Before coming to California and Mississippi, we gave a speech in London. In it we quoted economist Paul Krugman. Here’s the quote, from an article in The New York Times:
Keynesian economics rests fundamentally on the proposition that macroeconomics isn’t a morality play – that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that “we have magneto trouble” – i.e., the economy’s troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.
What kind of brain could think such a thing? How could you confuse an economy with a machine? We promise not to become earnest about it, but it is probably worth spending a few minutes exploring this claptrap.
It is the fatal flaw at the heart of modern economics. It also happens to be the foundation of the Fed’s attempt to revive the economy. Krugman, Bernanke, Summers et al. think they are technicians…
They’ve got the wrong metaphor. You may be able to describe the human body as a machine too. But don’t try to fix it with an adjustable wrench. It’s a good thing Paul Krugman isn’t a medical doctor!
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