Paul Krugman Quotes About Economics
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Our popular economics writers, however, are not in the business of giving their readers a ringside seat on the research action; with no exception I can think of, they use their books to do an end run around the normal structure of scholarship, to preach ideas that few serious economists share. Often, these ideas are not just at odds with the professional consensus; they are demonstrably wrong, and sometimes terminally silly. But they sound good to the unwary reader.
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Economics is not a morality play.
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People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job or may not try to find one as quickly as they would without the benefit.
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In fact, I'd say that the sources of the economy's expansion from 2003 to 2007 were, in order, the housing bubble, the war, and - very much in third place - tax cuts.
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as an economics professor I am by nature inclined to the view that the truth isn't out there, it's in here - that usually you learn a lot more by thinking really hard about the data than you do by sniffing around for supposedly inside information.
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The problem isn't that people don't understand how good things are. It's that they know, from personal experience, that things really aren't that good.
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Close the weak banks and impose serious capital requirements on the strong ones...You see, it may sound hard-hearted, but you cannot keep unsound financial institutions operating simply because they provide jobs.
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However, the fact that an economist offers a theoretical analysis does not and should not automatically command respect. What is needed is some assurance that the analysis is actually relevant.
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I've always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly - that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum.
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It should be possible to emphasize to students that the level of employment is a macroeconomic issue, depending in the short run on aggregate demand and depending in the long run on the natural rate of unemployment, with microeconomic policies like tariffs having little net effect. Trade policy should be debated in terms of its impact on efficiency, not in terms of phoney numbers about jobs created or lost.
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This is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.
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We know that advanced economies with stable governments that borrow in their own currency are capable of running up very high levels of debt without crisis.
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The world economy is in a nosedive, and understanding what I call "depression economics" - the weird world you get into when even a zero interest rate isn't low enough, and a messed-up financial system is dragging down the real economy - is essential if we're going to avoid the worst.
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The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.
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Generous unemployment benefits can increase both structural and frictional unemployment. So government policies intended to help workers can have the undesirable side effect of raising the natural rate of unemployment.
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Governments do not necessarily act in the national interest, especially when making detailed microeconomic interventions. Instead, they are influenced by interest group pressures. The kinds of interventions that new trade theory suggests can raise national income will typically raise the welfare of small, fortunate groups by large amounts, while imposing costs on larger, more diffuse groups.
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In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price-determined by supply and demand, the same as the price of apples or coal. And it is for that reason, rather than the practical details, that the broader political movement of which the demand for a living wage is the leading edge is ultimately doomed to failure: For the amorality of the market economy is part of its essence, and cannot be legislated away.
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Raising the minimum wage and lowering the barriers to union organization would carry a trade-off - higher unemployment. A better idea is to have the government subsidize low-wage employment. The earned-income tax credit for low-income workers - which has been the object of proposed cuts by both President Clinton and congressional Republicans - has been a positive step in this direction.
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When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
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