This Sunday November 17th 3pm : GaiaMoney is hosting a meeting of the “Toward the Next Paradigm…” project group in East Oxford. All welcome. Free drinks and nibbles.
There are two topics on the agenda:
(1) Does Paul Krugman’s recently re-publicised self critique on globalization miss the point?
(2) How many, if any, theses should launch a new paradigm?
To open the discussion my preliminary answers are:
(1) Yes he does.
Much as his penchant for occasional self critique should be appreciated, he (yet again) does miss the “systemic” point. More below.
(2) Let’s try ten.
When a relatively glamorous bunch of Post-Keynesian heretics sellotaped 33 theses to the glass doors of the LSE two years ago they didn’t get a lot of reaction beyond the media aura of the sponsoring Guardian.But there was some critical engagement. Some thought 33 theses was simply not enough and pointed to paradigm reformer Jack Reardon who sets out his stall in 95 theses (download here)
and more specific omissions on financialisation, methodology and trade. Ben Chu thought there were too many “daft generalisations” and Frances Coppola’s heart just sank as she read those 33 “flawed theses”.
Richard Murphy, on the other hand, was “… more than happy to endorse these Theses and recommend them.” Nonetheless he comes up with his own “… more tax orientated variation on the theme, with 45 Theses.”
In one discussion thread trying to whittle down dozens of theses to a more manageable number one contributor suggested: “Ten. It worked well for Moses!” I go with that. I also have some sympathy for the complaint about too many “daft generalisations”. Bearing in mind Kuhn’s original concept of paradigm shifts involving the solution of existing problems, I would argue for an initial focus on the dominant paradigm’s foundational problems.
So why not start with a thesis on real as opposed to effective demand, based on a critique of the empirical vacuity and theoretical impotence of the supply and demand curve?
As to Krugman’s change of tune on globalisation the self critique is as limited as the reaction is mixed.
Brad DeLong reckons that “… the key thing that we missed about globalization was not its impact on factor prices in some Heckscher-Ohlin model or a shared rents in some specific-factors model but rather that when a big financial crisis and depression came “globalization”—and poor people elsewhere—would provide an excuse to distract blame …” so it’s “… the Greenspan-Snow shock, not the China shock …”
argues that “… concessions of previous held orthodox views are hardly straightforward. Despite this large concession, Krugman still wants to defend free trade and is against any tariffs. One may critique selective protectionism but there is also the option of imposing tariffs non-discriminately, i.e., non-selective protectionism.
More importantly, as Joan Robinson often stressed the thesis of free trade ought to also come with the answer to the question: what is the mechanism for resolving imbalances? Free traders always avoid this question, sometimes claiming—as Milton Friedman did—that floating exchange rates does the trick. But we know that it’s hardly the case. In the absence of any market mechanism, we need an official mechanism.”
And “… for all his brilliance…” Nicholas Gruen continues to be shocked “…at Krugman’s complacency regarding his own discipline.”
And indeed, Krugman’s criticism always stays clear of the fundamentals: “It’s not the paradigm, stupid, it’s that shocking reality!”
Be shocked if you want to. Just follow the money …