Monday, December 20, 2010

Krugman on Why Zombie Ideas Don't Die

I usually agree with Krugman but his analysis of why zombie ideas don't die is superficial. He puts too much of the blame on Obama. The zombie ideas that he dislikes are taught in almost every introductory economics course. They are also included in his textbook for good reason. It is the only way to get an introductory text published or marketed to a wide audience. Economics is like religion. That is, many of the basic ideas are articles of faith and they are not subject to attack by contradicting evidence. Moreover, almost everyone in business would prefer to have a monopoly if it were possible. They will do all that they can do to acquire monopoly power while they sprinkle themselves with the holy water of free markets. I spent several years reviewing business plans from entrepreneurs seeking investment capital. Invariably, the investors were looking for evidence that the business would not be subject to competition because of patent protection or other means to limit competition. It is not really necessary to adhere to zombie ideas in practice. It is only required that one claims to believe in them because they are articles of faith in the dominant culture which legitimizes one's position in the hierarchy. The victors in economic warfare deserve their position because they beat everyone else in a fair fight.

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