Coupling and de-coupling in economic discourse

June 12, 2008

Alison Kemper send me a link to the following gem (thanks!), a transcript from a roundtable of Nobel laureates in economics, held by the infamous financier Michael Milken

Quite a few issues are being dealt in the short text, all related, naturally, to the continuing weakness of markets. The opening question, for example, is about the de-coupling of the courses that different blocks of national economies take. The discussants do not agree about the degree of de-coupling and its future impact. However, just a few questions down, Ed Spence is performing a remarkable act of de-coupling, conceptually and rhetorically. This time, the ‘economy’ is de-coupled from financial markets, and in particular, from volatility in financial markets:

Milken: Another Nobel Laureate, Joseph Stiglitz, has said recently that the U.S. is facing one the worst downturns since the Great Depression. Does anyone agree with that?

Spence: That is very unlikely. It would take mistakes in policy in a number of areas to cause that outcome. The American economy is functioning remarkably well in view of the financial turmoil.

Note also that this assumed detachment of the ‘economy’ from ‘financial markets’ is presented as a structural factor that is defending us from recession!

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