The Bottom Line of Paul Krugman’s Robbins Lectures At The LSE (London School Of Economics)
Lately, when I can’t sleep, I logon and listen to Paul Krugman’s three Lionel Robbins lectures, “The Return of Depression Economics” at the London School of Economics, given in mid-June. Lecture one is here. Lecture two is here, and Lecture three is here. Contrary to what you might think and perhaps what I was hoping for, they do not make me sleepy. There’s a lot to digest here.
At one point he says that there are many skilled and eminent economists, thought leaders who speak publicly, that just haven’t given the subject of Keynesian, or Depression Economics, serious and sustained thought in a long time. Neo-Keynesian Economics (or the neoclassical synthesis) was a later development by Paul Samuelson, John Hicks, Franco Modigliani, and others that was critiqued so successfully by Milton Friedman in the 1970s and the 1980s. Keynesian economics focused on nasty situations like liquidity traps, something we are re-learning to fear in this economy. The point is this: once an economy begins to go down the liquidity trap route, all the usual monetarist macro strategies, like restraining spending, balancing the budget, cutting taxes, controlling the growth of government spending make things worse, not better.
For a good example of this, have a listen to a recent Bloomberg On The Economy podcast with Prof. Steve Hanke of Johns Hopkins and the Cato Institute. After about 5 minutes of listening to Prof. Hanke, I thought for certain I was listening to a political speechwriter, not an analytic personality trained in examining both sides of an argument.
Krugman at one point makes a crack about inflation in Zimbabwe, in reference, I think to some of Prof. Hanke’s recent work about hyperinflation.
Krugman is very clear on something else: hyperinflation should not be a current concern, given the Japanese experience of pumping the money supply for years, starting in 1997. Krugman has a slide showing that that strategy did not revive their economy, employment or anything else in Japan for years afterward.
