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Schumpeter Calls Krugman

In the noisy urgent quarrel about economic crisis almost everybody is asking how to get out of recession or how not to get into recession.

You’d be forgiven for thinking the menu boils down to “growth or austerity”, like a limited choice of “rabbit or fish” in a poor pueblo or kampung restaurant.

Recently Paul Krugman complained to his son with characteristic biting humor:
“Standard economics in this case — that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks — was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite. And now the results are in:  Keynesians have been completely right, Austerians utterly wrong — at vast human cost… Nobody ever admits that they were wrong, and Austerian ideas clearly have an emotional and political appeal that is resilient to any and all evidence.”

Running alongside are debates about what famous economists “really said” or “meant to say”. Krugman argues: “Milton Friedman may have opposed fiscal activism, but he very much supported monetary activism to fight deep economic slumps, to an extent that would have put him well to the left of center in many current debates.”