Your feedback is important to us!
We invite all our readers to share with us their views and comments about this article.
Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.
Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)
Whereas the Great Depression of the 1930s produced Keynesian economics, and the stagflation of the 1970s produced Milton Friedman's monetarism, the Great Recession has produced no similar intellectual shift.A decade ago, two schools of macroeconomists contended for primacy: the New Classical – or the "freshwater" – School, descended from Milton Friedman and Robert Lucas and headquartered at the University of Chicago, and the New Keynesian, or "saltwater," School, descended from John Maynard Keynes, based at MIT and Harvard.Krugman is a New Keynesian, and his essay was intended to show that the Great Recession vindicated standard New Keynesian models.This clever history of pre and postcrash economics leaves key questions unanswered. First, if New Keynesian economics was "good enough," why didn't New Keynesian economists urge precautions against the collapse of 2007-08? Second, Krugman fails to explain why the Keynesian policies vindicated in 2008-09 were so rapidly reversed and replaced by fiscal austerity.The New Keynesian models did not offer a sufficient basis for maintaining Keynesian policies once the economic emergency had been overcome, so they were quickly abandoned.Without acknowledgement of uncertainty, saltwater economics is bound to collapse into its freshwater counterpart.
Economic consequences of automation
The fall and rise of public heroism
Has austerity been vindicated?
FOLLOW THIS ARTICLE