2011-08-20 03:52:00echoes of climate denial in the continued recession
Dana Nuccitelli

Krugman on the continuing recession, and how we're bringing it upon ourselves through a denial of basic economics.  Reminds me a whole lot of climate change, and how we're bringing it upon ourselves through a denial of basic climate science.  Emphasis added:

"seriously: things are looking really terrible, And crucially, they’re looking terrible in the wrong way, at least if you wanted to believe that political and policy debate over the past year and a half made any sense at all. We’ve been utterly preoccupied with deficits, deficits, deficits; there was supposedly a crisis looming, but a crisis that would take the form of an attack by the bond vigilantes."

"In the past, you could make excuses on the grounds of ignorance. In the 1930s they didn’t have basic macroeconomics. Even in Japan in the 1990s you could argue that it took a long time to realize that the liquidity trap was a real possibility in the modern world.

But we came into this crisis with a pretty good understanding of what was at stake and pretty good analysis of the policy options — yet policy makers and, I’m sorry to say, many economists just chose to ignore all that and go with their prejudices instead.

And the worst of it is that the people who got this so wrong have not and probably won’t admit to their awesome wrongness; on the contrary, they’ll dig in. And the Lesser Depression will go on and on and on."

2011-08-20 04:56:35


Yes, many economists think than Keynes was right after all, but it still isn't politically acceptable to go down the public spending route which he advocated.  I was impressed with the assessment of the economist Jeffrey Sachs in this Newsnight interview two nights ago, Sachs said

  • the remedies proposed so far are just short term gimmicks which have merely extended a consumption bubble
  • there is a lack of strategy on both sides of Atlantic with too much focus on national interests
  • globalization benefited the East but shook the competitiveness of western economies, particularly the manufacturing sector
  • we need public investment for infrastructure such as new energy systems
  • austerity measures don't provide growth
  • globalization allowed the rich walked off with the prize, the poor were left and this increased inequality
  • both political parties cater to those who finance their campaigns, tax cuts at the top and public spending cuts at the bottom.

Compare this to the utter garbage from Tim Congden (a monetarist from the City and UKIP candidate). He says

  • governments have been too tough on the banks preventing them growing and that has extended the recession
  • disparity was down to bad education for less well off

Listen from 5 minutes onwards (unfortunately this might not be available outside the UK)


That said, all this still assumes growth is good.  We really need a third way, a stable level of economic activity without destabilising society which requires a different paradigm again.

2011-08-20 14:02:12
Dana Nuccitelli

Good points from Sachs there.  What really bugs me is that not too long ago, the focus was correctly on job creation.  Then we had the stimulus, which the Republicans managed to limit to an ineffective level.  Thus insufficient jobs were created, and they were able to make the argument that the stimulus hadn't done anything other than increase the debt.  So they shifted the argument to spending cuts, even though that's about the worst thing to do during a recession.  And the Democrats caved.

I think that people are starting to realize that hey, spending cuts aren't going to magically create jobs.  Republicans argue that tax cuts for the rich will magically create jobs (a.k.a. trickle down BS theory), but most people don't buy that.  A vast majority of Americans favor increasing taxes on the rich, which the Democrats have been trying to do (though not trying hard enough) for years.

So you have to hope by next year enough people will finally realize that Republican economic policies are disastrous that they'll vote for Democrats in the 2012 elections.  Because obviously the Dems can't get anything done unless they have total control of Congress and the presidency, and even then Republicans manage to block most of their policies.  Republicans get control of just one house of Congress and we end up doing whatever they want.

2011-08-20 20:02:25


- "Growth is good": Unfortunately, I haven't heard of any economist who has formulated a framework for economics which assumes anything different.

- "Then we had the stimulus, which the Republicans managed to limit to an ineffective level.": Unfortunately, it was not only the GOPers who pushed for tax cuts as part of the "stimulus": Obama pre-conceded something like 50%, I believe. This, despite Krugman's pointing out that the general economic consensus is that tax cutting is the LEAST effective form of stimulus.

- There may be hints that the public is losing taste for GOP remedies (smoke & mirrors). Nate Silver's analysis of polls suggest that it might be happening. I believe that Obama is still most likely to be re-elected, although Perry bothers me: He seems to be seamlessly connected to the GOP fund-raising machine. Maybe his gaffs will get to him; I'm not sure that his evident anti-science posture will do him sufficient harm.

2011-08-20 21:28:38
Paul D


"Growth is good": Unfortunately, I haven't heard of any economist who has formulated a framework for economics which assumes anything different.


Some alternative economics in the UK (I just googled them, so know nothing about them):


Actually Tim Jackson Professor of Sustainable Development at Surrey Uni was an advisor to the last government, however my understanding was that the main opposition to his ideas were from the Treasury civil servants.


New Scientist article by Tim Jackson (behind a pay wall):


2011-08-20 21:56:37


I'm glad someone is thinking about it. However, it seems a bit counter-productive to "promote" ideas behind a pay wall!

2011-08-20 22:21:33


Also of interest is the New Economics foundation

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist" - Kenneth Boulding

There is nothing ‘natural’ about our current economic arrangements. They have been consciously designed to achieve a simple objective: growth. But growth is not making us happier, it is creating dysfunctional and unequal societies, and if it continues will make large parts of the planet unfit for human habitation.

We need to do things differently, and soon.

This means starting from first principles and building a new model for how the economy functions. Right now every one of us is dependent on growth. The way our economy is structured means that unless there is growth people lose their jobs, the tax base shrinks and politicians struggle to fund the public services we all rely on every day.

At nef, we want to break that vicious cycle by building a new macro-economic model that is geared not towards growth, but towards achieving the outcomes that are important to society and that can be sustained by the planet's finite carrying capacity.

This will not be easy. But we believe that if we can create an economy to achieve the goal of growth then we can also create an economy that delivers for people and the planet.

What we're doing
From 2009, we will be working with other economists on a radical new approach to economic modelling. Standard models take no account of resource use and environmental constraints, and are blind to social outcomes in terms of equity and, of course, human well being. They are open-ended by nature, with growth being the primary output of interest. Inputs feed in, interact with each other, achieve balance (or equilibrium) and outcomes result.

Our approach turns this on its head. We will start with the hard outcomes we need - environmental sustainability; equitable economic justice; and high levels of human well-being - link these to relevant economic determinants within the model (aggregate output, income distribution and working hours, respectively, for example) and to ‘reverse engineer’ what this would imply for the levels and types of differing inputs.