Paul Krugman takes the gloves off in Friday's New York Times, bashing economists who insist on believing in phony austerity models and offering a full-throated defense of old-fashioned Keynesian economics, even if it's not a fashionable or trendy "new idea."
"It’s hard to argue against new ideas in general," Krugman writes. "In recent years, however, innovative economic ideas, far from helping to provide a solution, have been part of the problem. We would have been far better off if we had stuck to that old-time macroeconomics, which is looking better than ever."
Krugman writes that right-wing European politicians especially buried their heads in the sand, seeking justification from economics for the horrible political and ideological agendas they wished to impose. The exciting new research all proved grounded in phony assumptions. The old-school Keynesians were right. The ideologues refused to listen.
He singles out one in particular, Wolfgang Schäuble, the German finance minister, who wrote a piece for the Times earlier this week which Krugman lays into:
It’s a flat-out rejection of everything we know about macroeconomics, of all the insights that European experience these past five years confirms. In Mr. Schäuble’s world, austerity leads to confidence, confidence creates growth, and, if it’s not working for your country, it’s because you’re not doing it right.