All Life Is Problem Solving

A stunning analysis of the economic crisis by James K. Galbraith just appeared in the Washington Monthly. What’s stunning about it is its wide-ranging analysis of the present economic crisis; its historical perspective; its properly skeptical remarks about CBO and other projections based on standard economic models and available historical data; its very clear-eyed view of the chances of success of the current recovery strategy of the Administration; its suggestion of remedies based on a long view of what we must do; its analysis of the so-called “deficit,” “entitlement,” and “potential inflation” problems; and its willingness to go way beyond prescriptions based on the happy view that if we tinker a bit, or even a lot, with Banking Systems and inadequate stimulus packages, we can bring back an international economy successfully driven by the bankers and high finance.

Once again, in looking at the Administration’s view of the crisis we see that lack of transparency and effective knowledge integration, I’ve been pointing to in recent blogs. As Galbraith says near the beginning of his piece.

”The president has an economic program. But there is, so far, no clear statement of the thinking behind that program, and there may not be one, until the first report of the new Council of Economic Advisers appears next year. We therefore resort to what we know about the economists: the chair of the National Economic Council, Lawrence Summers; the CEA chair, Christina Romer; the budget director, Peter Orszag; and their titular head, Treasury Secretary Timothy Geithner. This is plainly a capable, close-knit group, acting with energy and commitment. Deficiencies of their program cannot, therefore, be blamed on incompetence. Rather, if deficiencies exist, they probably result from their shared background and creed — in short, from the limitations of their ideas.”

And I might add, a clear statement of their thinking, followed by a dialogue with “outsiders” like Galbraith, might serve as a cure for the limitations of their ideas, and as a beginning in their assessing the very large risk of error in the decision model they’ve decided to implement.

Read this piece! It’s the best I’ve seen on the economic crisis and what our response ought to be.