Wednesday, 31 July 2013

The Economics of Innocent Fraud: Was Galbraith right or wrong?

John Kenneth Galbraith's last book was "The Economics of Innocent Fraud", in which the 95-year old economist asserted that the Federal Reserve was utterly ineffective - not due to the political issues as much as the fact that modern macroeconomics does not work the way it does. Tao Jonesing has an excerpt -

Understandably, Galbraith has come under a whole lot of flak from economists across the spectrum in the profession, because if what he says is right, everything that has been taught in Macroeconomics 101 goes down the gutter, because the Central Bank is such a critical institution. The prospect of finding basic macroeconomics - the stuff that is taught at the beginner level, which no student of the subject can do without anytime in their career - to be utterly and absolutely wrong is just ghastly.

Let this not be dismissed as the writings of a senile man - Galbraith at 95 was far more lucid and sensible than economists half his age. This man was a titan in his field, and he had a breadth of experience few economists of his generation or otherwise could possibly have. Galbraith's words on Greenspan proved prescient in the wake of the 2008 financial crisis, two years after he died. Even if Galbraith is wrong about the Federal Reserve or any Central Bank for that matter, his observations should raise serious questions on the nature and state of our current economic system.

One of my majors in undergrad was economics. Now, Galbraith's words leave me wondering just how much I really know about the subject, whether I've been learning truth or nonsense throughout. It's a frightening prospect, and not one that I'm inclined to take lightly. Will someone eventually come to teach undergraduate college students that the 'dismal science' is far less scientific than it purports to be? I really don't know.

No comments:

Post a Comment