I present this Post to express my great faith in economic models. There is sharp tendency to define models in terms of the desired Variables wished present. It is like the old Packaging axiom: if it fits, the box is Right, even if it is a little loose inside–just add Packing. Economists have a whale of a lot of Packing, and utilize an incredible amount in their daily activities. I must have encountered at least a thousand definitions for even the simplest Demand/Supply interface, all leading to different conclusions about a near universal economic model. Know that there is a Marginal Utility to all such models, which becomes increasingly minute as it drifts away from the absolute Center of the argument. This might be considered the essential flaw of economics.
Are liberal economists trying to pick a fight with each other, or are they trying to find some common thread to devise another form of attack on recession woes. I could present a very ideological, and depressingly conservative, definition of balance sheet recessions. There are Those Few Strange Bedfellows who would insist that balance sheet recessions are nothing but the native system Safety value to release excessive Wages, Profits, and Benefits being paid on distressingly light actual Production figures. Americans may have been living far above their Means, and not paying for it in any significant way; the economy must find a natural Means to stabilize itself. Most of my Readers will find that that not to be very ideological, but intense contemplation might worry a considerable number of you.
Paul Krugman is a man who believes in economic models, and does a really good job of defining them with relative accuracy. He sometimes does not fully explore the differences between economies, though, and this Post points out that fact. Iceland enjoyed greater occupational opportunity than have the Baltic nations, where a loss of Jobs means Unemployed, while Icelandic model only calls for alternate Employment which must be funded. I would consider all nations to have adopted the most advantageous policy for each nation. It is also somewhat silly to proclaim that economic policy constraints in less developed nations hold real significance for a more advanced and evolved economy. lgl