“Nobody could have predicted. . . .” It’s what you say with regard to disasters that could have been predicted, should have been predicted and actually were predicted by a few economists who were scoffed at for their pains.

Krugman: “We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.” So wrote John Maynard Keynes in an essay titled “The Great Slump of 1930.”

Freshwater economists are, essentially, neoclassical purists. They believe that all worthwhile economic analysis starts from the premise that people are rational and markets work.

Meanwhile, saltwater economists balked. Where the freshwater economists were purists, saltwater economists were pragmatists. So they were willing to deviate from the assumption of perfect markets or perfect rationality, or both, adding enough imperfections to accommodate a more or less Keynesian view of recessions. And in the saltwater view, active policy to fight recessions remained desirable.

SHOOT: When I studied economics it was hard not to acknowledge the reality beyond the perfect island economy and perfect markets, namely that some countries remain locked in situations where the inequalities in terms of poor versus wealty [expressed as Gini coefficients] particulary in Brazil and South Africa, are dire, and can apparently only be addressed via ethical - note ETHICAL state or other intervention.

clipped from www.nytimes.com