Krugman nails it without saying it explicitly: Freshwater economics is fake, it’s not economics. It’s propaganda paid for by the rich and powerful to convince everyone else that what the rich and powerful want is what we should want too.
July 1, 2012 § 3 Comments
“Recent events have been one empirical debacle after another for that view of the world – on interest rates, on inflation, on the effects of fiscal contraction. But the truth is that freshwater macro has been failing empirical tests for decades. Everywhere you turn there are anomalies that should have had that side of the profession questioning its premises, from the absence of the technology shocks that were supposed to drive business cycles, to the evident effectiveness of monetary policy, to the near-perfect correlation of nominal and real exchange rates.”