Saturday, October 9, 2010

How Did Economists Get It So Wrong? -

Nobel Prize-winning economist Paul Krugman is routinely bashed and/or dismissed by the entrenched Luddite turd-polishers on the conservative right, ostensibly because of his presumed ideological liberal bias which - so the turd-polishers believe - undermines a full comprehension of the supposed Truth of, variously, modern Supply-Side/Monetarist/Austrian School economics.

Smacks of psychiatric projection to me. If I thought it would help, I might suggest they take a look in the mirror, and go get some help for their patent group-think dysfunction. But, as howling Know-Nothings committed to the idea of the perfect rationality of man, they likely don't believe in psychotherapy either.

In this piece, Krugman lays out a lengthy & compelling explanation of why modern economic consensus so badly missed not only the brewing storm of the recent Great Recession, but also why the right continues to prescribe dangerously bad policy remedies. Some of my favorite passages include:

"More important was the [economic] profession’s blindness to the very possibility of catastrophic failures in a market economy."

"... the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. 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."

Thomas Frank would be proud.

Which, of course, will only make the turd-polishers bark at the moon even louder.

Read on here:
How Did Economists Get It So Wrong? - "- Sent using Google Toolbar"

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