When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Friday, September 9, 2011

Krugman on "highly educated ignorance"

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I wrote about Paul Krugman’s observation of  “highly educated ignorance”  in economics, a couple of months ago - http://www.johnmpoole.com/2011/07/highly-educated-ignorance.html.
Now, Krugman has presented a full paper of how economists failed to see the crisis coming and more - The Profession and the Crisis  - which should be required reading for everyone in government and higher education. Excerpts:

. . . We’ve entered a Dark Age of macroeconomics, in which much of the profession has lost its former knowledge, just as barbarian Europe had lost the knowledge of the Greeks and Romans. . . .  How did all this knowledge get lost? Well, being the age I am, I was able to watch the transformation of macroeconomics in real time, and I’d say that what happened was a runaway social process.

First, success in academic economics came from publishing “hard” papers — meaning papers that used rigorous and preferably difficult mathematics. This in itself biased publication toward equilibrium business cycle models, as opposed to the ad hoc modeling typical of what I consider useful macroeconomics. Graduate education, in turn, became increasingly focused on the kind of work that could get published and lead to tenure. Successive cohorts of students were trained only in the newly rigorous version of macro, which had lost touch with the field's previous intellectual achievements.

And as these cohorts became professors in their turn, they closed off both publication and promotion to anyone who questioned the dominant academic approach. Robert Lucas wrote more than 30 years ago — approvingly! — about how participants in seminars would “whisper and giggle” when someone presented a Keynesian analysis.(emphasis added)
. . . . There are also many calls for new economic thinking; there's even an institute dedicated to that project. Again, fine — but the biggest problem we had as a profession wasn't failure to keep up with a changing world, it was failure to remember what our fathers learned. (emphasis added)

What we really need is a change in the destructive social dynamics that brought us to this point. . . . .  http://www.palgrave-journals.com/eej/journal/v37/n3/full/eej20118a.html

In other words, political correctness and absence of diversity, led to “highly educated ignorance.”  The “social dynamics” that Krugman refers to is the systemic “group think” in academia, of which conservatives have complained for years. It’s a healthy sign that liberals like Krugman are finally “getting it.”

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Financial Crisis - The Telegraph

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