Robert Kuttner : "America would be a far healthier country if the ideas of Nobel Prize Winner Economists Joseph Stiglitz and Paul Krugman broke through". "Taken together, Stiglitz and Krugman occupy something like the indispensable role that John Maynard Keynes played in the period between 1919 and his death in 1946."

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The American Prospect
Our Most Widely Ignored Public Intellectuals
By Robert Kuttner
June 4, 2012

Our Most Widely Ignored Public Intellectuals

Some excerpts :

Keynes’s sheer intellect and deftness at translating abstruse economics into wry English won him a wide readership. In a time like our own, when austerity was peddled as the cure for depression, his was the voice in the wilderness whose theoretical insights about the need for public outlays to maintain demand kept being vindicated by events.

Yet except for the accident of massive wartime deficit spending and a burst of practical influence late in life, when Keynes designed a new international monetary system for the postwar era, his ideas were purged of their radicalism by governments and economists alike. In recent decades, mainstream economics has turned his broad theories of the instability of capitalism into a cookbook on the occasional usefulness of deficits, while too many policymakers have reverted to a pre-Keynesian obsession with budget balance.

In this orthodox climate, Stiglitz and Krugman are excluded much as Keynes was. The practical reforms that logically flow from their ideas would include drastically increasing regulation of finance, creating a medley of measures to promote equality, and massively increasing public spending. None of this has been on the table for a Democratic president since Lyndon Johnson.

In their new books, Krugman and Stiglitz both argue that the income distribution in America is outrageous, with economic as well as social consequen-ces. Krugman, in End This Depression Now!, a primer on how Keynesian economics applies to today’s circumstances, offers a smart explanation of why the dynamics of this slump are reminiscent of the 1930s, with a downward spiral of depressed purchasing power reinforced by debt overhangs, especially in housing. In fact, Krugman first warned of the risk of “the return of depression economics” in his 1999 book by that title, which dealt in part with Japan’s deflationary slump. Here he unpacks the central role of deregulated finance and exotic speculation in the current crash, drawing on the late economist Hyman Minsky’s work on the fragility of financial systems. Krugman argues that a moderate dose of inflation would be preferable to prolonged depression, and he’s right.

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More fundamental to their marginalization is the relative radicalism of what Krugman and Stiglitz are advocating in our conservative era, one in which even Democratic presidents have done little to reverse unconstrained finance, shrunken government, and deepening inequality. To embrace their wisdom would require something close to a political revolution. So two of our most lauded economists remain prophets with little power to change events. America would be a far healthier country if they broke through.

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