Econintersect: An interesting editorial by R.A. in the The Economist is worth reading. There are a number of reasons why this is so, which will be listed after the Read more >> jump. Note: The reader is alerted that the news presented here will conclude with some obviously editorial observations.
Hindenburg disaster, 06 May 1937, Lakehurst, N.J.
Reasons the article in the Economist, entitled “Are We Doomed?” should be read:
- There is a thorough discussion of Paul Krugman’s commentary in The New York Times on Monday (actually an extension of a series which started with an article he posted last Thursday 08 August 2013) which lamented the decline of the recognition (especially in political circles) of the understanding of what Milton Friedman was actually postulating in his monetary theory applied to moderation of the business cycle.
- There is a useful comparison of the current debt-deflation cycle with the last one that occurred in the 1930s, concluding that the extent of the economic damage in the 1930s cycle was far more than occurred in the current crisis. Unfortunately the discussion centers on a graph which Econintersect could not find.
- The article correctly recognizes the increased awareness of the importance of such factors of economic health as understanding “effects of trade and capital flows” and “changes in the distribution of income“. (However, the author makes a debatable statement that the crisis did not generate the interest; but he fails to observe that it (the crisis) certainly heightened the interest.)
- The author expresses the hope that learning from the current Great Financial Crisis (GFC) will rival (or, less ambitiously, “yield one-tenth the intellectual dividend”) of the Great Depression. That is a commendable wish but is missing a simple caveat: And this time not forget almost all of the lessons learned.
But there is a phrase in the conclusion that completely overwhelms the rest of the discussion. For this statement alone (emphasized in the excerpt below) this article should go down in history as an “article of infamy” (so labeled with apologies to FDR and the “day of infamy”).
We learn from failure. It took the Great Recession to tell us where there has been intellectual progress in the fields of economics and political economy and where there has not. But there has been progress and there almost certainly will be more: building on the strengths of the broad neoclassical synthesis.
Whatever credibility the rest of the article may have is utterly destroyed with this gratuitous, patronizing and outrageously false characterization. If this characterization is accepted by economists in general and if these economists have any influence over our future course, then the answer to the title question is, unfortunately, obvious:
Yes, we are doomed!
The “broad neoclassical synthesis” did not see the GFC coming, even in the final year when it was building to it’s September 2008 climax. And in the recovery period since, the “broad neoclassical synthesis” has been unable to explain why the GFC happened in any but superficial terms.
Sources:
- Are We Doomed? (R.A., The Economist, 13 August 2013)
- Synthesis Lost (Paul Krugman, The New York Times, 12 August 2013)
- Milton Friedman, Unperson (Paul Krugman, 08 August 2013)