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Krugman vs. Galbraith via Lars Syll

Lars dug up this on-line debate from the 1990s between Paul and Jamie. He linked to the full debate here. The part he posted is about the use of math and models in economics. There are other interesting parts in the debate, even if it is dominated by a discussion of the effects of free trade policies on manufacturing wages in the US (these was after the publication of Adrian Wood's book on North and South trade; mind you my problem with Wood's book is that it still uses Heckscher-Ohlin, but that is a different discussion).

Here is a brief comment by Jamie on two other topics that are quite relevant today, and that 'serious' economists did not (and still don't) agree.
"The merits of cutting the budget deficit. Do serious economists all agree that cutting the budget deficit will raise savings and investment, and increase the rate of productivity growth? They do not. The late, great Bill Vickrey, who died just three days after receiving this year's Nobel Memorial Prize in Economic Sciences, was only one of many who think our present preoccupation with deficit reduction is dangerously counterproductive. I'm another. 
The 'natural rate of unemployment.' Do serious economists agree that there exists a 'natural rate of unemployment?' No. Do those who do believe in this concept agree on what the natural rate is? No. Do those who have estimated the natural rate agree on how quickly inflation will accelerate if unemployment goes below the natural rate? Again, no. (The next issue of the Journal of Economic Perspectives will carry a symposium airing this argument.)"
I actually think that on the second most 'serious' economists do agree on the existence of the natural rate (including Paul), but not on what it is. As I referred to before, Bob Solow once said during a talk at the New School that the natural rate of unemployment didn't exist, but then by the end of the talk he suggested that it was 5.2% (this was in 2000).

The natural rate is actually the key issue for the mainstream suggestion that markets are efficient, and the more reasonable policy activists within the mainstream (like Paul or Brad DeLong, that are for fiscal activism, even if in very limited conditions) that think that imperfections (price or wage rigidities, lack of information, etc) preclude markets left alone to be self-regulating.

PS: Philip Pilkington has also posted on this here. Worth reading.


  1. "Bob Solow once said during a talk at the New School that the natural rate of unemployment didn't exist, but then by the end of the talk he suggested that it was 5.2% (this was in 2000)"

    The old Spanish adage: "Yo no creo en brujas, pero de que vuelan, vuelan".


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