Paul Krugman’s latest column on why economics “failed” in the real world in recent years is actually about the ways in which economics succeeded in understanding what was going on, but politicians chose to ignore what advice economists had to offer. Definitely worth a read. Tom “On Wednesday, I wrapped up the class I’ve been teaching all semester: “The Great Recession: Causes and Consequences.” And while teaching the course was fun, I found myself turning at the end to an agonizing question: Why, at the moment it was most needed and could have done the most good, did economics fail? “I don’t mean that economics was useless to policy makers. On the contrary, the discipline has had a lot to offer. While it’s true that few economists saw the crisis coming — mainly, I’d argue, because few realized how fragile our deregulated financial system had become, and how vulnerable debt-burdened families were to a plunge in housing prices — the clean little secret of recent years is that, since the fall of Lehman Brothers, basic textbook macroeconomics has performed very well. “But policy makers and politicians have ignored both the textbooks and the lessons of history. And the result has been a vast economic and human catastrophe, with trillions of dollars of productive potential squandered and millions of families placed in dire straits for no good reason… “Whatever the reasons basic economics got tossed aside, the result has been tragic. Most of the waste and suffering that have afflicted Western economies these past five years was unnecessary. We have, all along, had the knowledge and the tools to restore full employment. But policy makers just keep finding reasons not to do the right thing.” -Erika
Posted on: Sat, 03 May 2014 15:00:01 +0000
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