Saturday, February 14, 2009

Krugman and the financial crisis

Paul Krugman talks about the financial crisis:



I don't have an opinion here. The consensus seems to be that governments everywhere need to spend a lot of money in some clever way. I respect economists who believe that, especially those like Krugman here who are honest about the effects: It might not work. Nobody really knows how to solve this, in the end it comes down to luck.

I also respect critics like the libertarians at Reason who point out that governments aren't good at spending huge amounts of money. There's a certain arrogance among economists about how finally, this time, they understand the economy well enough to know how and where to spend. Spring time for Keynes. I'll believe that when they have a track record, not just anecdotes from the last crisis.

But maybe a wild and expensive shot with a hope of success is better than the alternatives. I don't know. I'm not qualified.

Here's what I believe: If this works, it will encourage people to think "hey, if the government can save the economy from a crisis by bluntly manipulating macroeconomic variables, maybe it's also qualified to manage it in detail under normal circumstances." That would be bad. We're feeding a monster here, in the hope that it will help us, but even if it does we'll have to wean it off the taste of blood later. (Alarmist metaphor? We're encouraging politicians to spend huge amounts of money. Think about that for a second.)

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5 Comments:

At 16 February, 2009 17:45 , Blogger Susan's Husband said...

Krugman just wants to increase government intervention and is using Keynes as an excuse. One need merely note that Keynes' theory was counter-cyclic and therefore a key component was reducing spending during booms. Yet Krugman never advocated any such thing.

 
At 16 February, 2009 19:42 , Blogger Bjørn Stærk said...

"is using Keynes as an excuse"

You're saying Krugman is _lying_ about what he believes, in the service of some secret agenda?

An idiotic claim, (unless backed by evidence.)

 
At 16 February, 2009 20:48 , Blogger Susan's Husband said...

I provided evidence, i.e. Krugman's past behavior with regard to following Keynes' economic policies. I also don't think it's "idiotic" to presume that if Krugman follows only specific parts of Keynes' policies, it is those parts (and not Keynes' policies) that Krugman favors. And I would hardly call it "secret" - it's obvious and blatant. And of course, Krugman has been caught lying numerous times, so one more is hardly a stretch.

 
At 16 February, 2009 21:46 , Blogger Bjørn Stærk said...

"I also don't think it's "idiotic" to presume that if Krugman follows only specific parts of Keynes' policies, it is those parts (and not Keynes' policies) that Krugman favors."

Exactly. What is wrong with that? Or do you believe that one should never agree with some of somebody else's opinions, without agreeing with all the rest?

It is the word "excuse" which is idiotic. As if there's something shameful in having ideas of one's own.

"And of course, Krugman has been caught lying numerous times, so one more is hardly a stretch."

Again without the evidence. It is not that I disbelieve you, or feel any need to defend Krugman's integrity or his ideas, but I expect someone who clearly has a strong negative opinion of both to provide a minimum of argument or fact. You have not done that. So why are you here? What was your purpose in commenting, if it was not to add anything useful?

 
At 19 February, 2009 16:40 , Blogger Oraklet said...

The Austrian school of economics questions the need for any stimulation at all. In fact, they claim that it will only make things worse.


http://mises.org/story/3128

 

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