Point # 1 is an interesting one. But as others have pointed out, 4 years ago there weren't all these licensed builders, real estate agents, and mortgage brokers either. People can adjust quite rapidly when it's in their self interest. One of the other economists at the debate pointed out how rapidly, under wartime conditions, entire armies can be raised and trained. People change jobs all the time.

And finally on Point # 2, there are lots of things that need doing, and lots of idle hands about. One doesn't need to instantly retrain people as nurses (Boldrin's example). Rather you give folk an income and the time to undertake their own retraining.

Bullshit.

“Economists are often thought of as conservative, but that was not the case in
the previous study nor in this one. In this study, 47 percent of the students classified
themselves as liberal, 24 percent as moderate, 16 percent as conservative and
6 percent as radical. (Six percent stated that politics were unimportant to them.)
These percentages are very similar to the last study, although the share of those
identifying themselves as radicals declined (from 12 percent). The students perceived
their views as slightly more liberal than those of their parents, 40 percent of
whom they classified as liberal, 36 percent as moderate, 16 percent as conservative
and 3 percent as radical.” -Colander, David. The Making of an Economist, Redux. Princeton: Princeton University Press, 2008.

And it's a bald stretch to call any of those people on the list “geniuses”. Economic research is rather subjective. The field has traditionally been dominated by conservatives, so if you're conservative, you're likely to get your research published. Among thinking economists, there's a consensus that technology shocks have nothing to do with the current crisis, and yet that's what Prescott won his Nobel for — an idea which is now completely discredited (except in the eyes of many conservative economists, for whom it is like the Penteteuch…)

Zingales basic premise is that the economic crisis and the banking crisis are completely separate. This is simply not so. Were the economy to grow at 10% next year, there would be no banking crisis (or, at least, a much more manageable crisis). Think about it — 10% growth implies unemployment down at 3% — suddenly, lot's of unemployed people who are struggling with credit card debt and mortgage payments will have a much easier time, the housing market would turn around, corporate profits would be fat, and the Dow would hit 10,000 again… The automakers would certainly be able to sell SUVs again… Christ, 10% growth and Madoff would likely be back in business! On the other hand, every month that 650,000 people lose their jobs, that must imply at least another 30,000 defaults of some kind… Especially, the people losing their jobs now are not likely to have suspected it one year ago… Zingales is arguing that even if we were to suddenly employ 4 million more people, it would have no effect on the banking crisis; conversely, he argues that if 4 million more people lose their jobs, more people won't default.

Zingales makes no sense.

OK, how can we take anyone seriously who says something so stupid. What has scared investors and destroyed the financial sector is financiers making really really really bad investments. If we can't agree on that simple point, wondering which economist we all are, is a waste of time.

The most amusing thing: DeLong's suggestion that the the Bush years were boom years! Well, now he tells us. What a hack.

Is it just me or does DeLong argue ideas through anecdotes and he said/she said type statements?

His video debate solidified this impression.

Zingales is arguing the point in which everyone, including DeLong, agrees, i.e., the financial crisis can't be solved with Keynesian polices.

So far, neither Zingales nor anybody here addressed the crucial problem: Is fiscal policy *the most effective* instrument available right now to fight rising unemployment? Why, or why not?

When debating DeLong, Michael Boldrin advanced 2 points against fiscal policy (and the stimulus package in particular) – after wasting 1 hour of debate talking about the banking crisis.

1 – Government spending is not very effective against unemployment because it will be focused on jobs that require qualifications the unemployed do not have – current unemployed labor is not sufficiently flexible to do the new jobs, therefore the spending will be ineffective.

2 – The Obama administration will incur in such a loss of political capital by pursuing fiscal policies, that it will not be able to take the unpopular but necessary measures to fix the banking system.

I would like these 2 points to be discussed, but it looks like this debate is heading in a familiar direction – Zingales saying “Fiscal policy will not fix the banks problem”, DeLong saying “It's not meant to. But it will combat the unemployement/falling demand snowball”.

If you think the Economist is like the Cato Institute, you are sadly misinformed. Hasn't been libertarian/free market for years.

Even Keynes stated that government spending beyond a certain ceiling will only make things worse. He stated that ceiling at 25% of GDP which we are well beyond if you include Federal, state, and local spending:
http://corner.nationalreview.com/post/?q=NmQ2NT...