Thursday, May 10, 2012
Easy Useless Economics - Krugman
Mark Thoma provides a Krugman commentary in the NY Times. Basically, how some economists explain away economic phenomena as "just because". That sounds bad. I should sum up a bit better. Economists calling the current drag in unemployment a structural problem. Krugman says this is the easy way out and leads to laziness - if it's structural, you're rather limited in what you can do to bring employment back up. He points to pre-WWII as evidence, as there's an article in the AER, a top economics journal, calling the pre-WWII high unemployment structural. Krugman says that WWII provided fiscal stimulus, and the US bumped down that high unemployment. While I (seem to) agree with Krugman that this current bout of high unemployment is unlikely to be (mostly) structural, as I can't imagine something that happened so quickly and drastically changing employment decisions, I'm curious if Krugman is insinuating that NOTHING is particularly structural. I feel it's appropriate to criticize the somewhat lazy thinking, but I think Krugman is thinking first best (when there's nothing to distinguish between ideal and real life), whereas we live in a world where we need to think about third best (transaction costs and political friction). There are folks out there who don't want to see fiscal stimulus, so even if you want to see it happen, it ain't happenin'.
Labels:
... fence
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment