for the all time
champion, economics division, Prof. Paul Krugman;
New classical macro
was and still is many things – an ideological bludgeon against liberals,
a showcase for fancy math, a haven for people who want some kind of
intellectual purity in a messy world. But it’s also a self-promoting
clique.
I don’t think this
clique could have formed and grown powerful in the first place without
the intellectual and ideological foundations. Economics as a discipline
being what it is, attacks on Keynesian economics as being inconsistent
with rational behavior were bound to get some traction, and the
stagflation of the 1970s certainly helped that attack, even if it was
less relevant than claimed.
We like that sly concession to reality.
Animus against government activism also
played a key role, both in motivating the new classical economists
themselves and in guaranteeing them external support.
'Animus' toward private consensual exchange--i.e. market behavior--being absent in the post WWII era?
Once the thing had
gotten going, however, I think you understand its dynamics much better
if you stop assuming that the motives of the movement’s leaders were
pure.
We're on board with that one! For one reason, the fact that Prof. Krugman (and his lovely wife) are still,
in their best-selling textbook, peddling a theory of market failure that they (he at least,
admitted it was false in 1998 to WSJ reporter Lee Gomes) know to be non-existent. As we put it last year;
The Krugmans' confidence being in inverse proportion to the evidence
they offer for the actual existence of the 'QWERTY problem'.
Perhaps we should call it the
QWERTY Clique.
Krugman and Wells also published "Macroeconomics" in 2012, which I haven't read. Economist Steven Landsburg points to the section in that book "The Income-Expenditure Model", showing that the reasoning in that section leads to impossible results relating spending and income. The discussion is about the Keynesian Multiplier.
ReplyDeleteLandsburg speculates that the result is wrong because life changes when economic policy changes. But, I say that it is much more fundamental than that. The Multiplier theory is wrong because is is flat out illogical, namely the argument reverses cause and effect.
This is a much more serious error than getting QUERTY wrong, as it is the basis for most of our crazy, increased government spending and the entire idea of "stimulus".
See The Illogic of the Keynes Multiplier - 1 for the links to Landsburg and the unpacking of the idiotic derivation presented in Krugman and Wells 2012.