Home > Austrian School, Mainstream failure, Socialist zealotry > Keynesian Krugman writes his own obituary

Keynesian Krugman writes his own obituary

Paul Krugman made me laugh today.  Really laugh!  Here is the funny piece from his blog:

This is the way the Chicago School ends.

Not with a bang, but with a cackle.

Brad DeLong, Justin Fox, and Paul Kedrosky have already weighed in on the not-available-online John Cassidy piece on Chicago economics.

Like them, I find it really sad. Here’s Eugene Fama, insisting that there was no financial crisis, just markets reacting rationally to an economic crisis caused by brain-eating aliens flouridated water something or other — hey, macro isn’t his department. John Cochrane, on the other hand, says that it’s all because George W. Bush gave a scary speech.

What struck me was the fact that Cochrane is still trying the argument-from-authority thing: this was all proved false in the 1970s, nobody serious believes in it, etc.. At this point he knows (although one wonders whether he did originally) that there’s this thing called New Keynesian economics on which a lot of smart people have been working since the mid-1980s. And yes, the models do allow for effective fiscal policy. But Cochrane is still using the Lucas giggles and whispers line.

It’s hard to avoid the sense that Chicago just turned inward on itself circa 1982, and stopped paying attention either to the world or to anyone not of its tribe. And now it finds that the rest of the world is returning the favor.

Two things made me laugh.

First, the brain-eating aliens/flouridated water line was both unexpected and very witty.  I liked it from an economist who is normally so serious about his own profession.

Second, the obituary he writes for the Chicago School is exactly the obituary I would write for the whole mainstream – particularly the Keynesians.  Henry Hazlitt cut Keynes to bits half a century ago, and Keynesianism still carries on, like a zombie, brain-dead, lifeless, causing death and destruction wherever it is allowed in.  After the Keynesian-induced disasters of Japan and the US, each time PK visits any country the call should go out across the land:

“A Keynesian is approaching!  Shut the town gates!  Hide the women and children!  Run!  To the men: Get the crucifixes, the Holy Water and the garlic and the shot guns and let’s all meet in the town square to distract the Keynesian zombie away from the gold and our women!  Apparently all Keynesian zombies love brains – give me some mad cow brains and perhaps he’ll eat those!”

Paul Krugman writes accurately of the Chicago School’s demise but doesn’t realise his words could apply equally to himself and Keynesians generally.

Then again, zombies can never tell that they’re already dead. 

Shhh…. don’t tell him (he might start staggering my way!).

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