Saturday, April 24, 2010

Krugman: The Emperor Has Few Clothes

In his column today, Krugman discusses financial reform, and he makes a point worth repeating: the financial sector has become a huge portion of the economy without adding a great deal of real value. Krugman argues that the financial sector doesn't do nearly as much as they claim. Indeed, of late, they've mostly just gambled with our money. As someone who does not make widgets, and whose "product" is relationships (legal), I understand that our contemporary economy might be dubbed "beyond widgets". Somewhere, however, you have to make and sell stuff. It's great and crucial to allocate capital and make investments, but these activities have to amount to more than Ponzi schemes. Krugman's article reinforces my belief that measuring economic well-being by dollar signs, or even by the sheer amount of stuff that one has, doesn't provide an accurate portrayal of well-being; in fact, it creates a deceptive measure of well-being.

No comments: