Mankiw’s problem17 February, 2014 at 18:05 | Posted in Economics, Politics & Society | 1 Comment
I won’t attempt to take on Greg Mankiw’s latest defense of the 1 percent …
But, in his defense of his defense, Mankiw does make a curious admission: capitalism is fatally flawed.
The admission actually occurs in his textbook, where … he admits that financial crises “do occur from time to time.”
“Finally, keep in mind that this financial crisis was not the first one in history. Such events, though fortunately rare, do occur from time to time. Rather than looking for a culprit to blame for this singular event, perhaps we should view speculative excess and its ramifications as an inherent feature of market economies. Policymakers can respond to financial crises as they happen, and they can take steps to reduce the likelihood and severity of such crises, but preventing them entirely may be too much to ask given our current knowledge.”
Yes, indeed, “speculative excess and its ramifications” are in fact “an inherent feature” of capitalist economies. But then, Mankiw adds, “preventing them entirely may be too much to ask given our current knowledge.”
What Mankiw sees as a problem of knowledge is what the rest of us see as a problem of economic institutions. It’s precisely because the economic system is arranged so that a tiny minority at the top is able to continue to capture the surplus that financial crises occur on a regular basis.
What the rest of us know is that defending the 1 percent is precisely what will guarantee more financial crises in the future.