Critique of «How did Economists Get It so Wrong» by Paul Krugman

The York Times article How did Economists Get It so Wrong dated 6th September, 2009, was written by Paul Krugman. He is a prominent economist who is well versed with economic matters as well as dynamics in performance of financial markets. In the article, Krugman (2009) relentlessly attempts to address fellow economists as well as other interested readers on the need to adopt effective economic policies as part of moderating performance trend of finance markets.

In other words, he is categorical on the fact economists have not lived up to the expectations of the public especially when interpreting trends in economic performance. Specifically, this article is all about Intellectual war in macroeconomics.

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The author is directing his comments to economists who have grossly misled various economies when interpreting economic performance and financial stability only to dip into crisis after a short while. He laments that economic experts may sometimes applaud their input in strengthening economic performance only to be surprised when recession follows later.

Nevertheless, their theoretical and practical successes have been positively identified for some time now. For instance, having settled their internal disputes, most economists thought that all was well and that the war on recession had been won. Ironically, with the recent economic crises, economists were unable to predict performance of financial markets. It is against this backdrop that the author aims at exposing loopholes within the profession.

Moreover, he aims at addressing various fault lines among economists and how these flaws impact economic stability. Hence, the article provides invaluable information both for the general public and economists as well.
Krugman has clearly stated his thesis with the aim of capturing the attention of his readership from the very beginning. Additionally, he has a specific point of view reflecting on how economists went astray and what can be done to improve current economic policies.

In his point of view, he asserts that the likely reason why economists went astray was largely due to the fact that they clung towards capitalism as the perfect strategy to promote economic stability (Krugman, 2009). Needless to say, he underscores that capitalism was not the best economic policy to be used in building robust economies bearing in mind that unemployment was very rampant by then.

Nevertheless, the author is quite categorical that economists ignored human rationality in order to try and perfect the market only to cause crashes that were unpredictable in the financial sector. Moreover, this article is very persuasive in highlighting how economists’ belief in capitalism blinded people and finally led to gross financial bubble yet nobody predicted it.

Definitely, he persuades economists to face the reality that they have fallen short of their professional perfection. In this case, he urges them to try and adopt more dynamic financial measures. Additionally, Krugman suggests that governments ought to monitor and regulate money being circulated in their economies to avoid likely depressions (Krugman, 2009).

A financial market policy is a concept that is closely related to the topic being discussed in the article (Clark, 2010). As an economist, it is always advisable to incorporate effective policies when managing financial markets in order to avert crisis. Such policies should be rational and realistic for economists to be able to monitor and regulate market trends. Therefore, it is possible to avoid economic catastrophes that might occur. In this case, the general concept in the article is on disaster management.

From the author’s point of view, the key problem facing most economies is failure to manage risks and uncertainties in the market. Evidently, economists have witnessed financial recession due to their divided views in determining the effective policies for the financial market.

Comprehensively, proper market policy eliminates economic shocks (Davies, 2010). Certainly, the kind of material used in the article is mainly from a personal observation. It is evident that the author uses the first person singular mode to outline his ideas. In this case, all the information given is from his own observation (Krugman, 2009).

However, he has analyzed some literature works written by other scholars to reinforce his ideas. For instance, he quotes other articles like “The state of Macro” to point out the on the issue of recession. Moreover, he uses historical records in the article to create a vivid scenario of the trend of macroeconomics. He quotes events related to economy thereby, giving a chronology of such aspect and the responses made to them.

The materials have been effective for the author to bring out evidences to support his views. For instance, from the author’s observations he emerges critical to the fact that economists have failed in their duties to control and regulate financial stability. The author comments that “…in the wake of the crisis, the fault lines in the economics profession have yawned wider …” (par.3).

Observations have enabled him to present rational arguments. Moreover, his critics are not biased from hearsay information. Apparently, additional materials from literal and historical records have acted as important facts in supporting his perspective.

Additionally, from the same paragraph, he uses literature work of Brad De Long to emphasize more on his idea regarding the economic profession (Krugman, 2009). However, the author’s tone is very satirical. In other words, he ironically states that economic professionals had a golden era from the theoretical and practical successes.

The fact remains that having thought that everything is under their control, there emerge financial crisis from the current recession yet they could not predict. Additionally, he sounds harsh especially when referring to bankers as idiots. To point this out, he emerges rough and insulting as he attacks other people’s weaknesses.

Nevertheless, the author has made it out in bringing forth his views regarding the macroeconomic failure and hence he poses a challenge to the economists.

Indeed, the article is highly informative and worth reading. Needless to say, the it is an eye opener to economists to embrace sound economic policies in minimizing some of the economic challenges that have been experienced in the past. Additionally, it poses some challenge to the profession.

For instance, economists are being urged to be more analytical and precise when predicting financial performance of various markets so that people may positively accept any released economic data as authentic. On the same note, the article attempts to urge economic activists to enforce market systems and structures that will foresee monetary stability both in the long run. Indeed, this calls for government intervention.

However, Krugman has not clearly elaborated his argument on “beauty”. This may likely lead to misunderstanding of some sections of the article. Moreover, his argument on recent and past economic recessions fails to account for their specific causes. Although economists may have indirectly contributed to past recessions, there are other economic factors which may not be ignored at all.

References

Clark, K. (2010) I’m just saying. Indianapolis: Dog Ear Publishing, Inc.

Davies, H. (2010).The Financial Crisis. Boston: Polity Press.

Krugman, P. (2009). How Did Economists Get It So Wrong? Retrieved from
www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagew

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