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[Opinion] `Everyone is an Economist`

Posted February. 13, 2009 03:43,   


U.S. President Barack Obama made people laugh last week in a meeting of Council of Economic Advisers members and private economic experts. “You`ve got some economists and some folks who think they`re economists,” he said while introducing guests. People burst out laughing at his joke. Then the president added, “By the way, these days everybody thinks they`re economists.”

Faced with the 21st century’s first crisis and the worst economic turmoil to hit the world economy in history, economists are competing to find a solution to the problem. Most of them agree with Nobel laureate economist Paul Krugman, who says the government should expand fiscal spending even more drastically. Another Nobel laureate Gary Becker strongly disagrees with Krugman, however, saying this will only result in leaving debts to future generations. Inspired by the Keynesian way of thinking, every government is trying to implement “New Deal” policies, but this method is under fierce debate. Conservatives in the United States say World War Ⅱ rescued the country from the Great Depression and high unemployment, adding heavy fiscal spending in the 1970s brought about inflation in the 1980s. Certain critics even say British economist John Maynard Keynes was not afraid of fiscal deficit only because he had no children.

Other economists have begun to correct themselves. Christina Romer, a former professor at the University of California at Berkeley, wrote in her March 2007 paper that tax breaks are a more effective way of overcoming an economic downturn than expanded fiscal spending. She has changed her stance since then, saying more fiscal spending is more effective in her thesis released last month. Of course, logic might have to change along with the situation. Uwe Reinhardt, a professor of economics at Princeton University, says it is easy for economists to infuse an ideology into their theories.

In Seoul yesterday, 48 economy-related academic groups began a two-day conference at Sungkyunkwan University. Jwa Seung-hui, a senior researcher at Gyeonggi Research Institute, said market failure did not cause the latest economic crisis. “The U.S. mortgage crisis occurred not because of market instability but because of the government’s ‘anti-market’ intervention.“ On tax breaks, Jeong Se-eun, professor at Chungnam National University, warned that most tax incentives go to the rich and that they will only worsen fiscal soundness. For ordinary citizens, guessing which economists are right is proving tough. Regardless of what economists say, their insights will be useless if politicians fail to perform their roles properly. No wonder why Koreans have started to say, “It’s politics, stupid,” instead of “It`s the economy, stupid.”

Editorial Writer Kim Sun-deok (yuri@donga.com)