by Mario Rizzo
Paul Krugman continues to invoke Keynes’s famous statement. I wish Krugman and others would give some serious thought about what it is supposed to mean and the errors it involves.
In the first place, Keynes was complaining about the “classical” economics, that is, the ideas of the economists before him who believed that the market, if unhampered after a recession, could reduce or eliminate the unemployment associated with the business cycle.
Of course, this puts many economists – with different ideas – in the same category and treats the issue of cyclical unemployment in a grossly simplified way. But this, in general, is how Keynes treated those who disagreed with him. Keynes, the polemicist, was without inhibition.
Some basic methodology is in order. When economists talk about “the long run” they do not mean calendar time. Yes, that’s right. Read the rest of this entry »