Sunday, February 15, 2009
Economic Creationism?
This Bloggingheads discussion gives a good summery of how I've been feeling about the debate around the stimulus package and economic crises in general. Not being an economist, I've understood the disagreement on questions as basic as "did the New Deal work," as an unresolved debate between followers of Keynes and followers of Milton Friedman. But you would expect, after all this time, for some consensus to have been reached. Maybe, as Clarke says, it is a difference between real economists and the economics equivalent of creationists. Can you weigh in on this Munir?
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Only a quick comment (haven't had time to watch this vid yet). From what I understand (and this is not my field) reasonable economists believe the New Deal was A Good Thing, as these things go. Government intervention is almost never seen as a first-best option, but anyone realistic enough to realise we don't live in a first-best world can see why gov'ts need to act. Again mirroring the Keynes/Friedman split, there are two ways to think about whether gov't doing some particular action is a good thing. We have theory (Friedman) and Econometrics (Keynes). Theory looks at the nuggets that make up society, individuals and firms, and sees whether, starting from first principles, there are inefficiencies or 'traps' the economy can fall into that gov't action can redress. The second way is to look at historical evidence, and try to figure out (though this is always muddy - we can't run experiments to really test things) what works and what doesn't.
ReplyDeleteOh, and don't tell anyone in economics what I said about the theory/econometrics split, especially as it relates to Friedman/Keynes. It's technically wrong but paints the picture :)