Keynesians And Austrians Are Ignoring Basic Factors, Like The Energy Crisis
Gregor MacDonald | Jul. 4, 2010, 1:16 PM | 95 | 1
Left unaddressed during the past 3 years in most of the debates between economists has been the problem of energy. The reason is simple: post-war economists don’t do energy, except as an ever-expanding resource that the credit system and technology makes available. For the post-war economist, the supply curve of energy–save for brief lags–is always coming back into rough equilibrium with the economy. Accordingly, the ongoing dispute between Keynesians and Austrians (or Austerians if you like) is exceedingly boring in this regard.
As late as 2008, for example, economist Paul Krugman was at least an infrastructure-and-engineering Keynesian. However, Paul quickly converted to becoming just a throw lots of money at the existing system Keynesian. The hollow nature of Krugman’s debate with Niall Ferguson meanwhile comes via their shared belief that the system will self-organize, if you follow their respective prescriptions. They are indeed the inheritors of Adam Smith. However, neither allowing the economy to deflate further from here via austerity, nor throwing more debt-marked stimulus will solve the present day problem. For the United States, along with the rest of the developed world, has reached a boundary in energy.
Only an economist could wonder in their leisure now, whether energy played a significant role in our current crisis. Indeed the public remarks of Ben Bernanke on the matter of energy, during the 2005-2010 period, were at least as clueless as his embarrassing commentary on the historic bubble in housing and credit. As the nation’s chief economist, Bernanke saw no problem with credit, with derivatives, with the fast inflation in housing prices, or with energy prices. And as an American economist, he was not alone. more