2. Krugman (1994a & b, 1996a) suggests that international influences are less important, due to the size of proportions, than commonly thought. Yet, he himself (1996b) comes with the ‘parable of clocks’: international fluctuations may get into phase, similarly like clocks.
Comment:
So, though fluctuations may only be the cream on top of fundamentals, there still is a new research topic.
Note too that the Great Depression and the Great Stagflation were OECD phenomena and more than ‘cream on the top’; these may be traced to the Trias Politica.
3. Krugman (1993): “I had some trouble getting that paper published - receiving the dismissive rejection by a flagship journal (the QJE) that seems to be the fate of every innovation in economics”.
Comment:
My experience is the same. People in responsible position have the awkward tendency to start criticising before asking questions. They fail to see that their criticisms can be formulated as questions - which then are a reason for publication. And they are insulated against protest to this injustice. I recently came upon some beautiful comments by Bellman (1968) on the evolution of scientific ideas. Note, though, that Krugman’s wonderful books since 1990 have only been made possible since my analysis has been blocked from general attention: so that is a form of comfort.
4. Note: With respect to Table 19, I’ve hesitated about classifying Krugman as having less roots in econometrics. His credentials as a technical economist are quite adequate. But, my experience with econometric modelling has been extensive and will not easily be copied. Also, I don’t particularly like the topic of taxation myself either, but it only by going through the details of a complete model (too) that I came upon that explanation. Though, Paul may make me regret this classification.
Addition 2004: Krugman (2001), “Fuzzy math”, and particularly (2003), “The great unraveling”, are advised reading for anyone who wants an enlightened view on the world economy. Yet, Paul Krugman has not yet benefitted from reading the analysis in these pages, and the reader must make amends for that.
Phelps: “Structural slumps”
Phelps (1994) is as creative as the others, but also the technically most advanced author who also presents econometric tests for some of his conjectures. His book is impressive.
My first reaction in 1994 to Phelps’s book was guided by his explanations in plain English. Given those explanations, his study dropped in my priority list. My attitude is (in line with Tinbergen and Keynes) that substance comes before technique. So it may come as a surprise to the reader that I as an econometrician did not jump to the occasion to comment on Phelps’s techniques and tests. But of course, had I had more time, I would have studied those pages too. And of course it is still appreciated that Phelps has produced these technical pages. They have affected his style, and they allow for wider tests at a later stage. Indeed, for the purposes of this chapter, I have looked into the estimation sections more deeply. My comments below however remain preliminary, since, indeed, I have not fully read all chapters.
The major comments are:
1. Phelps (p374-375) is sceptical about how politicians abuse economics, and about how economists themselves react to (new) ideas.
Comment:
Talk to Krugman, and study my analysis on the Trias Politica.
2. Phelps: “There is already a moral-philosophical case for employment subsidies targeted at the low end of the wage scale to bring the rewards for work not having a high scarcity value more nearly in line with the requirements of econmic justice.” (p366) and he seems to approve of proposals also made by Dennis Snower.
Comment:
I even show that these measures cost nothing and are Pareto improving.
Do you agree that there may be an ‘equilibrium’ in your sense, but inoptimal ? (See below.)