Krugman’s short answer: this time around, not nearly as useful as they could have been and should have been. According to Krugman, this was in large part because economists who understood the modern version of Keynesian analysis lost out to others who didn’t, and to politicians who feel more comfortable with the damnable household analogy when formulating policy… “households are having to tighten their belts, so government should tighten its belt, too” … a proposition leading to absolutely ass-backward policy-making. But you can just imagine that from the mouth of, say, John Boehner. Or, regrettably, Barack Obama.
The other cause Krugman offers is a moralizing view on the part of some government leaders, a view that people (or nations) who got themselves into trouble are to blame for their troubles, and should be made to suffer for their sins (call it the German model of economic morality).
Krugman’s speech, delivered upon receiving an honorary degree in Lisbon, is long, but goes a long way toward explaining the needlessly sorry condition the world’s economy is in today. It’s worth reading, and it is not a difficult read.