An informative talk by Paul Krugman on the current economic crisis - and economists

[miketheidiot]

Originally posted by: Genx87

Originally posted by: miketheidiot

Originally posted by: Genx87
This neo-keynesian push is cute and all. But many forget why we left keynesian theory behind in the 1970's. It ended with stagflation. I am sure in 30 years we will see similar threads about the death of keynesian theory again and the rise of classical economic theory.

I dont know how much those economists saw the light or if they didnt like the consequences of a free market. Free markets are harsh and may not be realistic in all situations like what we had last Fall. There is no perfect solution to a complex world.

Personally being somebody who believes the govt should stay out of the market minus provide a legal framework I advocated for the bank bailout last Fall. I took from the 1930s the credit crunch was a driving factor in the destruction of the economy.


My question right now. Has the govt regulation fixed the causes of the meltdown? I havent heard much about new regulation to tighten up the financial markets.

stagflation was caused by a combination of the end of the gold standard (which had kept the currency artificially valuable for a long time), oil shocks, and very unwise government price controls under nixon.

I should have written that better. What I meant by it ended with stagflation. Keynesian theory was unable to cope with stagflation. Economists moved away from the theory as the end all and returned to more classical less interventionist theory.

Not that keynesian economics was the cause of stagflation.

as krugsman mentions in the video, much of the decline in the prevalence and popularity was based on the new demand for micro foundations for macro theory, which didn't really do much for things like Keynesian theories, which don't rely much on micro theory. Additionally, people had increasingly come to believe that we had the business cycle thing solved and more people had started to focus more on growth theory.

 

[blackangst1]

Originally posted by: Craig234
So, is one person going to watch the talk?

I'll link a pretty picture to one of the slides he uses, borrowed from the great Atlantic article by Simon Johnson.

It shows part of the problem, in how the financial sector - following the 'free market' ideology - became too powerful and its income shot up.

Chart

Marked for when I get home

 

[Craig234]

Originally posted by: Craig234
So, is one person going to watch the talk?

Originally posted by: miketheidiot
as krugsman mentions in the video

I feel better.

 

[bamacre]

Originally posted by: Craig234

Originally posted by: bamacre

Originally posted by: Skoorb

Originally posted by: bamacre
If anyone wants to know why Krugman should be totally ignored, read what he had to say in 2002...

http://www.nytimes.com/2002/08...ubya-s-double-dip.html

Typical Keynesian, replace one bubble with another.

I think that was said in a mocking tone; i.e. "haha, now the fed thinks they can solve it with another bubble". I was about to post this link, too. The guy called it. This is why he called it a bubble. Using that word clearly showed he knew it would be unsustainable and was thus folly.

So, is one person going to watch the talk?

I generally hate audio/video for things of any kind of length because it's a very very slow way to gain information. I can read much faster than somebody can talk.

Then what exactly was Krugman advocating the Fed do?

And at minimum, he was at least admitting that the Fed causes asset bubbles, something our economic super stars here seem to not be able to admit.

He wasn't advocating the Fed do anything so much, as I said already, predicting where the economy was going and how the Fed's prediciton would take a housing bubble to happen.

As for your comment about the Fed causing bubbles - that comes up in his talk, and I'm not going to waste the time explaining what you can't be bothered to watch.

But no, his article here does not admit that. Saying the rosy predicitons would need a bubble is not the same as saying the Fed is the cause of the bubbles.

http://www.pkarchive.org/column/81401.html

"Consumers, who already have low savings and high debt, probably can't contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery.... But there has been a peculiar disconnect between Fed policy and the financial variables that affect housing and trade. Housing demand depends on long-term rather than short-term interest rates -- and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was on Jan. 1.... Sooner or later, of course, investors will realize that 2001 isn't 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place.

http://www.pkarchive.org/economy/ML071801.html

"Post-terror nerves aside, what mainly ails the U.S. economy is too much of a good thing. During the bubble years businesses overspent on capital equipment; the resulting overhang of excess capacity is a drag on investment, and hence a drag on the economy as a whole.

In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. But it seems inevitable that there will also be a fiscal stimulus package"

http://www.pkarchive.org/column/122801.html

"The good news about the U.S. economy is that it fell into recession, but it didn't fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed's dramatic interest rate cuts helped keep housing strong even as business investment plunged."

 

[sandorski]

What's your point? That you don't understand Economics?

 

[bamacre]

Originally posted by: sandorski
What's your point? That you don't understand Economics?

:roll:

Krugman was advocating the creation of a housing bubble. He's now trying to defend himself, yet he's just digging himself a bigger hole. Ironic, no?

Their "fixes" just cause more problems down the road, as we now see again.

 

[mshan]

Just finished watching part 1 and part 2 of that Paul Krugman lecture at the London School of Economics and must say it is quite educational.

He isn't writing a column for NY Times, and he isn't giving a speech to some ultra conservative or ultra liberal Washington think tank, so it seems like a much more academic economic lecture.

Probably are other economists with legitimate, pretty much non-political, economic views, too, but I'd say the speech is well worth watching (part 2 was superb, part 1 was very good, especially starting around minute 51 - there are several minutes before that that I found very educational - but around minute 51 he starts talking about real interest rates and how the Fed has massively increased it's balance sheet and why)

 

[sandorski]

Originally posted by: bamacre

Originally posted by: sandorski
What's your point? That you don't understand Economics?

:roll:

Krugman was advocating the creation of a housing bubble. He's now trying to defend himself, yet he's just digging himself a bigger hole. Ironic, no?

Their "fixes" just cause more problems down the road, as we now see again.

No he didn't.

 

[JKing106]

Originally posted by: bamacre
Krugman? Pfffft.

Where's your Nobel?