Monday, March 7, 2011

Krugman on IMF, DSK, and Macro

Paul Krugman is glad that the IMF is spearheading an effort to rethink macroeconomic theory and praises Olivier Blanchard for leading the charge. Then he asks why Blanchard is being allowed to do this, and DSK gets some of the credit:

But then the question becomes, why is the IMF willing to let him speak up? Other international organizations, like the OECD, have been willing to throw all logic aside in order to be properly austerian;why not the Fund?
One answer is that Blanchard is who he is — a big gun in the field, someone the IMF needs more than he needs the IMF, who has the kind of independence that lets him speak his mind.
Another answer is that Strauss-Kahn runs the IMF, and — aside from being Blanchard’s compatriot — he’s a political force in his own right, to an extent unusual for the Fund, and one with moderately interventionist instincts.
Too bad Krugman doesn't have quite the public visibility in France that he has in the US. I can see the campaign posters now!


TexExile said...

I see Paul Krugman is still linking to his comment on last spring's OECD Economic Outlook -- a comment that confuses (perhaps deliberately) the difference between the Outlook's projections for where monetary policy and interest rates will go on current policy settings and its policy prescriptions. He's done this more than once.

The OECD was not advising monetary tightening AND fiscal stringency -- they were saying that interest rates would rise if the fiscal situation were not addressed. You can agree or disagree, but this is not at all the message PK attributes to the Outlook.

Granted, I think the OECD Economics Department did a poor job making that distinction clear. Many a reader might get confused. But Krugman is an economist and a very clever man, and he's made this mistake at least twice. One can only conclude either that he does not care what the truth his or that he reckons that being a Nobel laureate means he need not read complex documents in order to pontificate on them.

Arthur Goldhammer said...

C'mon, Tex. Krugman links to a paragraph of OECDese that signals hypersensitivity to "long-term inflation expectations." Krugman says piffle, look at your own unemployment projections, you can see that these expectations are not rational. He might have gone even farther by suggesting that policymakers ought to accept higher inflation targets as the new normal, which is the IMF's (unofficial) position. I don't see any lack of concern for "what the truth is."