Monday, 4 February 2013

M. Anti-Austerité

Le Monde has a story about an impostor who fooled various media outlets in Portugal, posing as an economist with anti-austerity views. The question that comes to mind is why anyone would bother to pose as an economist today. Certainly, the failure to prevent the financial crisis and the weak recovery cannot all be blamed on economics as a discipline. Not all economists failed to the same degree and economic policy is often not written by professional economists. But advice given by economists matters and on the whole has not been very successul as of late and it will be interesting to see how the discipline emerges from this crisis in the long term.

The crisis in the 1930s led to a paradigm shift in economics. Keynes's 'General theory', Schumpeter's 'Capitalism, socialism and democracy', and Hayek's 'The road to serfdom' were all to some extent responses to this crisis and deeply altered the way we think about economics. The current crisis may lead to similar re-birth of economic. But it may also not. In many ways the current crisis resembles that of the 1930s (one of the reasons why history matters so much in the current debates) and for this reason we are mostly seeing a rehash of past debates. It's mainly Keynes vs Hayek again. But with Hayek winning the argument this time. We all are therefore to some extent participating in a major macro-economic experiment that will be very useful to future economists and economic historians. Of course even with the most interesting experiments there is often no happing ending for the guinea pigs.

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