luisgg

The stated aim of this book is to demonstrate that economic policy is the product of political expediency much more than the of the wisdom of learned economists. Along the way he gives fairly detailed descriptions of the policies that were in effect, primarily during the period that brackets the years of Reagan administration. He demonstrates that when economic policy had any effect at all, it was generally not the effect that was claimed by the ascendant political proponents. The most effective means of regulating the economy is the power to regulate the supply of money, which is wielded by the Federal Reserve. Otherwise, the economy operates under its own observable but dimly understood logic. Often as not, official economic policy is mumbo-jumbo whose main purpose is to mask the discomfort of recession that occurs when the Fed tightens to money supply to ward off inflation. It’s an even-handed account. Krugman gives no more or less credence to the supply-siders than he does to their detractors. One of the more interesting points to me was Krugman’s debunking of the myth that the market has the wisdom to find the most efficient means of production and distribution. Historical happenstance often embeds intractable inefficiencies in the system. An example is a principle commonly known as the QWERTY theory. This states that the market does not necessarily produce and nurture the best ideas. Just as often it is carried by the momentum of earlier decisions and it is powerless to improve upon them. The example is the QWERTY layout of the keyboard, which is not the most efficient for the human hand, but was originally devised to avoid keys striking each other and getting stuck on typewriters. When this no longer was an issue, manufacturers were still constrained to produce keyboards this way because that’s how typists had learned to type. So inefficiencies and bad ideas can get reinforced by the marketplace, and the market does not have a good mechanism for overcoming such a shortcoming. The material is a bit dated now, and the details may not be of general interest, but it’s a good evocation of the information swamp we live in. these days

2022-12-13 19:02