Friday, September 4, 2009

Krugman: "How Could Economists Have Got it So Wrong"

http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?_r=1&hp

Paul Krugman discusses how economists were blinded by their love of numbers and their idealized notions of market operations before and after the Great Depression:

"Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess."

Krugman's essay is defintely worth reading. However, it fails to acknowledge the myriad criticisms of Chicago school economic theories and practices emerging from academics in anthropology, global studies, political science, sociology over the last 30 years. These researchers' studies often employed qualitative methods (e.g., ethnography).

Mainstream economists' disdain for the purportedly "soft" social sciences and humanities and their concomitant disregard for qualitative methods ensured their blindness to the considerable bodies of research demonstrating the theoretical and empirical limits and contradictions of neoliberalism.

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