Commentary by Roger Martin Martin writes about research at KU for Kansas media and in a Web zine. Contact Martin at rmartin@kucr.ukans.edu or (785) 864-7239. Martin also can be heard on KANU 91.5 FM public radio Archives More articles by Roger Martin Subscribe now to receive KU News by email

Economics truly can be the 'dismal science'

by Roger Martin

Thomas Malthus predicted a couple of centuries ago that population increases would eventually produce widespread famine.

When he said this, he wasn't just being grouchy. He was being an economist.

Thomas Carlyle, a 19th-century historian reflecting on the grimness of Malthus and his professional kin, nicknamed economics the "dismal science." Last week, a fairly famous dismal scientist named Paul Krugman delivered a lecture and led a symposium at the University of Kansas, under the auspices of the Self Graduate Fellowship Program.

Krugman writes a twice-weekly column for The New York Times. He teaches at Princeton. Given the state of the economy these past 12 months, he was surprisingly cheery. But delirious, he wasn't.

In fact, he doesn't fully believe we've been delivered from the economic toxins that have produced layoff shock and poisoned retirement portfolios across the land.

Krugman says that no one believes we're going to suffer through a Japanese-style recovery that takes a decade or more. But if we have escaped recession, he says, we've done so only by the skin of our teeth.

It took about a year for the Federal Reserve Board to cut interest rates from 6.5 percent to 1.75 percent. That speed is unprecedented, Krugman says.

Even so, people are biting their fingernails, Krugman says.

"There's been an economic bounce, but people are wondering, 'Is this a dead-cat bounce?'" he says. A "dead-cat bounce" is one of those charming Wall Street coinages for a rally that doesn't last.

Still another reason Krugman lacks enthusiasm for the current economic recovery is that recovery ordinarily rides the coattails of consumer confidence.

That is, people like you and me, sensing the return of good times, go out and spend. But that spending surge can't happen right now because consumer spending didn't really fall off during the past year. (We continue to be the Country that Cannot Save, while Japan is the Nation that Never Spends.)

Meanwhile, Krugman says, business investment remains flaccid. There's simply nothing new and big, technologically speaking, to interest the business sector in spending.

What will deliver us?

One thing we've got going, Krugman says, is a large slug of military spending in the pipeline. But, he cautions, that'll likely be offset by slashes in state and local government spending. Some people, Krugman says, think the economy won't soar until the next killer application comes along -- some must-have piece of technology.

At this suggestion, a hand goes up in the audience.

"How about fuel cells, Dr. Krugman?" someone asks. Fuel cells are gadgets that generate cheap electricity with very little pollution. Krugman shakes his head. Too far off, he says.

Then he smiles and asks, "Aren't we all supposed to be getting scooters?"

The audience laughs. The deflection of the question is beautiful. Krugman obviously knows enough to know that he doesn't know.

Is economics really dismal? If so, it's not because of Malthusian mass starvation anymore.

It's because the crystal ball economists work with is so full of fog.