In 1945 Norway was a war ravaged country. 5 years of rationing, asset deterioration and a brutal and dictatorial government had produced a tremendous need for rebuilding the country and its economy after a ruinous war. Political leaders asked for more sacrifice, more savings, and deferral of spending in order to channel resources to the overwhelming task of reconstruction. One voice stood out: Now is not the time to save! The rationing during the war left people with plenty of unspent money. Now was the time to spend! The voice belonged to Ragnar Frisch. Politically he was a Marxist. Economically he knew that a free economy would allocate resources far better than politicians would or could. Fortunately people listened to one of the best economists in the world at the time: He was the very first recipient of the Nobel Prize for economics established by the Bank of Sweden in 1967. Norways economic growth took off as the spending stimulated the economy. Other countries followed. For some reason the counterintuitive rule for an economy in recession has to be learned over and over again. Krugman discusses this in the column below, but every teacher of economics knows the costly and dangerous consequences of doing the exact opposite of what is called for by economic experience when an economy sinks into a deep recession.
Posted on: Fri, 23 Jan 2015 23:06:32 +0000
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