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Paul Krugman: The Austerians of Today Are the Austerians of 1931

Paul Krugman:

Same As It Ever Was: FT Alphaville went trawling through the New York Times archives to look at what people were saying about monetary policy in 1929-33, and produced a wonderful piece that’s both deeply reassuring and deeply frustrating. The thing that’s both reassuring and frustrating is how much it sounds just like the discussions and debates we have today….

[A]s a card-carrying model-building economist, my justification for existence relies on the belief that the issues and fundamental stories in economics are fairly stable…. [A] liquidity trap in the 1930s is recognizably the same kind of animal as a liquidity trap in the 21st century…. Keynes’s and FDR’s economy, it turns out, was enough like ours that the same stylized models still apply.

Now the disturbing part… it’s a huge failure of economics as a practical discipline that we’re hashing over the same debates our grandfathers had (and making many of the same mistakes). Some of this reflects the refusal of policy makers to listen… a lot of it reflects the deliberate forgetting of many economists, and the resulting lack of any clear professional guidance.