Re: Krugman's Love Letter to Markets, not to Enron

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Clifford Poirot wrote:

> I think the important thing about Krugman is to criticize him for what he
> deserves to be criticized for. For some strange reason he has emerged as the
> whipping boy of the right. Perhaps because of his pseudo-Keynesianism and
> identification with Al Gore, Bill Clinton and Lawrence Summers.
>
> If you actually read most of his work, it is clear that by and large, he is
> a fairly conventional mainstream economist, who occasionally says something
> interesting or non-mainstream, and tries to tie it to Keynes.
>
> Galbraith he is not. Not even close.
>
> But he has succeeded in making a sort of luke warm centrism intellectually
> attractive, selling the idea that government policy can be effective. From
> the perspective of the right, that is the unpardonable sin.
>
> >From the perspective of Post-Keynesians, Krugman's "sin" was not in taking
> money from large corporation, but in praising the entire system of
> deregulation.
>

I agree. That is why it is ludicrous for Krugman to defend his serving on the
Enron Advisory Board with his love letter to markets.  It is defending a
superficial sin with a cardinal sin.

Keynes's 'The General Theory of Employment, Interest and Money' (1936) showed
that Adam Smith's classical model - founded on the virtues of thrift and
balanced budgets, laissez faire capitalism and free trade - was a 'special' case
and only applied in times of full employment.  Keenness' model portrayed the
market as a car without a driver or a destination, allowing the slightest bumps
in the road to push the economy off the road at any time and not necessarily
heading toward common good. He showed that the economy needed an activist
government to steer it on the road of full employment.   The fundamental flaw of
market fundamentalism is that it is valid only under full employment, while the
measures taken in the name of market fundamentalism directly increase
unemployment, making market theories inoperative.

Actually, most economist are very intelligent.  When reading their writings,
from Keenness to Hayek, Galbraith to Freidman, if the reader does not challenge
basic ideological assupmtions, the logic tends to be flawless, or at least
defensible within narrow limits.  Thus the arguement that a particular economist
may be wrong headed, but still has a lot to say is rather irrelevant.  We do not
read economics for amusement, though the undrtaking can be amusing, but for
understanding to solve real. pressing problems.  Heading in the right direction
is the whole game.

Krugman's record has not been prescient, although he is intelligent enough and
ideologically neutral enough to shift positions before the obvious. He was not
first to warn about the Asian financial crisis as he likes to claim, although he
was the first that Citibank listened to.  People before him were simply
dismissed as cranks.

There is a whole gang of social scientists at MIT, ranging from economics to
arms control and foreign policy, who claim to be "scientific" in approach, but
in reality merely give intellectual anchor to the latest national interest fad.
Unlike the Chicago boys, ot the Harvard boys or the Stanford boys who are
ideologically defined, the MIT boys pride themselves as being ideologically
neutral, but in fact their ideology is power.


Henry C.K. Liu