Wednesday, July 13, 2011

Paul Krugman swims against the Chicago School


Paul Krugman being reviewed in a sustainablity blog? Yes. Remember that the intersection between a thriving economy and a just society is a bearable social economy, and Krugman is all about that, while his rivals are not. Besides, he's probably the most visible mainstream economist who takes the environment seriously, and doesn't just write it off as a series of externalities. However, that's not why I'm writing about him tonight. Krugman is also an academic, and he's dismayed at how his intellectual opponents at the University of Chicago refuse to accept the reality of today's economic situation.
Reading Noah Smith reading John Cochrane solidified a thought I’ve been grasping at for a while: the extraordinary lengths to which the Chicago School is going to avoid a straightforward interpretation of the mess we’re in.
[A]t Chicago and elsewhere in the freshwater universe they’re playing Calvinball (and what a good coinage that was from Mike Konczal). All kinds of novel and implausible effects — effects that weren’t in any of the models they were using before the crisis — are invoked to explain why we’re in a sustained slump; strange to say, all of these newly invented models just happen to imply the need for tax cuts and a shrunken welfare state.

But I don’t think it’s just political bias: part of what’s happening, I’m sure, is intellectual embarrassment. These people come from a movement that declared, with great arrogance, that Keynesian economics was dead – then failed to produce a workable alternative, and now finds itself in what is very recognizably a Keynesian world. Recognizably, that is, to everyone but them, because admitting that Keynesian-type thinking is useful now would just be too humiliating.
As one academic to another, I pointed out both the deeper problem and the solution.
The physicist Max Planck had this to say about progress in his field, "Science advances one funeral at a time." If economics works the same way, then the freshwater economists have exploited this process to make economics retreat, not advance. It will take decades of work by the saltwater economics departments churning out Ph.D.s to undo the damage.

So, Dr. Krugman, how many grad students are you advising these days?
I've seen this dynamic in action before, so I know what Krugman has to do in addition to being a public intellectual--train more people who think like him to outcompete his rivals. If nothing else, doing so would piss off his academic rivals no end, as it would be a sign that they haven't won, and won't have succeeded for the rest of their lifetimes.

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