There is nothing that plays worse in our culture than seeming to be the stodgy defender of old ideas, no matter how true those ideas may be. Luckily,… - Paul Krugman

When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right.

Whose fault is the replacement of serious discussion of world trade by what I have come to think of as "pop internationalism"? To some extent, of course, it is the result of basic human instincts: intellectual laziness, even among those who would be seen as wise and deep, will always be a powerful force. To some extent it also reflects the decline in the influence of economists in general: the high prestige of the profession a generation ago had much to do with the presumed effectiveness of Keynesian macroeconomic policies, and has suffered greatly as macroeconomics has dissolved into squabbling factions. And one should not ignore the role of editors, who often prefer what pop internationalists have to say to the disturbingly difficult ideas of people who know how to read national accounts or understand that the trade balance is also the difference between savings and investment. Indeed, some important editors, like James Fallows at The Atlantic or Robert Kuttner at The American Prospect are pop internationalists themselves; they deliberately use their magazines as platforms for what amounts to an anti-intellectual crusade.

The idea that a country's economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets.