I really like this idea, because we need to reemphasize as a society that the only way to create real wealth is patient investment of time&effort&money in worthy projects and organizations, not some scam or the other.

Posted at September 16, 2008 7:11 PM in response to Medicine for Wall Street: A Financial Transactions Tax

Prof Krugman, big fan from way back. I can't give very pointed criticisms of mainstream economics, but I can just say when I think about my economics undergrad education, I often had a woolly-headed feeling that we were analyzing the problem one or two levels too high up. It reminded me of Heilbroner's criticism of Marshall: "Nothing he said could be faulted. The problem was that nothing he said went far enough."

Instead of directly discussing technology & organization & compensation-structure, it seemed like we were instead discussing meta-policies which might slightly better encourage technology & organization & compensation-structure.

Obviously this is desirable and necessary (Keynesianism produced useful insights without getting into specific technologies, etc.), but I just had a vague feeling whether we were one level too high in the analysis.

For example, on health care economists seem to sort of take it for granted, at least in public, non-cutting edge discussion, that technology in health care will be "quality-increasing, cost-increasing". But must it be like that? Couldn't we have "quality-maintaining, cost-reducing" medical and medical-finance innovation, enough to make a real difference in long-term growth of medical spending?

I mean, it's said a CT scan costs a thousand bucks or something, but couldn't we envision some way of financing CT Scan manufacture which entailed a lot of cost at the beginning (like a big prize?), but dramatically reduced the marginal cost of each additional CT Scan machine, and enabled each additional CT Scan machine to be sold much closer to marginal cost?

Posted at May 31, 2007 10:40 PM in response to The Methodology or The People

I'm not sure that "dismal" is the right word to describe it, maybe sensible? Because when I think about bits of economic knowledge that are non-obvious yet important, the very top one for me is that "a country is not a company". That is, that analyzing open systems (corporations, individuals) is *very* different from analyzing closed systems (countries, continents).

As laid out in Krugman's very instructive (for me) 1996 article, "A Country is not a Company"

http://www.pkarchive.org/trade/company.html

Yet that's not a dismal insight. It's the opposite of dismal to some extent, because it implies that in some cases (a recession) there *is* an easy way out, that busts are not just punishments for booms, and that it often isn't necessary to purge the rottenness out of the system.

Posted at May 31, 2007 9:49 PM in response to It's Different for Lefties and Righties

But Prof. Delong, they do say what they mean by "Postmodern": they say it's the opposite of the belief that economic knowledge is going to converge towards more and more precise statistical models with the range of debate becoming increasingly narrow.

If I'm understanding them, that is.

Posted at May 31, 2007 9:37 PM in response to Intellectual Claim-Jumping Watch

thanks much for the reply. One reason I asked about rich & poor is that I've taken a couple courses in development economics, and usually at the end of the course there was a paper to write using what we've learned to give advice to a policy-maker for a poor country. (once for Jamaica, once for Sri Lanka, FWIW). For the paper about Jamaica, it was a group project, and those of us in the group eventually settled on:

1. pro market and anti-deficit reforms
2. pro anti-corruption and increased transparency reforms
3. pro education & health reforms. We might have mentioned gender-equity, education & rights for women & girl-children as well.

I had some misgivings about the list, not so much because I disagreed with the prescriptions (except possibly some of the "pro-market" boilerplate), but because they seemed like good things that any country should do, rich or poor. They didn't seem to have much to do specifically with the problem of poverty & under-development. But eventually I went along because I certainly couldn't think of anything better.

Also a small query about prescribing education as remedy for countries/regions or individuals. Education in what? Does it matter, or is it just literacy in a general sense that matters?

Posted at May 30, 2007 12:24 PM in response to A (Strong) Response to Tyler Cowen

I have a pretty sincere, though possibly lazy and over-broad, question to ask of smart economists. I learned from Prof. Krugman's 1994 book "Peddling Prosperity", (I'm paraphrasing) "There are two really great questions in economics:
1) Why are rich countries rich and why are poor countries poor?
2) Why is there a business cycle, and what is the appropriate policy response to it?"

So my question is, what do economists know about these two questions, and what don't they know? If the economics science keeps progressing, when will we have really good answers to these questions?

One reason I ask is that I have a fair amount of undergrad econ education, and while I think I have a reasonable grasp of question #2 (business cycles), I really am quite confused and have no clear idea of how to think about question #1 (wealth & poverty, & the appropriate pro-wealth, anti-poverty policies)

If these questions were over-broad, here are 2 more specific ones:

Whatever you think of Michael Moore's other work
or ideas, "Roger & Me" is a very funny, moving documentary of the economic pain the people of Flint, Michigan went through after GM moved its Flint plants to Mexico.

For me, the most interesting part of the movie was watching Flint's politicians try to get the city's economy moving again. Their attempted, and disastrous, solution was to attract tourist dollars (A common response of local officials everywhere, I think).

Then they more or less gave up, content with
attracting celebrities to give pep talks (Ronald Reagan's (not bad) advice: "Move to the Sun Belt, where jobs are plentiful")

So here is the question: What should Flint have done after losing so much of its economic base? And what branch of economics do questions like this fall under?

I've asked the Flint question to 2 economists. The first was Gavin Wright, an economic historian from Stanford, and Wright's reply was along the lines of "That's more a question for an MBA rather than an economist.

Basically, the City Fathers have to get together and ask: What Are we good at? What can we do?"

When I suggested that the City Fathers of Flint could have used some help, he smiled ruefully and said "Yes, well, good public officials are always a useful thing to have"

The second economist (via email) was Prof. Krugman, and his reply:

"The field is urban economics / economic geography. I've done a fair bit of work in it myself.

But Flint is a hard case - it's not a place you would really want to locate another industry. New York is different, and there have been a number of good studies of what it's good for.

See Michael Porter's books - and mine. Also the classic by Hoover and Vernon."

The second more specific question I have is I've heard Prof. Krugman getting asked a question along the lines "everything is getting outsourced these days. What would be a good field for a young person to get into?" and I was somewhat surprised to note that Krugman took a pass on the question.

Probably Krugman was right not to give over-specific advice to a specific person without knowing their situation, but what do economists, in general, have to say about the question "So what's a good field for a young person to get into, these days?"

Posted at May 29, 2007 6:19 PM in response to A (Strong) Response to Tyler Cowen

I'm more inclined to think the populist rationale is "we haven't been hit,so Bush must be doing something right".

the obvious counter to that is that apart from oklahoma city and the first WTC bombing, there were no terrorist attacks on American soil during the Clinton administration. Terrorist attacks on American soil simply haven't been very common, though the collossal failure to prevent 9/11  temporarily blinded us to this fact.

Though pointing out that terrorist attacks haven't been common in the past is not to say that terrorism might not be much more important and dangerous in the future. Depends how many motivated terrorists there are, whether they're able to get their guys inside the country, and what kind of explosives and weaponry they can get their hands on.

Posted at September 7, 2005 9:41 PM in response to Disentangling Idealism

great column.

Posted at September 7, 2005 2:26 PM in response to 24/7/365

I think the conservatives who are attacking Mayor Nagin over the flooded buses have a point. But they're just blind to the fact that the primary responsibility for protecting us from "the big one" has to be the federal government, whatever form that "big one" may take. Obviously the person in charge of coordinating the response will make heavy use of state and municipal resources. But it's just common sense that FEMA and feds have to be the ones to take charge, lay out the broad vision and the broad plan, ensure that the plan is executed properly, and assume ultimate responsibility and accountability. The politically motivated attempt to shift responsibility to the bottom of the hierarchy is pathetic and shameful.

But this is a much bigger societal failure than the fact the FEMA head was asleep at the switch. Ideally, for responding to this hurricane, just off the top of my head, you'd want a master list, either of people or of units of area, you'd want a large and well-distributed network of volunteers, and then you'd want to give each volunteer responsibility either for a unit of area or for a list of particular people. I have no experience or special knowledge of that kind thing, but it seems to me that building that master list, and that distributed network of volunteers, is one of the things that we should be working on.

Posted at September 4, 2005 9:09 PM in response to The Responsibility Era

posted this on Ezra Klein's blog, cross-posting it here:

The problem with saying that nation-building is practically impossible and therefore wrong in principle, is that there's very little in principle that differentiates the task before us in Afghanistan and the task before us in Iraq (the reasons why we are undertaking the task, are, of course, completely different).

Thus saying regime-change in Iraq was a bad idea, even in principle, implies that nation-building in Afghanistan was a bad idea as well. Yet Afghanistan has turned out sort of okay, while Iraq hasn't. And the Administration's actions in Afghanistan were less corrupt & manipulative than their actions in Iraq, but it's not like they ran the Afghanistan mission perfectly or anything. It was merely good enough. We did have one big advantage in Afghanistan, though, which was that we had some authentic Afghani allies: the Northern alliance + Karzai & co.

Posted at August 19, 2005 1:17 PM in response to Changing One's Mind