Trying to Fix Broken Economics

“Here is a list of economic questions that have something in common. In a recession, should governments reduce budget deficits or increase them? Do 0 percent interest rates stimulate
economic recovery or suppress it? Should welfare benefits be maintained or cut in response
to high unemployment? Should depositors in failed banks be protected or suffer big losses?
Does income inequality damage or encourage economic growth? Will market forces create
environmental disasters or avert them? Is government support necessary for technological
progress or stifling to innovation?
What these important questions have in common is that professional economists can’t
answer them. To be more precise, economists can offer plenty of answers about
government deficits, printing money, inequality, environmental issues and so on; but none
of these answers is authoritative enough any longer to persuade other economists, and
never the world at large.
Take two examples. On whether government borrowing aggravates recessions or promotes
recoveries, the world’s most eminent economists fall into one of two violently conflicting
schools. The world’s most important central banks, the U.S. Federal Reserve and the
European Central Bank, hold diametrically opposing views about the effects of quantitative


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