Paul Krugman\’s fascinating view of macroeconomics

Now you might say, if this stuff is so out of fashion, shouldn\’t it be dropped from the curriculum? But the funny thing is that while old-fashioned macro has increasingly been pushed out of graduate programs – it takes up only a few pages in either the Blanchard-Fischer or Romer textbooks that I am assigning, and none at all in many other tracts -…out there in the real world it continues to be the main basis for serious discussion

That is that, because:

Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

In short, because we\’ve advanced beyond Keynes, we should still teach Keynes, because people who have not advanced beyond Keynes still believe Keynes.

Purely a personal viewpoint, of course, but wouldn\’t it be easier to teach everyone the stuff that corrects Keynes and thus end up with, in time, people less in hock to to the ideas of a now dead defunct academic scribbler?

Mebbe?

6 comments on “Paul Krugman\’s fascinating view of macroeconomics

  1. To say “advanced beyond Keynes” implies that Keynes was a step on the road to better economics; that is that we are post-Keynes. Tim, do you believe that anything in Keynes is correct, and was an advance on prior economic thought? If so, what?

  2. Ian…keynes was a powerful intellect and had a lot of interesting things to say. What we call keynesianism was actually derived after his death in the 50s by people like Hicks. Just as marxism was hijacked by people such as Lenin and Mao, Keynes was hijacked by a buch of academic economists in the 50s. If you can derive their equations from the writings of Keynes, you have earned a PhD.

  3. This is a mighty interesting post, Tim, from all kinds of angles: economic, political, philosophical, scientific. For instance, I’ve often been intrigued by the correlation between the rise of macroeconomics and its equivalent in politics: ie totalitarianism (fascism, nazism, communism etc). Both seemed to arise mid-19th century. Philosophy too seemed to take a turn in this direction about the same time; specifically Nietzsche, though one could ague there had been a trend in this field since Rousseau and the French Revolution.

    Now, as we well know, correlation does not equal causation, and let’s face it, I think you would be hard put to prove that one led to the other. Rather, I think each fed off the other, and that both arose from a common mindset – a miasma of thinking, if you will (hence my mention of philosophy).

    Despite the collapse of communism (ie, the idea that one can “plan” an economy, ie, macro-economics) and, in the West at least, totalitarianism (ie, that one can mould people to conform to some ideal such as Hitler or Lenin or Stalin or even Blair’s “will of the people”) both ideas linger on within Western democratic politics and those who seek to “control the economy” and people’s behaviour within in, either economic or otherwise.

    I think if you thought about it, Tim, you have the germ of an idea for a good piece at ASI, which is perhaps more open to the philosophical area of economics. After all, Adam Smith was no macro-economist: he merely noted what the effects of individual choices (micro-economics) had on the wider picture and noted that the major macro-economic policy of the time (protectionism) was actually hurting everyone (including its advocates) more than helping anyone.

  4. 1 How are you going to teach 60+ year olds who are in their full power?
    2. Has communism and totalitarianism collapsed. From the outside the UK seems to be eagerly embracing both.
    Watch your dust bins.

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