Building A Mystery

by Paul Krugman

Jared Bernstein shakes his head at what he calls “weirdness” at the Washington Post, citing an editorial and a commentary by Robert Samuelson. I second his views, but I’d like to point out something else about Samuelson’s piece.

What Samuelson does is to throw up his hands and declare that we just don’t understand what’s going on in the macroeconomy. How does he know this? He talks to several people who declare themselves deeply puzzled by events — notably, Lorenzo Bini Smaghi and Allan Meltzer.

But it’s no mystery why Bini Smaghi and Meltzer would find it all very puzzling — they personally got everything wrong. Bini Smaghi spent years sneering at anyone suggesting that Greece might need to write off some of its debts. Meltzer has been predicting runaway inflation for four years.

Some of us don’t find the macro developments puzzling at all; we applied basic IS-LM macro, understood from the beginning that monetary policy would have little traction, warned that austerity policies would have major negative effects. Basic textbook macro has in fact worked fine. And so you might think that Samuelson would ask the people who got it wrong why they got it wrong, and whether it might not be because they had the wrong framework while the Keynesians were closer to the truth.

But no; he acts as if these people are the authorities, and their personal predictive failures demonstrate that nobody can get it right.

Oh, and it goes without saying that these “experts” have not reconsidered their views at all.