[...]
>
> In short, what we're looking at is learned helplessness. Economists who
> didn't go down this path, who didn't flush everything the profession
> had learned between 1936 and 1973 down the memory hole, aren't
> especially baffled by the situation we're in now; on the contrary, it
> looks like an extreme version of a fairly familiar event, and policy
> recommendations aren't hard to make.
Thanks for this - the Morley link is interesting (he ends up cheering Minsky). Real business cycle theory is so crazy. I do think the so-called 'freshwater economists' (i.e. new classicals) Krugman beats up on all the time were well on the decline long before the crisis - if not in academia, certainly in policy economics, because its patent unworldliness.
There's a great bit at the end of this Reserve Bank of Australia review of the history of "the intellectual framework for understanding inflation" saying that by the 1990s the Bank's understanding of mainstream macroeconomics had come full circle and basically returned to what it had thought in 1971. http://www.rba.gov.au/publications/rdp/1999/pdf/rdp1999-01.pdf
This was consoldated in the 2000s - cf. Philip Arestis's edited 2007 book on 'the New Consensus in Macroeconomics'. In the US it was signified, for example, by even an administration as conservative as Bush Jr's elevating New Keynesians like Mankiw (chair of the Council of Economic Advisors who was politely but damningly dismissive of New Classicals) and Bernanke. They were all Keynesians again.
So while it's fun to watch Krugman and mates ripping into the idiots, it's not exactly speaking truth to power or taking on Goliath - it is more or less the policy economics establishment reasserting itself in academic economics by kicking an irritating dog while it's down.
Mike Beggs