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Economists Unleash a Reign of Error

Paul Krugman: The Great Recession has brought us back into a world of persistent inadequate demand that has unleashed a sort of reign of error among anti-Keynesian economists and pundits.

Niall Ferguson, seen here at the Tokyo Stock Exchange, apologized recently for his remarks about John Maynard Keynes's sexuality. (Photo: Dewald Aukema)

After his Keynesianism-is-gay remarks got him in trouble, the Harvard professor and historian Niall Ferguson did the right thing and offered a straightforward, no-excuses apology.

Unfortunately, it seems that he has reverted to type; sigh.

But this does seem to call for an update on a subject I have written about occasionally: the remarkable way in which the Great Recession, by bringing us back into a world of persistent inadequate demand, has unleashed a sort of reign of error among anti-Keynesian economists and pundits. And I’m not talking about the usual hacks from the Heritage Foundation or the Cato Institute; I’m talking about people with serious reputations either for research or for seemingly judicious commentary.

Oh, and by “error” I don’t mean “views I disagree with”; I mean raw conceptual or empirical banana-peel episodes, the kind of thing that defenders of these men (who have a lot of defenders) try to justify not by claiming that they were right, but by claiming that they didn’t say what they did, in fact, say.

Now, few have matched Mr. Ferguson’s awesome arc of inanity. But still, consider the list of mistakes from these economists and pundits:

1. Robert Barro pointing to the decline in private spending during World War II as evidence that multipliers are small, somehow forgetting rationing and all that.

2. John Cochrane and Eugene Fama confusing accounting identities with causal relationships, and reinventing the Say’s Law fallacy (that debt-financed government spending crowds out an equal amount of private spending, even if the economy is depressed).

3. Robert Lucas misunderstanding Ricardian equivalence.

4. Robert Samuelson and Olli Rehn asserting that John Maynard Keynes wouldn’t have been a Keynesian given current debt levels, without checking actual British debt in the 1930s (which was much higher than debt now).

5. John Taylor equating the Federal Reserve’s policy to hold down interest rates with a price ceiling on, say, apartment rents.

And I’m sure I’m missing others.

So, if I were Mr. Ferguson I guess I’d have to seek some kind of psychosexual explanation here.

I would note that none of these guys has a beard. Masculinity issues?

Anyway, it’s quite remarkable.

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