Brad DeLong recommends Martin Wolf:
Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge. He wished to preserve as much liberty as possible, while recognising that the minimum state was unacceptable to a democratic society with an urbanised economy. He wished to preserve a market economy, without believing that laisser faire makes everything for the best in the best of all possible worlds.
This same moralistic debate is with us, once again. Contemporary “liquidationists” [on the right] insist that a collapse would lead to rebirth of a purified economy. Their leftwing opponents argue that the era of markets is over. And even I wish to see the punishment of financial alchemists who claimed that ever more debt turns economic lead into gold. Yet Keynes would have insisted that such approaches are foolish.
I’ve inveighed many times against neo-Hooverite rightwingery here. And on Boxing Day I was able to put in a decent amount of time in my gym’s sauna and enter a Zen meditative trance in which I fully purged myself of any lingering desire to see the punishment of financial alchemists who claimed that ever more debt turns economic lead into gold.
What lingers after the trance, however, is a firm conviction that they should have been punished earlier. That, specifically, back during years like 2002, 2003, 2004, 2005, and 2006 or in years like 1997, 1998, and 1999 there were a lot of people earning a great deal of money and that it would have been smart to take a nice chunk of that money away from those people and spend it on useful projects like helping citizens avoid malnutrition, doing something about our ridiculous child poverty rate, building cool trams everywhere, or investing more funds in the labor force policing our streets and teaching in our schools. But back during those years, the tax hikes weren’t being implemented. And we were told they weren’t being implemented for a mix of reasons — on the one hand, a principled aversion to meddling in the market, and on the other hand a pragmatic necessity to let those folks get as rich as possible lest society at large be deprived of the larger fruits of their efforts. What you see during the crash is that those rationales are essentially hollow and bankrupt.
And I, for one, intend to remember that fact when growth returns. Will Martin Wolf be with me?