The Economy

[kandrathe]

I found this article today, where Paul Krugman basically claims that macroeconomics is useless.<blockquote>If zero interest rates cannot get consumers to spend, then governments must spend instead. That remedy comes from economics so the discipline is not without merit. The trouble is, “the analysis we’re using is decades old”. It dates back to Keynes, one of the few economists whose reputation has been burnished by the crisis. (Another is Hyman Minsky, whose main insight was that stability leads to too much debt, and then to collapse.) Most work in macroeconomics in the past 30 years has been useless at best and harmful at worst, said Mr Krugman.</blockquote>I suspect by "we", Krugman means his cronies at the NYT or his neo-Keynesian friends, rather than those radical economists who predicted the crisis. Here is a Dutch economist who predicted this mess back in 2006.<blockquote>The most important lesson is that policy changes now could stop the mania and herding behaviour before the problem gets even bigger. Stopping the housing market from continuing its reinforcing process until an even bigger and less controllable bust would occur would therefore be advisable, whereas a gentle policy response should be incorporated.</blockquote>In fact, even "I" (who am merely a business savvy executive) counseled my clients in January of 2008 to prepare for a crisis by cutting their FY 2008/2009 plans because the economy was being squirrelly just as it was before the recession of 2001. The storm is here, but only a few ignored economists knew it would be a hurricane.