Monday, June 8, 2009

The 2009 Irving Fisher Award...

goes to, drum roll please, economist Paul Krugman. Every age has smart stupid men, and Paul Krugman, what with his recent pronouncement that the economy will, in time, be seen to have come out of recession sometime this summer, is my top choice to emulate Depression era economist, Irving Fisher, who said shortly before the onset of The Great Depression that, and here I slightly paraphrase, "We have reached a permanent plateau of prosperity". From where I humbly sit, Professor Krugman, a man of undoubted erudition and high achievement, is very much prone to amazing blindspots about the economic state of play. A Keynesian, Paul Krugman may forever be known (by me at least) as the man who mistook the eye of a category five hurricane for the beginning of a sunny and pleasant summer afternoon.

One can't help but think that Professor Krugman must not merely have witnessed the sprouting of green shoots, but the budding of whole beds of roses. Or has he? Where, after all, is the (undoctored) evidence? A decrease in the steep slope with which unemployment has heretofore risen, for example, is no more evidence that the economic downturn is about to reverse course than finding out that no new tumor growth has been detected is evidence that a cancer is now in remission. There are, after all, such things as lulls that do occur within well established trends. And when there is no unambiguous contrary evidence, lulls or respites are far from reliable signals of a change in trend. Recall from your history that after war was declared in Europe in late 1939, for a number of months very little seemed to transpire. A "phony war" had broken out it was said, and the panic about a general military conflagration abated in favor of the idea that armed hostilities would be averted. We now know just how fanciful that notion that was.

I posit that we are exactly in the same position now. However, Instead of finding ourselves in a phony war, we are ensconced in a bogus economic recovery. The frightening metrics and plummeting production data of '08 have, for now, merely slowed their rate of descent. So, rather than behaving as if the big bad storm is spent, we should instead be prepared for another leg down in a global Depression that is probably, at best, only half way through doing its worst.


Thai said...

In case you were worried things were getting a little comfortable were looking for another issue to motivate voter discontent, I thought you might be interested.

I guess it must feel good to at least know your senator is fighting the good fight... Though I do keep wondering if it counts as political dishonesty (corruption?) when the dishonesty is done for "the right" reasons- i.e. protecting the home team?

I do recommend you follow this issue closely as it likely to impact Boston far more than many others.

... We live in interesting times.

Anyway, I hope you are well.


Edwardo said...

Yes, it must be gratifying to see the issue that you gave discussed become central to the discussion about health care. Personally I think it will be a mostly moot issue before too long.

Hal Horvath said...

I expect that *if* we continue down into a depression, which is quite possible, but still uncertain, we are nowhere near the half-way point, not at all.

But I also don't think the depression is a given, and why is at my blog, mostly here:

Edwardo said...

Thanks, Hal, for dropping by.