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Paul Krugman tries to spend his way out of personal bankruptcy


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Why haven’t I thought of spending my way out of a lower salary?

 

Krugman would claim that governments are “different” because they can borrow and print money at will. Of course, I can do the same, giving Credit card swipes as payment for goods. If I can get people to accept my plastic, then I have “stimulated” my personal economy. Right?

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There we go again. http://en.wikipedia.org/wiki/False_analogy

 

From the Harvard Business Review 1996 (!):

 

A Country is not a Business.

http://www.pkarchive.org/trade/company.html

 

In a society that respects business success, political leaders will inevitably -- and rightly -- seek the advice of business leaders on many issues, particularly those that involve money. All we can ask is that both the advisers and the advisees have a proper sense of what business success does and does not teach about economic policy.

 

In 1930, as the world slid into depression, John Maynard Keynes called for a massive monetary expansion to alleviate the crisis and pleaded for a policy based on economic analysis rather than on the advice of bankers committed to the gold standard or manufacturers who wanted to raise prices by restricting output. "For -- though no one will believe it -- economics is a technical and difficult subject." Had his advice been followed, the worst ravages of the Depression might have been avoided.

 

Keynes was right: Economics is a difficult and technical subject. It is no harder to be a good economist than it is to be a good business executive. (In fact, it is probably easier, because the competition is less intense.) However, economics and business are not the same subject, and mastery of one does not ensure comprehension, let alone mastery, of the other. A successful business leader is no more likely to be an expert on economics than on military strategy.

 

The next time you hear business-people propounding their views about the economy, ask yourself, Have they taken the time to study this subject? Have they read what the experts write? If not, never mind how successful they have been in business. Ignore them, because they probably have no idea what they are talking about.

 

 

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PlanMaestro,

 

For your false analogy to apply, I think Keynes' has to be followed in totality, not just when there is trouble. That said, I believe there is one paragraph in that satire that may be true: "However, Keynes did not advocate using debt financing to stimulate the economy. Rather, he argued that government should save in the good times and spend in the bad." The analogy works, because like Krugman, governments had not followed the first part of the equation, which is to save (not balance) during good times, so that you can spend more during bad times. I would love to read about one government which saves during good times to prepare it for the bad times. (Well, I have read about Texas, and Alaska, so maybe my wish is to read about some places where I would be shocked.)

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Guest valueInv

There we go again. http://en.wikipedia.org/wiki/False_analogy

 

From the Harvard Business Review 1996 (!):

 

A Country is not a Business.

http://www.pkarchive.org/trade/company.html

 

In a society that respects business success, political leaders will inevitably -- and rightly -- seek the advice of business leaders on many issues, particularly those that involve money. All we can ask is that both the advisers and the advisees have a proper sense of what business success does and does not teach about economic policy.

 

In 1930, as the world slid into depression, John Maynard Keynes called for a massive monetary expansion to alleviate the crisis and pleaded for a policy based on economic analysis rather than on the advice of bankers committed to the gold standard or manufacturers who wanted to raise prices by restricting output. "For -- though no one will believe it -- economics is a technical and difficult subject." Had his advice been followed, the worst ravages of the Depression might have been avoided.

 

Keynes was right: Economics is a difficult and technical subject. It is no harder to be a good economist than it is to be a good business executive. (In fact, it is probably easier, because the competition is less intense.) However, economics and business are not the same subject, and mastery of one does not ensure comprehension, let alone mastery, of the other. A successful business leader is no more likely to be an expert on economics than on military strategy.

 

The next time you hear business-people propounding their views about the economy, ask yourself, Have they taken the time to study this subject? Have they read what the experts write? If not, never mind how successful they have been in business. Ignore them, because they probably have no idea what they are talking about.

 

Wow, great post!! I have never understood how every person from every profession has become an expert on macro. Why most hedge fund letters devote pages to macro issues but talk little about the companies they own.

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I would love to read about one government which saves during good times to prepare it for the bad times.

 

Yeah, the guy you're thinking of is Bill Clinton.

 

http://www.businessinsider.com/how-clinton-surplus-became-a-6t-deficit-2013-1

 

Something similar also happened in Canada, where a Liberal government sustained a surplus for a decade, and the "Conservative" government eliminated it.

 

All that said, I'm extremely surprised to hear that you're a Keynesian, Yankee.

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