Sometimes I lament the fact that instead of running the show, he's left to opine about the policies of others.
There are always these rather ridiculous omissions and oversimplifications with krugman.
Take this paragraph...
"During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. "
That's a straw man if ever there was one. I don't think any economist has ever denied the reality of market corrections. In fact, while Krugman picks out a few choice quotes the fact is many, many economists have been warning about the housing bubble for years. He does eventually address this with one sentence on page 5 but then obscures the issue by quoting politicians denying the bubble (a politician is never going to predict doom and gloom even if they do see it coming)
In the end there were mistakes made in our economy but Krugman's using those mistakes to float a theory that the whole system is flawed even though the system created 26 years of relative prosperity. Just because deregulation went a little too far doesn't mean going in the complete opposite direction is wise.
Well, let me identify some for you. The tulip bubble, which is the classical example of a bubble had absolutely nothing to do with government manipulation. The internet stocks bubble of the late 90s also was largely unrelated to government manipulation. The housing bubbles of some eastern european countries also had nothing to do with the government as those governments did not subsidise housing. Even with the US housing bubble government involvement was rather tangential, the most troubled assets were not in any way subsidized by the government.
" He goes on at length about Keynesian stimulus with no mention of its dismal failures, most notably in Japan."
Japan is not an example of failure of Keynesian economics, because it is not really an example of keneysian economics. There haven't been the large public works project perscribed by keneysian economics in japan. Japan has tried to get out of the recession mostly by secretly subsidizing its banks.
For the record, there are plenty of bubbles that have not been caused by government manipulation. For example, the Tulip bubble that happened in the Netherlands (http://en.wikipedia.org/wiki/Tulipmania) (not to mention bubbles caused by people like Madoff and other con men).
Also be careful. The government is always involved with any economic crisis and you can always blame a government action for making a bubble worse. If you believe that without a doubt the government is the cause of all bubbles, then no one will ever "prove" you wrong. If you are open minded and use the simplest explanation for a given set of facts (i.e., Occam's Razor), then you will find that not all bubbles have happened because of government manipulation.
Also, I think your assertion that asset bubbles do not occur absent government interference is wrong; or at the very least leaves out the fact that often it is the speculators themselves who are most demanding that the government aid and assist the inflation of the bubble.
http://en.wikipedia.org/wiki/Political_economy
Economics isn't a science. Physicists can agree on 99.99 percent of what they talk about, and the other .01 percent is agreed to be unknown or arguable. Economists can barely, just barely, hold a tenuous consensus on things like comparative advantage. The reason economists "get it wrong", is:
1. They want to direct the money into XYZ set of pockets instead of ABC set of pockets, thus they're always "wrong" as for as ABC is concerned, and
2. They don't have the predictive consistency typical of scientists because...they aren't scientists.
Systems biologists can't, nor can climate scientists, oceanographers, ecologists, geophysicists or astronomers.
A few fields (namely the ones taught to physics majors) have a simple unified theory that every sane person can agree to. The rest are messy, much like economics.
Notably, all fields where you can't do controlled experiments.
Also, the work done in Econometrics and Statistics in the field is totally solid. So, I wouldn't say they're not scientists. Or take Game Theory etc. - a lot of fields in Econ could just as well be in AI.
Anyway, macro's set of classical assumptions of modeling aggregate decisions based on rationality/ price-taking is too simple. Eventually we'll have to embrace more ideas out of complex systems analysis... but then all those neat macro formulas might not work out so well.
My two cents.
That does not mean that the social sciences are unimportant. In fact the amount of money (which you alluded to) means they are actually perceived as important. Once upon a time physics wasn't a science either.
Krugman's not bad, he writes good mainstream stuff, which is hard to do. I would be far more impressed if he had spent the last 5 to 10 years writing to the mainstream, screaming his head off about the dangers of the bubble we were in. And if his answer is that he wasn't certain is was a dangerous bubble, he can hand over his Nobel to me, because I sure as hell knew.
