It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.Three years ago. That would have been 2010... which was several months after I published The Return of the Great Depression, which explained that the issue was credit inflation, not insufficient demand. Unlike all those economists, I also declared that we would be in the middle of an economic depression now, which is the case, even though few seem to consciously be aware of it due to the various statistical shenanigans.
This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.
So what went wrong? The answer, mainly, is the triumph of bad ideas.
It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders — and all too many economists — chose to forget or ignore what they should have known.
And three years later, after Obama passed a BIGGER stimulus plan than the one for which Paul Krugman himself called for, Krugman is still trying to claim that the mainstream economists were not incorrect, while repeating his previous and incorrect diagnosis.