Jeffrey Sachs is one of my favorite economists. He ties together the 3 E's (economics, energy, environment) very eloquently. Anyone who is talking about long term economics and isn't talking about the huge impacts that Energy and the Environment are having on our economy, frankly, hasn't a clue of what lies in our future.
Today in the Financial Times, Mr. Sachs does a wonderful job of covering the Economics that we need to be concentrating on, that requires a much bigger part for Energy and the Environment (especially the impact global warming is now having). But then for some bizarre reason, Mr. Sachs takes what I believe to be, an unnecessary swipe at Krugman.
Here is the article, but it may be hidden behind a free registration filter, so I'll include excerpts below the fold.
Economic debate out of it's time warp
Economics is the dismal science, and I never find myself in 100% agreement with any economist, but then again to paraphrase the great 20th century philosopher Groucho Marx, I wouldn't want to belong to any club that would have me as a member. So although I agree a great deal with Sachs, I certainly think he went overboard on his swing at Krugman.
Here are some quotes from his article, rearranged a bit.
Today’s free market ideologues are uninfluenced by the lessons of recent history, such as the financial crisis of 2008 or the devastating climate shocks hitting the world with ever-greater frequency and threatening far more than the economy. Their single impulse is the libertarianism of the rich: the liberty to enjoy one’s wealth no matter what the consequences for the economy or society.
Couldn't agree more and give him an A.
The US and UK are far more interested in defending Wall Street and the City than in fixing the global regulatory landscape. Germany has been much more interested in coddling its errant banks than in fixing the eurozone banking system.
Yep, the banks and financial wizards still have their grubby paws deep inside the government.
In high-income countries, the only route to middle class jobs is through education, skills and active labour market policies that match jobs and needs.
Fair enough.
Third, tax collections today are little more than a Swiss cheese of tax evasion and tax havens for the rich and corporations.
Now where are all those articles about Mitt Romney's offshore tax havens? Oh yes, they're everywhere today.
Fourth, we are in the age of the Anthropocene, where global growth is limited by natural resources, climate change and hazards. If the world economy grows at 4 per cent or more, oil prices soar above $100 per barrel and food prices hit historic highs. This fact is of fundamental importance yet not properly part of any country’s economic strategy. The American illusory answer, hydrofracking of natural gas and more offshore drilling, will not solve the heat waves, floods, droughts and other disasters hitting the US and much of the world this year. Nor will it do much to ease the worsening resource constraints that will squeeze economic growth until we shift to new and sustainable technologies.
BINGO! Home run! This is where Sachs really shines. In one felt swoop, he ties the 3 E's together in a powerful way. I really, really, wish that Krugman, Stiglitz and others would give the emphasis that Energy and Environment deserve.
But now, here are some parts of the article that had me confused.
Paul Krugman defends crude Keynesianism as if we’ve learned nothing in recent years about the severe limitations of short-term fiscal stimulus.
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In Paul Krugman’s telling, we are in the 1930s. We are in a depression, even though the collapse of output and rise of unemployment in the Great Depression was incomparably larger and different in character from today’s economic stagnation.
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In Krugman’s simplified Keynesian worldview, there are no structural challenges, only shortfalls in aggregate demand. There is no public debt problem.
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Why have we come to this vacuous debate between a free-market extremism and a Keynesian superficiality that addresses none of the subtleties, trade-offs, and uncertainties of the real situation?
Whoa there! What's that all about?
First, to characterize Krugman's position as not seeing structural challenges or public debt problems, is simply false. I follow Krugman very closely and I don't know how many times he's talked about stimulus to get out of the immediate mess, then we have big problems with debt and structure that we have to address.
So here's my take. I've seen interviews with Sachs where he comes across as very frustrated. He tries to talk about how important Energy and the Environment are to not only the economy, but the survival of civilization, but economists want to talk about supply, demand, taxes, ... the kind of economic stuff they've always talked about.
So I think Sachs is trying to paint a deliberate false extremism picture where Republicans live in the 1920's and Democrats live in the 1930's and he's pointing a way to 21st century economics. So although I think he's right about the Republicans (maybe 1830's rather than 1930's), and he's wrong about the Democrats (although they need to talk more forcefully abut Alt-E and the Environment), he certainly needs to separate himself from the norm if he wants to get the attention he deserves.
So All in All, Jeffrey Sachs has written a very good article about things most economists are not thinking or talking about, but he went a little overboard with Krugman. I hope people take away from the article the importance of energy on our economy and the ever more devastating impacts that global warming will have on any chance of a true economic recovery.