Paul Krug­man, the cham­pion of iner­tia

Flattr this!

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…

Click here to read the rest of this post.


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.
Bookmark the permalink.
  • ken

    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”.

  • Bhaskara II

    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.

  • Willy2

    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 ?).