Paul Krugman, the champion of inertia

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In his latest blog, Paul Krugman slings off at non-mainstream economists — and the students at Manchester University campaigning for change to the economics curriculum — for wanting fundamental change in economics. paraphrasing his argument, it is:

No need for change, boys and girls: mainstream economics has everything under control. We missed the crisis just because we failed to observe the shenanigans in the shadow banking system. Once we realised our observational errors, we had all the necessary tools and knew what to do (oh, and what the rebels said would happen didn’t anyway, so there!). The status quo is fine: move along folks, nothing to see here…

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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3 Responses to Paul Krugman, the champion of inertia

  1. ken says:

    Soi according to Krugman economics didn’t fail, economists failed. The problem I see with the assumption that it was bad loans, is that once you get into the mode of fixing things with increasing debt the response to poor economic conditions will be to increase debt. So governments and reserve banks will always try to do what they can to encourage borrowing. We can see it now. Expect in 5 years time to see another round of “I didn’t see that coming but it’s not the theory that is wrong”.

  2. Bhaskara II says:

    Re: Debt measured by accounting ratios, debt ratios

    Once the acocunting is done ratios are made to analyse the results. Debt ratios are a measure of leverage, risk, and ability to pay service the debt.

    In general accounting ratios are stock with stock ratios, stock with flow ratios, or flow with flow ratios. Flow:flow and stock:stock ratios are ratios with the same units that cancle each other when the quotient is made. A mixed stock:flow ratios´ final result is a time or a frequency (inverse of time) as the flow is in units of stock. ie stock/(stock/time). Can be expressed in time or in how often such as how often in a year. Example are the accounting ratios called “inventory turn over ratio” and “interest coverage ratio”.

    Debt Ratios Links:
    “Accounting Demystified” , Jeffry R. Haber

    (see also accounting textbooks)

    Data using debt ratios:

    The existance of data collecting chalenges the statement that these things were over looked.

  3. Willy2 says:

    It’s getting SO boring. Why doesn’t Krugman want to change his mind ? Is it the fact that Krugman lives in an environment where everyone still believes in the old theories ? Is he getting too old ? Time for another funeral ? (Krugman’s ?).

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