【正文】 problem with an easy solution. While it may often be possible for countries, especially large, stable, selfsufficient economies like the United States, to handle recessions simply by printing more money, we are finding an increasing number of cases in which countries find either that they cannot apply that same medicine or that the medicine is ineffectual. There is, in short, a definite whiff of the 1930s in the air. Unit Six The Return of Depression Economics — Paul Krugman The point is not that all of the current economic difficulties will necessarily get worse. There is a reasonable chance that 1999 will see some economic recovery in Asia, if not the beginning of a real climb back to economic health. Through prompt Federal Reserve action (and luck), the United States managed to avoid a financial panic last fall. Even Japan could do better in 1999 than it did in 1998. But even if all the current crises are weathered, the mere fact that they could happen—and that conventional policy responses have turned out to be either ineffectual or unavailable—is an ominous warning. The problems of the 1990s have distinct similarities with the problems of the 1930s。 so do the solutions. We had better all start relearning our Depression economics. Unit Six The Return of Depression Economics — Paul Krugman It’s the Short Run , Stupid BEFORE THE 1930s most economists regarded the business cycle—the alternation of recessions and recoveries—as a relatively minor issue. Whatever the causes of such fluctuations, economists believed that slumps were selfcorrecting and that the economy always tended to restore full employment in the long run. Hence, the fundamental economic problem was to ensure that resources were used efficiently, not to ensure that they were used at all. True, as early as 1923 John Maynard Keynes famously took his colleagues to task, admonishing them not to ignore the short run: Unit Six The Return of Depression Economics — Paul Krugman This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again. But not until the Great Depression did economists realize that “short run” shortfalls of demand were crucially important. Perhaps slumps were still self correcting in the long run, but would the economy survive to reach that long run? Given the experience of the Depression, one might have thought that classical economics was gone for good. But the success of Keynesian economics in damping down the business cycle meant that the old focus on the full employment long run could reemerge with a new justification. It was once again Unit Six The Return of Depression Economics — Paul Krugman reasonable to assume that the economy would always tend quickly back to full employment—not because of any automatic mechanism but because intelligent policymakers would use moary and fiscal policy to get it there. Like traditional European wine grapes that survived the great phylloxera epidemic by being grafted onto Americanroot stock, classical economic theory survived the Great Depression by being grafted onto the assumption that activist moary and fiscal policy would ensure more or less full employment. In the 1950s Paul Samuelson dubbed the resurrection of classical fullemployment economic theory the “neoclassical synthesis.” It remains to this day the position of those who appreciate but do not worship free markets. Here, for example, is what I wrote in Slate two years ago in an article entitled “Vulgar Keynesians”: Unit Six The Return of Depression Economics — Paul Krugman In reality the Federal Reserve Board actively manages interest rates, pushing them down when it thinks employment is too low and raising them when it thinks the economy is overheating. You may quarrel with the Fed chairman’s judgment—you may think that he should keep the economy on a looser rein—but you can hardly dispute his power. Indeed, if you want a simple model for predicting the unemployment rate in the United States over the next few years, here it is: It will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.