I don’t know what it is about the Nobel Prize that makes economists fall in love with John Maynard Keynes, but once again I see a Nobel winner trying to convince us that the Keynesian package is sound economics. This time it is Joe Stiglitz throwing idiocy at us in the name of economic authority.
While most of his article is pretty bad, he manages to outdo himself here:
During the Great Depression, similar arguments were heard: government need not do anything, because markets would restore the economy to full employment in the long run. But, as John Maynard Keynes famously put it, in the long run we are all dead.
Markets are not self-correcting in the relevant time frame. No government can sit
idly by as a country goes into recession or depression, even when caused by the excessive greed of bankers or misjudgment of risks by security markets and rating agencies. But if governments are going to pay the economy’s hospital bills, they must act to make it less likely that hospitalization will be needed. The right’s deregulation mantra was simply wrong, and we are now paying the price. And the price tag–in terms of lost output–will be high, perhaps more than $1.5 trillion in the United States alone.
The right often traces its intellectual parentage to Adam Smith, but while Smith
recognized the power of markets, he also recognized their limits. Even in his era,
businesses found that they could increase profits more easily by conspiring to raise prices than by producing innovative products more efficiently. There is a need for strong anti-trust laws.
This is most interesting. We are hearing the need for another “New Deal,” but the New Deal was all about the government creating cartels and limiting output. But, now we have Stiglitz telling us that the trouble is those damned markets and not enough anti-trust.
Oh, like his good friend and partner-in-crime Paul Krugman, Stiglitz rewrites the history of the Great Depression. The problem was that the markets did not correct because the government blocked both the correction and the recovery. But, being a Nobel winner means one does not have to stick with the truth when fabrications will do just fine.