Williamson. Will the Geithner Plan Work? - Room for Debate Blog. (Credit: Evan Vucci/Associated Press)Demonstrators standing behind Treasury Secretary Timothy Geithner before the start of a hearing of the House Financial Services Committee on Tuesday. Updated, 7:55 p.m. | Brad DeLong responds to Mark Thoma’s thoughts about failing banks. Scroll down to his added comments at the bottom of this post. Updated, 2:50 p.m. | Mark Thoma comments on Simon Johnson’s position. Scroll down to read his response. Updated, 2:35 p.m. | Brad DeLong responds to Paul Krugman. Scroll down to read his rejoinder. By offering private investors huge amounts of cheap financing at little risk to buy bad mortgage-related securities, along with an expansion of an existing federal program, the public-private plan unveiled by Treasury Secretary Timothy Geithner could buy up to $2 trillion in toxic assets now weighing down the banks.
The market soared on high hopes that this will solve unfreeze credit and revive the crumbling economy. Perception vs. So can this work? Mathematics and economics - Paul Krugman Blog. I’ve been getting some comments from people who think my magazine piece was an attack on the use of mathematics in economics. It wasn’t. Math in economics can be extremely useful. I should know! Most of my own work over the years has relied on sometimes finicky math — I spent quite a few years of my life doing tricks with constant-elasticity-of-substitution utility functions. And the mathematical grinding served an essential function — that of clarifying thought. What I objected to in the mag article was the tendency to identify good math with good work. And conversely, you can have great work in economics with little or no math. So by all means let’s have math in economics — but as our servant, not our master. I’ve been getting some comments from people who think my magazine piece was an attack on the use of mathematics in economics.
Math in economics can be extremely useful. Krugman on Economics. This weekend’s New York Times Magazine has the 7,000-word article about the state of macroeconomics that Paul Krugman has been hinting at for some time now. It’s a well-written, non-technical overview of the landscape and the position Krugman has been presenting on his blog, which for now I’ll just summarize for those who may not have the time to set aside just now. Like many, Krugman faults the discipline for its infatuation with mathematical elegance: “[T]he central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.
“Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. This false peace was exploded during the financial crisis by the zero bound, something Krugman has invoked often. This is from Krugman’s conclusion: “So here’s what I think economists have to do. By James Kwak. A few notes on my magazine article - Paul Krugman Blog. So my big state-of-economics piece is out. Just a few notes, since I have to get to bed early: we have 27 miles over hills to do tomorrow. First, to anyone who wishes I’d given credit — yes, I was helped by reading many sources (especially Justin Fox), but it’s a magazine article, not a book with room for an acknowledgments page; I couldn’t even acknowledge the editing work done by my wife, Robin Wells, which played a big role.
Some fairly extensive sections had to be taken out — for example, I wanted to include material about Paul Samuelson’s 1948 textbook, which reads very well in the current crisis, but had to cut it. Hyman Minsky also got crowded out. Sorry. Second, on whether the pretty good response of policy-oriented economists in the crisis undercuts the thesis — I don’t think so. Third, on an interesting point raised by Discover (via Mark Thoma): won’t we eventually have a true theory that’s as beautiful as the full neoclassical version?
So be it. How Did Economists Get It So Wrong?