Opinion | A Smorgasbord Recession? (Wonkish) – by Paul Krugman – The New York Times

“The 2008 financial crisis is (duh) a decade in the past; employment has been growing steadily since early 2010. Since nothing is forever, and proclamations that the business cycle is over have always ended in embarrassment, lots of people are looking for the sources of the next recession.

The thing is, there’s nothing out there as obvious as the housing bubble of the mid-2000s, or even the tech bubble of the late 1990s. So here’s my thought: maybe the next recession won’t be caused by one big shock but instead by the combined impact of several smaller shocks. There are arguably several mid-sized bubbles out there, from private equity debt to emerging markets. Stocks are priced as if there’s no risk despite omens of trade war, consumer confidence similarly seems to discount dangers. There’s probably other stuff I’m missing.

The point, anyway, is that we might be looking at a smorgasbord recession, one that involves a mix of smallish things rather than a single dominant item. And there’s a model for that kind of recession: the slump of the early 1990s.”


Opinion | What Do We Actually Know About the Economy? (Wonkish) – Paul Krugman – NYT

“So let me talk about three things:

The unsung success of macroeconomics

The excessive prestige of microeconomics

The limits of empiricism, vital though it is

The clean little secret of macroeconomics

There’s a story about quantum physics – not sure where I read it – about the rivalry between the physicists Julian Schwinger and Richard Feynman. Schwinger was first to work out how to do quantum electrodynamics, but his methods were incredibly difficult and cumbersome. Feynman hit upon a much simpler approach – his famous diagrams – which turned out to be equivalent, but vastly easier to use.

Schwinger, as I remember the story, was never seen to use a Feynman diagram. But he had a locked room in his house, and the rumor was that that room was where he kept the Feynman diagrams he used in secret.”