End this Depression Never?

flattr this!

Larry Sum­mers’ speech at the IMF has pro­voked a flurry of responses from New Key­ne­sian econ­o­mists that imply that Sum­mers has located the “Holy Grail of Macro­eco­nom­ics” – and that it was a poi­soned chalice.

Sec­u­lar stag­na­tion”, Sum­mers sug­gested, was the real expla­na­tion for the con­tin­u­ing slump, and it had been with us for long before this cri­sis began. Its vis­i­bil­ity was obscured by the sub­prime bub­ble, but once that burst, it was evident.

An outbreak of communication

flattr this!

Any­one who has been moti­vated to read eco­nom­ics for the very first time by the eco­nomic cri­sis that began in 2007 should have real­ized at least one thing: that com­mu­ni­ca­tion between econ­o­mists resem­bles the Tower of Babel after the con­found­ing of tongues. Econ­o­mists who speak in one tongue hear what those in another say, but com­pletely fail to under­stand it—and then shout back some­thing that is just as incom­pre­hen­si­ble to the oth­ers’ ears.

Economics’ odd couple highlights a Nobel folly

flattr this!

I would love to be in the audi­ence watch­ing the body lan­guage at this year’s “Nobel” cer­e­mony for eco­nom­ics. Robert Shiller, who is far too polite a per­son to make it obvi­ous, will nonethe­less at least fid­get as he lis­tens to Eugene Fama’s speech, since Fama con­tin­ues to dis­pute that bub­bles in asset prices can even be defined. Shiller, in con­trast, first came to pub­lic promi­nence with his warn­ings in the early 2000s that the stock and hous­ing mar­kets in the States were dis­play­ing signs of “irra­tional exuberance”.