Krugman freshly laid out today the divergence between the two main economic theories that underpin liberal and conservative ideologies in the U.S. The graph shows independent confirmation that inflation is low (and falling!) despite an extraordinary increase in money supply. I think Krugman is on-target, but I can see how a die-hard Austrian/Chicago-school economists will respond that these “experiment results” Krugman cites are incomplete for some reason that is either very difficult-to-measure (and hasn’t been explicitly measured by the one making the assertion), or reverses notions of cause-and-effect, or some such dubious squirm out of the line-of-fire, yet makes no politically plausible predictions that could be used to test their validity.
It seems like we really need the election of 2012 to be a referendum-debate-discourse on the legitimacy of Freshwater Econ. We need to kill these ideas – or at least strip them down – force them to reconcile their past and current predictions with reality – and make the intellectually honest leap forward. We can’t continue to have a polarized polity anchored to polarized economics if we’re going to solve this generation’s governing problems within this generation. That polarization is basically why, instead of following the Clinton-era policies and paying off the national debt by 2011, we instead exploded it to “test” failed policies….
Frankly, I would rather see this election pit the economists in a kind of “debate” than the candidates. Call it a “summit”. Get all the high-profile economists to come together and – with Mitt Romney, Obama, Soros, Rove, and Matt Damon – sit down and force a kind of conclave – no one’s going anywhere until we all agree on what has happened, what the specific short-term estimates will be for each major economic model that survives that process, and what “experiments” the US will conduct to test the remaining contradictory ideas, if necessary (and feasible). Put everyone on record – sign their names to specific shared and dissenting opinions – and then let the reputations rise or fall on the facts.
It is ridiculous that in this day and age we have such a muddle of ideas – so little clear consensus – that anyone can appear as an “expert” in any particular news vendor and spew ~plausible~ foolishness over and over.
Update: Here’s a nice breakdown with a finale of, what’s that, ECB? Negative inflation in May? Yes, that inflation is getting out of control. Whatever you do, hold interest rates steady….