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Paul Krugman recently wrote this, elaborating on the apparent Keynesian suggestion that World Wars are good ways to solve economic depressions:

But maybe this is an opportunity to reiterate a point I try to make now and then: economics is not a morality play. It's not a happy story in which virtue is rewarded and vice punished. The market economy is a system for organizing activity -- a pretty good system most of the time, though not always -- with no special moral significance. The rich don't necessarily deserve their wealth, and the poor certainly don't deserve their poverty; nonetheless, we accept a system with considerable inequality because systems without any inequality don't work. And before the trolls jump in to say aha, Krugman concedes the truth of supply-side economics, that's not an argument against progressive taxation and the welfare state; it's just an argument that says that there are limits. Cuba doesn't work; Sweden works pretty well.

And when we're experiencing depression economics, by which I mean a situation in which it's hard to create sufficient demand to achieve full employment -- mainly because short-term interest rates are up against the zero lower bound -- the essentially amoral nature of economics becomes even more acute. As I've said repeatedly, this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn't particularly wise.

This made me think: What is the point of economic policy? Where do we spend governing resources? Who gets the most attention and respect? That shows our values. So I am already skeptical that economy has nothing to do with ethics.

So what does the modern society value? Where does it go to big lengths? As Krugman says, equality is not our value - it does not work. So the most needy must not be concerned. What does work?! Petty privelege fights?!

I would say, if some decent standard of equality is a problem for an economic system, to hell with the economic system. If Krugman is happy enough that Japan's depression is dissapointing but not disastrous, wouldn't he change the opinion on Cuba some time?  

by das monde on Fri Oct 1st, 2010 at 11:27:15 PM EST

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