August 25, 2011

Going to the well again

It's too good. The Barro piece in the WSJ was an embarrassment, Krugman calls him on it.

[W]hy, exactly, are we supposed to have such faith in “regular economics”? What is the compelling evidence that the vision of a competitive, efficient economy allocating resources to the right uses is actually a good description of the world we live in?

I mean, it’s a lovely model, and one I, like everyone else in economics, use a lot. But I would not have said that it’s a model backed by lots of evidence. We do know that demand curves generally slope down; it’s a lot harder to give good examples of supply curves that slope up (as a textbook author, believe me, I’ve looked); and it’s a very long way from there to the vision of Pareto efficiency and all that which Barro wants us to take as the true economics. Realistically, imperfect competition, market failure, and more are everywhere.

To which I can only add this.


Blogger First Sea Lord said...

Not precisely on point, but it reminded me of a conversation long ago:

Me and my friend Matt, International Studies guy, at Reed College, in early 1986:

me: "It seems like any study of politics requires an intense study of economics, and vice versa. Power and money are obviously intensely related. I don't think you can understand economics without understanding political power. "

Matt: "Yeah, you know, Princeton (if memory serves) has a department of political economy. Most schools used to. "

me: "That's seems like the way to go. We should get one here."

August 25, 2011 at 11:52 PM  
Blogger Laird of Madrona said...

Beardie is on a roll. Thank goodness he isn't in government, and can tell us exactly what he thinks.

August 27, 2011 at 12:49 AM  

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