Monday, September 15, 2014

Paul Krugman's Defense Of Economics

Krugman attended a meeting of students who want to rethink economics.  He seems to be less interested in rethinking economics than he is in defending it.  He does not refer to any of the ideas that were discussed at the rethinking economics meeting.  He chastises his rivals, primarily from the Chicago School, who led the revival of classical economics under the banner of rational expectations theory.  They gained control over the direction in which macroeconomics has developed over the last few decades with the economics profession.  The Chicago crowd adheres more closely to classical microeconomics than the Neo-Keynesians who believe that prices do not adjust rapidly to changes in supply and demand.  The Chicago crowd has no use for most of the ideas that we associate with Keynes.  They assume that the economy is self adjusting.

Krugman, however,  goes beyond the ongoing battle within the academy between the Chicago crowd and the Neo-Keynesians.  He argues that economists who know better are the real problem.  Many of them have allowed their political preferences to influence their policy recommendations.  He is also critical of politicians who search out economists who will advocate for the policies that they favor.  Most of the political decisions that have prolonged our economic recovery run counter to the most basic ideas that are taught in Econ 101.  We don't need to rethink economics as much as we need to use the economics that we know according to Krugman.  Economists and politicians are the real problem.  Econ 101 is fine.

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