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2017-01-03

Krugman: policymakers chose to believe in the confidence fairy to justify attacks on the welfare state, because that’s what they wanted to do.

Now, policymakers chose not to believe this. 
They chose to believe that monetary policy could do the job absent fiscal support, because for several reasons they refused to use fiscal policy to promote jobs; they chose to believe in the confidence fairy to justify attacks on the welfare state, because that’s what they wanted to do.

And yes, some economists gave them cover.
But that’s a very different story from the claim that economics failed to offer useful guidance. 
On the contrary, it offered extremely useful guidance, which policymakers, for political reasons, chose to ignore.

Krugman, NYT 24 December 2016

Economic theory discredited

Internal devaluation 

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