Where I disagree with Krugman in his blog today is his references to the economics profession.
In his discussion this morning he is critical of a defense of the hedge fund managers made by Jesse Eisinger. That defense rests on the notion that economists have no clue about the economy as demonstrated by their inability to predict the bubble and subsequent collapse. There were, of course, many economists who did predict the bubble, but they were not influential enough to have an impact. They remain mostly without influence due to their being outside the profession’s orthodox traditions. Krugman, however, defends the profession against Eisinger’s criticism, and this is where he goes wrong.
It does not matter that some economists were correct. The central orthodoxy of the profession, the source of most advice to policy makers and business people, and the basis of most commonly taught textbooks, totally missed both the possibility and then the existence of the bubble. Economics was horribly wrong. It hasn’t recovered since. Instead it is stuck in an unproductive self-examination that has yet to have much impact. Those who were wrong still pronounce and influence policy. They continue unabashedly to teach and perpetuate their errors. The profession, such as it is, is splintered into ideological warring camps making no progress towards a newer or more complete understanding of actual economies where things like asset price bubbles can, and evidently do, exist.
In short economics is a mess and is completely deserving of the skepticism Eisinger attributes to the hedge fund managers.Real-World Economics Review Blog
The state of economics: Krugman is wrong
Peter Radford
5 comments:
How can a system based on usury for stolen purchasing power and which incredibly thinks of itself as "free market capitalism" despite massive government privilege NOT go wrong?
Their job is to not understand anything. They are doing their job properly and paid for that.
Perfectly rational behaviour btw /troll
The human stories of destitution, inequality and poverty created by the orthodox economic and financial prescriptions for society all at once make these debates seem important but also a bit high minded and out of touch with the magnitude of the chaos they have created. Politicians lost elections, financiers were bankrupted, the poor were jailed, every one has paid a price. The economists had fervent debates about the finer points of their models.
I don't see what that has to do with my comment...
Ryan, that's why it is called "the ivory tower."
The rest of us call it being out to lunch.
Sorry Tom, I was a bit off topic. I watched that video immediately before I arrived at MNE and my head was more there than here.
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