After Reading Krugman and Ferguson

The question, it seems to me, is whether economics is "political" or not.

That is, is the distribution of scarce resources bound to laws of reality like the falling object is bound to laws of physics? Or, is economics a cultural/political subject that can be shaped any way we like.

If economics is like physics, Ferguson is right, and we're screwed.

If economics is like cultural studies, Krugman's right, and, with some deft movin' and shakin', we'll be good as new soon.

I know what I suspect--that Ferguson is right; but I don't know if what I suspect is correct, because if Krugman is correct, then what I suspect is just a function of my cultural biases.


Postscript: you probably know Krugman. He's always on with Stephanouosuosplous on Sunday morning and has an influential column in the NY Times. If you don't know Ferguson, you really should. He's the "conservative" to Krugman's liberal, but he really is a serious intellectual. As far as "ethos" goes, this is a draw.

PPS: If you haven't watched PBS's documentary, The Ascent of Money, hosted by Ferguson, you've missed out:

UPDATE: read more from the Freakonomics blog. Anybody know enough about "deflation" to convince me that Krugman's view isn't insane? Rising interest rates means, in Krugman's interpretation, that "fears of deflation" are diminishing.

Deflation: an increase in the real value of money.


Mark said...

Now that the debate of the 19th and 20th centuries is over -- whether a socialist or capitalist society will prevail -- we are now left to endless bickering over what level of tweaking is proper and how to best keep the machinery of the markets producing as much as possible. I'm with you on tending to believe Ferguson more. For me because his approach seems to mirror more of what a prudent person or household would do. If the state is like a household writ large, it ought to be prudent, cautious, and conservative about how it handles its money. Krugman seems like an informercial trying to convince us that we really can afford to have our cake and eat it too.

Casey said...

I hear that. Seems like, in the wake of that "great debate" between the capitalist and socialist models, everything became so muddled that -- as we've discussed before -- only the technocrats are qualified to comment (and in light of the most recent economic slide, we must wonder about even that statement).

But if we concede that point, we are no longer living in a functioning democracy -- because if the democracy votes on which theory of special relativity better describes reality, the outcome of the votes doesn't matter.

And that correspondence (between physics and economics) is central to my understanding and does inform the way I vote: I assume that there are really-existing pressures on the market.

Once I do that, I need to examine an issue like "deflation" -- is it a danger? Is it a fake-danger? And until I understand what it is, I genuinely cannot comment. Then I read that Krugman (with a Nobel prize in hand) tells me deflation caused the depression... Then I read Ferguson (chair of departments at Oxford and Harvard) tells me that deflation did not cause the depression, and is more a part of the solution than a problem.

And what can I do? What can I say? The short answer is, all I can do is "trust," or have faith, in my government... but while that seems easy for many academics (as long as the gov't is being run by democrats), it'll never be easy for me, no matter who's in charge.