In the article, Krugman addresses several problems underlying the recent state of the economy. He traces the cause for our recession all the way back to academia. The problem is rather subtle. He argues that faulty thinking about the market is the primary reason that has led to the 2008 and 2009 recession. The crisis has evoked the two schools of macroeconomics thought for long have stayed dormant: the “freshwater” and the “saltwater” economist. Both have their own ideology in resolving the crisis.
As Krugman put it “freshwater economists are, essentially, neoclassical purists.” They assume that people are rational and markets work. They do recognize the use of Keynesian theory but just do not trust the government interference. Therefore, they usually prefer monetary policy over fiscal policy. On the other hand, Krugman says that “saltwater economists are pragmatists.” Their approach is to do apply any methods that can keep the economy running smoothly whether it’s a fiscal or monetary policy. They usually favor Keynesian theory.
Freshwater economists base their practices on the perfect market. They trust that the market system will not ever fa...
... middle of paper ...
...hould accept the inconvenient truth that the markets sometimes do not function properly. Second, economists should re-embrace Keynesian practice because it does offer a legitimate answer for economic downturns. Finally, they should consider the realities of finance in the world of macroeconomics (Krugman 2009). As an upcoming economist from George Mason, primarily a “freshwater” school, I find the first suggestion a bit difficult for me to accept. I think the best option right now is to stay neutral and open-minded because I still have a lot to learn about economics.
Krugman, Paul. "How Did Economists Get It So Wrong?" How Did Economists Get It So Wrong? The New York Times, 2 Sept. 2009. Web. 09 May 2011.
Mankiw, N. Gregory. Macroeconomics. 7th ed. New York, NY: Worth, 2009. Print.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- ... Our daily decisions are in the main economic decisions, and nearly all our daily economic decisions have, in turn, an ethical aspect.” The society we have created, materialism engulfs moral commitment. We have achieved rapid growth that is not sustainable to the environment or socially, acting together to address our common needs does not exist ( Siglitz,2). The government passes laws and regulations that enable people to choose some of their utility from non-exchanged goods, such as minimum wage.... [tags: right and wrong, human actions]
576 words (1.6 pages)
- The book The Banker’s New Clothes: What’s Wrong with Banking and What to Do About It was wriiten out of necessity after the worst economic downturn in the United States in more than eighty years. The massive breakdown of the United States housing market in 2006 and 2007 had overwhelming consequences on domestic and global economies and devastated the global banking systems. Between 2001 and 2006, many large financial institutions had accumulated large positions in the subprime mortgage market that gave out superb returns.... [tags: Bank, Economics, Finance, Subprime mortgage crisis]
1508 words (4.3 pages)
- One tweet can literally ruin your life. That’s what Justine Sacco, PR chief at New York-based IAC, which owns numerous internet brands, learned two years ago. While traveling from the States to Cape Town, South Africa, the 30-year old began tweeting some jokes about travel, including one that read, “Going to Africa. Hope I don’t get AIDS. Just kidding. I’m white!” Upon arriving in Africa after her 11-hour flight, Sacco learned that her comment had blown up into a raging firestorm. Thousands of angry responses had been posted on social media, accusing her of being a racist bigot.... [tags: Africa, South Africa, Social media, AIDS]
817 words (2.3 pages)
- New Ideas from Dead Economists Lukas Fricke In this class we constantly talked about the free market place and how it truly made a government different. How it made a country different. How it made a people different. Today, we are going to explore the ideas of economics and how the economic greats, Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, Karl Marx, John Maynard Keyes, and Milton Friedman changed the ways we would forever do business. Let’s get started with Adam Smith and his second coming.... [tags: free market place, smith, marxs, friedman]
1150 words (3.3 pages)
- Four of the Major Economists' Theories “Economics is the science which studies human behavior as a relationship between end and a scarce means which have alternative uses’ seems to capture the essence of Microeconomics, but does not convey much of the spirit of Macroeconomics.” - L. Robbins Although most economists cannot come to agreement on the definition of economics, the preceding quote from l. Robbins, in my opinion, seems to just about sum it up. Since the beginning, when man first had to choose between hunting and sleeping, there was economics.... [tags: Papers]
2610 words (7.5 pages)
- Introduction For many centuries, technology has encouraged growth: through increases in inequality and the market labor. Economists say that structural unemployment “occurs because workers don’t have the particular skills demanded by employers.” (Structural Unemployment: The Economists Just Don 't Get It. (2010, August 4)) There are many who question if technology has indeed raised or increases structural unemployment or if it hasn’t worsened the situation (by machinery taking over the jobs of humans for example or jobs that need a particular set of skills).... [tags: Economics, Inflation, Unemployment]
730 words (2.1 pages)
- Why Did the Polls Get it Wrong in 1992. Opinion polls play a major role in politics, they can be used by the Government to decide when to call and election, and, among other things, how their pre- election campaigns are run. Throughout the history of opinion polling, from the time when polling began to be widely used before an election, in 1945, until 1987, the last general election before 1992, the polls have on average been correct to within 1.3% of the vote share between the three leading parties, and the 'other' category (Crewe, 1992, p.... [tags: essays research papers fc]
1388 words (4 pages)
- Feminism in Tom Robbins’ Even Cowgirls Get the Blues In the novel, Even Cowgirls Get the Blues by Tom Robbins, Sissy Hankshaw is a young woman who gets introduced to the world via hitchhiking. From the beginning of the novel, Sissy’s sexuality is foreshadowed. She goes with her mother to see a psychic, Madame Zoe. When asked if Sissy will ever get married, Madame Zoe replies, "There is most clearly a marriage. A husband, no doubt about it, though he is years away…There are children, too. Five, maybe six.... [tags: Even Cowgirls Get Blues]
1296 words (3.7 pages)
- All the twelve great economists had great contributions to economics and they all showed great enthusiasm in studying economics. There were some differences between their concepts of economics, but all of these concepts built up the basic ideas of the economics we studied today. There were several criterion employed in ranking the economists. First of all, the economist should have great influences in economics. He / she should have substantial theories which could be applied in the real world and could be used as reference to other economists.... [tags: Economics Reflective]
1399 words (4 pages)
- As a coherent economic theory, classical economics start with Smith, continues with the British Economists Thomas Robert Malthus and David Ricardo. Although differences of opinion were numerous among the classical economists in the time span between Smith’s Wealth of Nations (1776) and Ricardo’s Principles of Political Economy and Taxation (1817), they all mainly agreed on major principles. All believed in private property, free markets, and, in Smith’s words, “ The individual pursuit of private gain to increase the public good.” They shared Smith’s strong suspicion of government and his enthusiastic confidence in the power of self-interest represented by his famous “invisible hand,... [tags: essays research papers]
728 words (2.1 pages)