The Pot Calling the Kettle a Pot
Paul Krugman, Oct. 16, 2009:
For a long time, there’s been an accepted way for commentators on politics and to some extent economics to distinguish themselves: by shocking the bourgeoisie, in ways that of course aren’t really dangerous…
Clever snark like this can get you a long way in career terms — but the trick is knowing when to stop. It’s one thing to do this on relatively inconsequential media or cultural issues. But if you’re going to get into issues that are both important and the subject of serious study…you’d better be very careful not to stray over the line between being counterintuitive and being just plain, unforgivably wrong.
Paul Krugman, Dec. 15, 2008:
Right now the world economy is in a nosedive, and understanding what I call “depression economics” — the weird world you get into when even a zero interest rate isn’t low enough, and a messed-up financial system is dragging down the real economy — is essential if we’re going to avoid the worst.
The key thing, when you’re in a situation like this, is realizing that normal rules don’t apply. Ordinarily we’d welcome an increase in private saving; right now we’re living in a world subject to the “paradox of thrift,” in which private virtue is public vice. Normally we want to be careful that public funds are spent wisely; right now the crucial thing is that they be spent fast. (John Maynard Keynes once suggested burying bottles of cash in coal mines and letting the private sector dig them up — not as a real proposal, but as a way of emphasizing the priority of supporting demand.)
The big test for the next few months will be whether policymakers here and abroad can wrap their minds around this Alice-in-Wonderland world. If they can’t, nobody knows how deep the rabbit hole goes.
