I have listened with attention to Paul Krugman (nobel laureate), Joe Stiglitz (nobel laureate), Nial Furgeson, historian of Empire and Simon Johnson past chief economist for the International Monetary Fund. They are all good. They all know their stuff. And; they disagree.
They disagree most vividly the need for a new stimulus, and yet agree on others items.
But before getting into the weeds of acute analysis of macro economic theory, let us look at a similar area of complexity. If you are of a certain age, you are more familiar with doctors than economics. We would never think of asking a surgeon about how to treat a rash. Nor would we ask a dermatologist as to how to treat a tummy ache. The same complexity engages the study of economics. Yet economics as most college graduates must know, are merely divided between macro, and micro economics.
Why should you listen to me: the self named carpenter economist on this subject. Aside from my university thesis, my awareness comes from working for a decade in the university textbook world over five states and I have had many, many discussions with economic professors, whom I submit, love to profess. I managed a present day anthropology of the economics profession. There are dozens and dozens of economic journals, which is to say they are as disciplined as cats. Yet in the academic world of endowed chairs, many economists have taken the bait of market fundamentalism, as George Soros has so well named. Think Tanks have called it ‘Free Markets’ and they have been impelled with tens and hundreds of millions of dollars which result in many endowed chairs. Their wind has been felt on trade policy ( laissez faire my patoot) as well as in the instruction of MBA’s and economics majors. I have seen the gears of this self generation of ‘policy’.
Back to the subject, namely that economics is as complex as medicine and to divide it into macro and micro and call it good, is as competent as to divide medicine into gastro enteritis or dermatology and consider you have mapped the territory. Knowing this, I am not at all surprised that the three luminaries named above have coherent and yet conflicting views.
These four, Krugman, Stiglitz, Ferguson and Johnson live in different timezones and scales, all of which are valid. Ferguson looks in terms of decades if not centuries, and observes the structure by which empires decline. Johnson worked with the I Stiglitz whose thesis was on the asymmetry of information, i.e. imperfect access to information, has worked internationally as chief economist at the world bank, and has a different perspective from Krugman, who is centered on US history and current macro economics.
Again I must state my bonafides in contrast to these titans, all of which I admire. I wrote my thesis in 1978 on the consequences of nature’s cost on the monetary system as advised by Gregory Bateson who had a remarkable influence on late twentieth century thought He is the one who put the Macys conference together when Weiner and Von Neuman coined the term ‘cybernetics’ which was the mother of automation, and that the mother of robots, which is the building block of what today we call: ‘production’. He was the first to apply information science (also known as system science) to living systems.
What Krugman sees as a period, a quarter, Ferguson sees as a millisecond. What Krugman sees as the way back to some pump in the economy, which is necessary to have some circulation of funds, Ferguson sees as
So I am not upset that these titans do not fit ‘global warming’ into their economic models. While in my opinion it is ignorant, their ‘science’ of economics has proven itself quite fallible of late, so from a theoretical point of view, I understand why they would prefer to keep it as simple as possible. However not attending to that variable is akin to playing cards on the tracks and not noticing the train.
YET, they have to deal with concrete political thinking, that is equally outside the science of economics to deal with all this talk of deficits, and more resembles a train than any sense of logic.
You see economics is very plastic. It is complex, and usually has enough variables to mask any shortfall. Politics is less so. The unfortunate fact is that the majority of people can be: wrong. That was proved in 1936 when FDR cut the stimulus too quickly in response to ‘common sense’ objections to deficit spending…. and re-triggered the depression. For economics works on a slow cycle, and the political topic can have changed a dozen times before economic action creates any economic result.
Thus while each of these titans covers the macro world of economics, they do it from different perspectives, and actually agree more than would a family practitioner, an acupuncturist or an ayurvedic physician, who, like our economic titans all look at the whole body of their medical field.
The debate that rages today: Cut the Deficit, or Spend more on Stimulus is an apparent conflict point among our titans. I hope a new cleavage can separate this debate into a more sensible and fruitful discussion. Stay Tuned.