Let's Start Taking Names of People to Ignore in 2009

Perhaps we should posit that those who claim the current economic crisis was unknowable are not now to be listened to in terms of what to do about it?

I gladly refer readers to Brad DeLong’s rant (and the original at Hilzoy's, which he references) about a hand-wringing Op-Ed piece by Robert Samuelson in yesterday’s Washington Post.  Here is an example of the wisdom Samuelson imparts:

So much that has happened was unexpected that the boom and bust's origins are obscured…

Prosperity, apparently forgiving of mistakes, bred the complacency that undid prosperity. On bad mortgages, losses could be recovered by selling the homes at higher values. Thus rationalized, bad loans were made. Some stocks might decline, but over time, most would rise. Risk seemed to recede, so investors and money managers undertook riskier strategies.

What will emerge from these shattered illusions? Will the crash stir social unrest, abroad if not here? Will Americans become so thrifty that they hamper recovery? Will economic nationalism surge? How will capitalism be reshaped? Much depends on whether the frantic policies to combat the recession succeed. Probably they will, but there are no guarantees. Our ignorance is humbling.

Well, Samuelson’s ignorance ought to be humbling—to him.  DeLong points correctly to the many warnings we’ve had from economic writers who often wrote of impending disaster in pieces for the general public, (Paul Krugman, Dean Baker, Daniel Roubini) not to mention the many more writers and scholars one might expect an economics writer for the Post to have been reading.

Even I noticed smart people talking about a real estate bubble growing—and how continued economic growth over the last few years relied heavily on consumers using their real estate assets as a piggy bank, as opposed to the economy actually producing more good jobs or more production.  Believe me, if someone as unskilled in economics as myself perceives a risk, it wasn’t unknowable.