Krugmanomics

Campus Report ^ | March 13, 2009 | Daniel Allen

[bs9021]

Krugmanomics

by: Daniel Allen, March 13, 2009

For months now, policymakers and critics have been calling this the worst economic crisis since the Great Depression. Likewise, many wonder if President Obama’s recovery plan has the ingredients to match the alleged success of the New Deal. Americans refer to the post-depression era in fondness, citing a time when the country overcame a series of seemingly insurmountable challenges to become stronger than ever before. What can we learn from the economics of that time? What can it tell us about how to resolve today’s economic concerns?

Economist Paul Krugman explains one of today’s more pressing social and economic concerns—a growing income inequality—through his understanding of the Great Depression and the culture and politics it produced. Brink Lindsey, vice president for research at the Cato Institute, argues that Krugman’s theories are correct, to a degree. However, Krugman suffers from a political bias and a longing for the “good ol’ days” that distorts his explanation of income inequality. Krugman suffers from what Lindsey terms “nostalgianomics.”

Lindsey puts his arguments in perspective by pointing out where Krugman parts from other economists. He writes, “Under the conventional view, rising inequality since the 1970s has been understood as a side effect of economic progress—namely, continuing technological breakthroughs, especially in communications and information technology.”

“By contrast, Krugman and his fellow revisionists see the rise of inequality as a consequence of economic regress—in particular, the abandonment of well-designed economic institutions and healthy social norms that promoted widely shared prosperity.”

Lindsey agrees that “changes in economic policies and social norms have contributed to a widening of the income distribution,” but disagrees with the explanations offered by proponents of nostalgianomics, which “give a highly selective account of what the relevant policies and norms actually were and how exactly they changed."...

[philsfan24]

It amazes me that anyone could believe the New Deal was successful at all. It literally kept the US in a depression until WWII. Anyone with half a brain can see that with a little research. I guess that’s what happens when liberals write the textbooks.

[OrioleFan]

Americans refer to the post-depression era in fondness, citing a time when the country overcame a series of seemingly insurmountable challenges to become stronger than ever before.

So it's good to have a Pelosi and Reid Congressional sponsored Depression in order to make DemocRATs look good when they decide it's over????

[genghis]

It amazes me that anyone could believe the New Deal was a success at all.

The new deal was a huge success. The goal was to grow government. The government grew , therefore it is succesful. In addition, the democratic party grew as well.
Obama has the same goals, the stimulus is SOLELY designed to grow government and grow the democratic party. With the changing demographics, he maybe successful at this as well.

[kenavi]

Very intelligent argument.

[kenavi]

I’d argue that the rise in income disparity, from 1980 to now, is more apparent than real. When income tax rates dropped, high earners had less incentive to hide income and risk tax evasion persecution, so they declared more of their income or realized it in taxable form more than before.