Wednesday, July 2, 2014

Economic Warfare And The Value Of Old Ideas

Ezra Klein's blog (Vox) is being criticized by conservatives because it uses "old ideas" from the era of demand side economics to frame policy recommendations.  Paul Krugman finds this rather strange.  Supply side ideas are also very old ideas but conservatives prefer them to demand side ideas.  That would be fine if supply side ideas worked better than demand side ideas.  According to Krugman, demand side explanations for our current economic problems have worked better than old supply side arguments.  The conservative preference for supply side economics is an ideological preference that is insensitive to empirical realities.  In any case, it is foolish for conservatives to argue that one set of old ideas is better than another set of old ideas.  They need to come up with a better argument against Ezra Klein's blog.

Keynes made an interesting comment in his General Theory about economic ideas.  His comment was about the rapid ascendency of David Ricardo's economic ideas in Britain.  Keynes argued that Ricardo's ideas were well received by powerful interests in Britain who benefited from them.  The implication is that economic ideas are not independent from the dominant political culture in a nation.  Economists, and their ideas,  provide the intellectual justification for the existing social order.  Supply side economics, which holds that government efforts to stimulate demand in a recession are counterproductive,  derives its power from sources outside of the academy.  Economists who wish to curry favor with the power elite serve a role similar to the priesthood which made the case for the divine rights of kings in another era.

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