Easy Useless Economics

http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?hp#

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"A conclusion is the place where you get tired of thinking." (Edward DeBono)
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I believe the title of this post helps to describe what's wrong with economics. What I find especially nice about it is that it's the "title" of Paul Krugman's most recent blog post. Here we have a Nobel Prize winner in economics accusing his own profession of ineptitude.

Krugman's post begins in a very unique way which I won't spoil for those of you who might want to read it. Ultimately, he segues into the WW II analogy which many of us are fond of using which basically suggests that the massive military build-up for war beginning in 1939 in the U.S. produced, by 1941, a 20% increase in non-farm employment. In today's numbers, 20% would be 26 million jobs.

Since the onset of the worldwide financial crisis, and consistently thru the recession that officially began in the U.S. in December, 2007, both Krugman and Warren Buffet have said that a massive stimulus is needed. They have both continued to say that the U.S. did not provide enough stimulus.

With 12.7 to 13.7 million people "officially" unemployed, we have "...authoritative-sounding figures [that] insist that our problems are 'structural,' that they can't be fixed quickly." Krugman defines "structural unemployment" as involving the claim that American workers are stuck in the wrong industries or with the wrong skills. While certainly some of these claims can be made sector by sector, Krugman's point is that the current depression-like situation is so massive as to disprove the "structuralists" de facto.

Krugman's point is that the U.S. suffers from an overall lack of sufficient demand. This is the kind of "lack" that could and should be cured quickly with government programs designed to boost spending (the definition of what that spending is has created debate but I'll go with Mark Zandi's recommendations to Congress that involved infrastructure spending - roads/bridges - where the "jobs multiple" is the highest). I would quickly reference here China's legendary economist Justin Yifu Lin, currently chief economist of the World Bank, who advocates a global infrastructure initiative where both developed and developing countries could benefit from public-private partnerships (PPPs) which he analogizes as similar to what Eisenhower did to create the U.S. interstate highway system (see "Bridges to Somewhere," Justin Yifu Lin, "Foreign Policy," Fall, 2011).

A last great quote from Krugman: "Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn't the future burden of debt - a burden, by the way, that premature spending cuts probably make worse, not better. It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives."

I ask myself where the jobs will come from. Krugman and others have answers.