Keynes is fine as long as it's not a means to an end. At least, that's how I always viewed it. As for Krugman, I've often complained about the predictability of progressives and their solutions to the economy. They never look at how entrepreneurs can help, for example, foster prosperity. For them, it's all top-bottom and directed. I won't get into it here but the bottom line they have no ideas - creativity.
From Forbes:
"...Now, the reason why we can’t have nice things in economic debates is that neither side is 100% right. You see, and once you grok this you grok all of our economic policy debates, the productivists are right in the short run, and the creativists are right in the long run.
I believe that’s the true meaning of Keynes’s so oft-cited and so widely misunderstood “in the short run…” phrase. I believe that Keynes was a true creativist, even though most of his disciples don’t get what he did.
In the short term, the productivists are absolutely right: if there’s some shock to the economy, and people don’t have enough money anymore, they buy less stuff, which means businesses have less money, which means they lay people off (because wages are sticky), which means people have even less money (because they or their wife just got laid off), and so on in a vicious cycle. And if you add more money to the system, whether via deficit spending, or central bank printing, or speculative bubbles, or whatever, then people will have more money and buy more stuff and the economy will kickstart again. This is why Milton Friedman was dead-set against austerity, and in favor of monetary stimulus, and why he said “We’re all Keynesians”. This was Keynes’ great gift to our understanding of the way the economy works: in the short run, it’s a productivist system.
But only in the short run. In the long run, it is absolutely clear that what creates economic prosperity is human creativity. Economic models, which have almost no predictive ability as it is, are even more utterly useless here: it’s very easy to model a productivist economy, and probably impossible to model a creativist one, so guess what academic economists who want to publish papers with lots of equations do? If you look at the history of the Industrial Revolution, it is absolutely clear that what drove the Industrial Revolution was good old fashioned innovation: the pin factory; the steam engine; the mechanical loom; and so on. You can’t model that on a spreadsheet, but it’s the fundamental truth.
And talking of disciples of Keynes who don’t “get it”, we must talk about Paul Krugman. The productivist/creativist difference hit me full force when I watched this interview of Paul Krugman by Business Insider editor Joe Weisenthal. Weisenthal notes that for the past twenty years we seem to have been unable to make the economy hit full employment without blowing up, and asks Krugman what we can do about it. Krugman notes, correctly, that this is a huge question at the moment and that nobody knows the answer with full certainty, but he offers up what he plainly admits are just musing suggestions of policy ideas to address the problem. And here’s the striking thing: all of them are productivist ideas. All of them are about finding some way to give people more money so they can buy more stuff. None of them are about encouraging economic creativity. In economics jargon, all of them are “demand-side” and none of them are “supply-side.” This is simply astonishing. It’s one thing for Krugman to be a social-democrat and a progressive who believes in an important role for the government in the economy. But the fact that, when idly musing about things which might be holding back the economy, he doesn’t even think at all about, say, how some regulations might be hamstringing some sectors of the economy, to my mind, shows that he is at the deep level, a productivist. He just doesn’t even muse or suggest “Well, maaaaybe we could think about ways to have a more innovative economy, to boost innovation”, even to suggest a big-government answer (more government spending on science! and schools!). If you ask Paul Krugman in an less-guarded setting to muse about how to make the economy more prosperous over the long run, the creativist story just doesn’t. enter. his. mind.
And this is the key thing: Paul Krugman is not a “bad economist.” This is at the deep-down, Weltanschauung level. Paul Krugman is a great economist. But he also doesn’t get it."
From Forbes:
"...Now, the reason why we can’t have nice things in economic debates is that neither side is 100% right. You see, and once you grok this you grok all of our economic policy debates, the productivists are right in the short run, and the creativists are right in the long run.
I believe that’s the true meaning of Keynes’s so oft-cited and so widely misunderstood “in the short run…” phrase. I believe that Keynes was a true creativist, even though most of his disciples don’t get what he did.
In the short term, the productivists are absolutely right: if there’s some shock to the economy, and people don’t have enough money anymore, they buy less stuff, which means businesses have less money, which means they lay people off (because wages are sticky), which means people have even less money (because they or their wife just got laid off), and so on in a vicious cycle. And if you add more money to the system, whether via deficit spending, or central bank printing, or speculative bubbles, or whatever, then people will have more money and buy more stuff and the economy will kickstart again. This is why Milton Friedman was dead-set against austerity, and in favor of monetary stimulus, and why he said “We’re all Keynesians”. This was Keynes’ great gift to our understanding of the way the economy works: in the short run, it’s a productivist system.
But only in the short run. In the long run, it is absolutely clear that what creates economic prosperity is human creativity. Economic models, which have almost no predictive ability as it is, are even more utterly useless here: it’s very easy to model a productivist economy, and probably impossible to model a creativist one, so guess what academic economists who want to publish papers with lots of equations do? If you look at the history of the Industrial Revolution, it is absolutely clear that what drove the Industrial Revolution was good old fashioned innovation: the pin factory; the steam engine; the mechanical loom; and so on. You can’t model that on a spreadsheet, but it’s the fundamental truth.
And talking of disciples of Keynes who don’t “get it”, we must talk about Paul Krugman. The productivist/creativist difference hit me full force when I watched this interview of Paul Krugman by Business Insider editor Joe Weisenthal. Weisenthal notes that for the past twenty years we seem to have been unable to make the economy hit full employment without blowing up, and asks Krugman what we can do about it. Krugman notes, correctly, that this is a huge question at the moment and that nobody knows the answer with full certainty, but he offers up what he plainly admits are just musing suggestions of policy ideas to address the problem. And here’s the striking thing: all of them are productivist ideas. All of them are about finding some way to give people more money so they can buy more stuff. None of them are about encouraging economic creativity. In economics jargon, all of them are “demand-side” and none of them are “supply-side.” This is simply astonishing. It’s one thing for Krugman to be a social-democrat and a progressive who believes in an important role for the government in the economy. But the fact that, when idly musing about things which might be holding back the economy, he doesn’t even think at all about, say, how some regulations might be hamstringing some sectors of the economy, to my mind, shows that he is at the deep level, a productivist. He just doesn’t even muse or suggest “Well, maaaaybe we could think about ways to have a more innovative economy, to boost innovation”, even to suggest a big-government answer (more government spending on science! and schools!). If you ask Paul Krugman in an less-guarded setting to muse about how to make the economy more prosperous over the long run, the creativist story just doesn’t. enter. his. mind.
And this is the key thing: Paul Krugman is not a “bad economist.” This is at the deep-down, Weltanschauung level. Paul Krugman is a great economist. But he also doesn’t get it."
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