community Survey since 1850, and it is used to learn about the demography and needs of the citizenry as a way to guide spending programs in a more sensible way:

It is the largest (and only) data set of its kind and is used across the federal government in formulas that determine how much funding states and communities get for things like education and public health.

The House of Representatives has already voted to abolish it.

Via all the poli sci grad students in my Facebook feed.

Defending Social Science Against Those Who Would Prefer to Know Nothing

Earlier this week PM included this line in defense of NSF funding for political science at DoM:

Indeed, the alternative to good social science is not no social science but bad social science.

The implication from that is not that all social science is good but that it strives to be, is useful when it is, and in aggregate has improved the stock of human knowledge. Enough has been written about the battle over NSF funding that I feel no need to weigh in, but I must object to this ridiculous post by Gary Gutting at the NYT (via The Monkey Cage). It's titled "How Reliable Are the Social Sciences?" and it argues, I guess, "not enough for it to influence policy". Or in the authors words:

How much authority should we give to such work in our policy decisions? The question is important because media reports often seem to assume that any result presented as “scientific” has a claim to our serious attention. But this is hardly a reasonable view. There is considerable distance between, say, the confidence we should place in astronomers’ calculations of eclipses and a small marketing study suggesting that consumers prefer laundry soap in blue boxes.

He then goes on to make a nearly uncountable number of false assertions, misplaced blames, understatements of the usefulness of the social sciences, and overstatements of the development of the natural sciences. It's hard to know where to begin. Take the above quote for starters: The first sentence asks about policy decisions. The concluding sentences reference two potential avenues for inquiry that, so far as I can tell, have nothing whatsoever to do with policy.

Or take this:

But often, as I have pointed out for the case of biomedical research, popular reports often do not make clear the limited value of a journalistically exciting result. Good headlines can make for bad reporting.

Biomedical research may have implications for policy -- e.g. what treatments should be covered in insurance plans or something -- but it is not a social science. Additionally, if journalists misread research findings that is an indictment of journalists, not researchers.

In the next paragraph:

Second, and even more important, there is our overall assessment of work in a given science in comparison with other sciences. The core natural sciences (e.g., physics, chemistry, biology) are so well established that we readily accept their best-supported conclusions as definitive. (No one, for example, was concerned about the validity of the fundamental physics on which our space program was based.) Even the best-developed social sciences like economics have nothing like this status.

Are the core sciences so settled? I'm no expert in any of them, but my impression is that they are filled with hotly-contested debates concerning almost all of their "definitive" conclusions. Do we exist in a multiverse? Does evolution operate at the level of the genotype or phenotype? Can a universe (or multiverse) arise from nothing, and if so what is the definition of "nothing"? Is consciousness a biological function, and if so how did it arise and to what species does it extend?

Should we accept the validity of bodies of work based only on their perceived "status"? As determined by who, exactly? 40% of Americans don't believe that evolution occurred. Despite clear evidence, only 60% of Americans believe that climate change is happening at all, and a majority believe that humans do not play a major role in altering the climate. Granted, those polls are examples of social science so Gutting would likely give them no credence but even then the question remains: where does this status come from, and why should it matter?

Perhaps more pointedly, everyone should well be concerned about the "validity of the fundamental physics on which our space program was based" considering the impressive number of boondoggles and outright tragedies that resulted from it.

There are many questions of policy relevance that social scientists have not yet answered sufficiently well to base policy on them. There are also many questions with policy relevance that are more or less "settled" by social scientists, in that they have coherent theoretical explanations that are supported by multiple empirical studies. There's no point in running down a list, which could only be illustrative in any case, but one example might be that if you pay people to put silly arguments into print under their own name then they will be more likely to do it than if they were taxed for it.

A bit further down:

Is there any work on the effectiveness of teaching that is solidly enough established to support major policy decisions?

The case for a negative answer lies in the predictive power of the core natural sciences compared with even the most highly developed social sciences. Social sciences may be surrounded by the “paraphernalia” of the natural sciences, such as technical terminology, mathematical equations, empirical data and even carefully designed experiments. But when it comes to generating reliable scientific knowledge, there is nothing more important than frequent and detailed predictions of future events. We may have a theory that explains all the known data, but that may be just the result of our having fitted the theory to that data. The strongest support for a theory comes from its ability to correctly predict data that it was not designed to explain.

This is both true and one of the weaknesses of the social sciences. But refer to the quote from PM with which I began this post, and consider the relative youth of social scientific inquiry that has employed the "paraphernalia" of the natural sciences. In some cases we've only been doing it for a decade or several, mostly with pretty poor data and not much sophistication. But these problems are being corrected with time and experience -- as science should do -- and even the flawed efforts of the past are better, in aggregate, than their alternative: setting policy according to how Thomas Friedman's (or Gary Gutting's) gut feels about it.

Gutting then goes on to suggest that social science's problem is that it cannot do randomized controlled experiments on its subjects and therefore cannot make "detailed and precise predictions". Setting aside the fact that, in many cases, neither can astrophysicists or evolutionary biologists, this is a) changing in the social sciences; b) not a panacea in any science, social or otherwise; c) RCTs are about testing hypotheses (or, sometimes, just seeing what happens) not generating them; d) the analysis of observational data has always been considered a valid way to examine the rightness of theories in the sciences. Should Galileo not have been trusted because he couldn't perform a randomized controlled experiment on the earth's orbit around the sun? Had Darwin no insight on natural selection because he could not perform a trial to determine why the beaks of finches in different places varied in thickness?

Even more absurdly Gutting then writes:

Without a strong track record of experiments leading to successful predictions, there is seldom a basis for taking social scientific results as definitive.

True. True not because social science findings are so unreliable as to make them useless. True because all findings in all sciences are provisional. That is the hallmark of science. To criticize science for not being definitive is like criticizing philosophers for asking questions.

Having painted himself into such a corner Gutting has no choice but to conclude:

Given the limited predictive success and the lack of consensus in social sciences, their conclusions can seldom be primary guides to setting policy. At best, they can supplement the general knowledge, practical experience, good sense and critical intelligence that we can only hope our political leaders will have. 

Well then God help us all.

More seriously, perhaps we should use research to influence policy decisions when the research is relevant and when there is strong empirical support from multiple research programs, while recognizing that changed circumstances or new information may cause us to modify these programs later. I'm not suggesting that ever will quite happen -- if they notice it all opportunistic leaders will cherrypick findings that support their preferences and disregard the rest -- but surely that's a better goal than relying on the "good sense and critical intelligence" our overlords do not possess to solve our problems.

And when our leaders stray, or when they set policy cynically, it is the role of intellectuals to use every faculty at their disposal to point out the emperor's nakedness. That is easier done with the arsenal of social science at one's disposal than with intuition or impression alone.

Gutting is a professor of philosophy at Notre Dame. It's worrying to see him so dismissive of his colleagues in the academy. Perhaps he should give them some more of his time.

Poking Macroeconomists with a Stick

In one small part of a longer discussion Scott Sumner says something interesting:

Macroeconomics is the study of policy failure. Once an issue goes away the field loses interest.

Leave aside for now whether or not that is strictly true, or whether it was inadvertent. When I read the first of those sentences I immediately thought "then why not study why the policies fail, dammit!" After a bit of reflection I've realized that macroeconomists think that's what they're doing. They have models, to which they are wedded ideologically and/or reputationally, which are internally coherent but externally invalid.* When they try to explain why they are invalid they claim that policymakers aren't doing what the models tell them they should do. That's what Sumner means by "policy failure". And they explain why policymakers aren't doing what the models tell them they should do by either demonizing them, calling them ignorant, or claiming that they are members of cults believing in confidence fairies, bond vigilantes, the hive mind of the Borg, or some discredited or otherwise objectionable ideology.

The assumption here is that policymakers are, or should be, utilitarian Philosopher Kings whose goal is to maximize output and employment while minimizing inflation. But maybe, just maybe, that assumption is false. If we get rid of it then we don't have to appeal to superstition or metaethics to explain the behavior of policymakers. Instead we can treat policymakers as being interested in gaining or retaining office, and that the best way to do that is not necessarily to bring unemployment down to its natural rate as quickly as possible.

In other words, we can treat macroeconomic outcomes not as "policy success" or "policy failure", but as things that benefit some groups of people and harm others. From the viewpoint of a policymaker a policy success is one in which the policymaker retains office, and a policy failure is one in which she does not. To remain in office she must appease some number of people (what we often call a "minimum winning coalition") and that's all. In advanced democracies that coalition is largely comprised of relatively affluent people who own some type of equity whose value is more sensitive to inflation than whether the marginal unemployed worker gets her job back. So when policymakers set policy to win over that person it isn't a "failure"... it's the whole purpose.

This is what Steve Waldman was driving at in his "choosing depressions" posts. This is the dynamic that I blog about in almost every post. This is what I was writing about in a prior post, "The Problem with Macroeconomics Is the Macroeconomists". If the world doesn't work the way that macroeconomists think it should, then maybe that's because macroeconomists don't understand how the world works.

That doesn't mean that macroeconomists, or anyone else, can't have their own preferences. Krugman's blog and associated book is titled Conscience of a Liberal, not Explaining How the World Works. But that's quite a different thing from saying that "macroeconomics is the study of policy failure". To acknowledge that different groups have different preferences over outcomes is to acknowledge that the definition of "policy failure" is a not a constant but a variable, and macroeconomics has nothing to say about that.

That's why we need political economists.

*Of course they will all protest that their pet model is not externally invalid, only everyone else's is. However no macro models have performed very well in this crisis. No macro models can explain the global nature of this crisis, why countries with similar characteristics have had vastly divergent outcomes, etc. The best argument that most macroeconomists can put forward in support of their preferred model isn't "it worked" but "it hasn't been sufficiently tried".