A bit of economic sanity from Paul Krugman

[BaalChatzaf]

Please have a look at this:

http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?_r=1&ref=paulkrugman&pagewanted=print

Ba'al Chatzaf

[Starbuckle]

Yeah, right. Here's a sample of the alleged "economic sanity" in this article, about how economists thought nothing could ever go wrong again: "Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation."

The role of the Fed in distorting the economy by pumping credit into the system? Government intervention in the housing markets? Government interventionism generally? Blankout. The problem, in Krugman's view, is inadequate government interference with economic actors, not the smothering interventionism that makes it harder to deal rationally with the world and that hides and defers costs of preventing people from doing so. Krugman also repeats the nonsense that economists were all on the same page prior to 2007.

[BaalChatzaf]

Yeah, right. Here's a sample of the alleged "economic sanity" in this article, about how economists thought nothing could ever go wrong again: "Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy's operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don't believe in regulation."

The role of the Fed in distorting the economy by pumping credit into the system? Government intervention in the housing markets? Government interventionism generally? Blankout. The problem, in Krugman's view, is inadequate government interference with economic actors, not the smothering interventionism that makes it harder to deal rationally with the world and that hides and defers costs of preventing people from doing so. Krugman also repeats the nonsense that economists were all on the same page prior to 2007.

His criticism of the economists was dead on accurate.

There are two issues:

1. Identifying the Problems. The economists failed

2. Proposing Solutions: We can argue about what should be done or not done.

Ba'al Chatzaf