Krugman Excels in Two Widely Disparate Activities
It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).
It’s a dazzling performance. Time after time, Krugman leaves me wide-eyed with wonder at how much economics he has to forget to write those columns.
17 Comments:
Does he really excel at economics? Or is that "excelled"? I thought he won for some really old work. I can't imagine he has good current economics papers out there, then writes those columns on the same computer.
"he was awarded a well-deserved Nobel Prize"...
LMAO!
Way to go Landsburg! This has to be Landsburg's own 'Krugman moment'...
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Krugman vs. Krugman
"I switched to a fixed-rate mortgage ... I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits ... we're looking at a fiscal crisis that will drive interest rates sky-high ... But what's really scary ? what makes a fixed-rate mortgage seem like such a good idea ? is the looming threat to the federal government's solvency." (March 11, 2003)
New York Times
vs.
"... the lesson of the 1950s — or, if you like, the lesson of Belgium and Italy ... is that you need to stabilize debt, not pay it off; economic growth will do the rest ... So, to review: to make the debt look scary, you have to dismiss the post-World -War II experience ..." (August 28, 2009)
New York Times
"Bad move on my part"
To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
- Paul Krugman, writing in August of 2002
New York Times
Krugman vs. Krugman
"Inside the Beltway, doomsaying about Social Security -- declaring that the program as we know it can't survive the onslaught of retiring baby boomers -- is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided." (November 16, 2007)
vs.
"[A] decade from now the population served by those programs [Social Security and Medicare] will explode. . . . Because of those facts, merely balancing the federal budget would be a deeply irresponsible policy -- because that would leave us unprepared for the demographic deluge, with no alternative once it arrives except to raise taxes and slash benefits." (July 11, 2001)
"Broadly speaking, the next administration . . . will face two big economic tests. One . . . is whether it can stick to a fiscal policy, including a policy toward Social Security, that prepares this country for the demographic deluge." (Nov. 12, 2000)
"The reason Social Security is in trouble is that the system has a large 'hole' -- basically a hidden debt -- because previous generations of retirees were paid benefits out of the contributions of younger workers . . . a multitrillion-dollar debt that somebody has to pay." (Oct. 1, 2000)
"[B]ecause the baby boomers' contributions were used to provide generous benefits to earlier generations, there isn't enough money in the system to pay the benefits promised to the boomers themselves." (June 21, 2000)
Washington Post
Krugman's statements are technically correct. However, he has become increasingly political. So, rather than identifying the truth, he supports his biased view. He's the leader of a new school of thought: Sneakonomics.
Here's what Krugman stated about the U.S. liquidity trap:
"One thing that’s been bothering me about the discussion over fiscal stimulus is the virtual absence of fully worked-out models, with all their t’s dotted and eyes crossed, or something. Not that a rigorous model is always better than a rough-and-ready but more realistic approach, but I like to have both on hand. So I’ve tried a very rough sketch of a full, intertemporal maximization yada yada analysis of the fiscal policy issue. It was written in a hurry, so it’s surely incomprehensible to readers who don’t know the New Keynesian Economics literature, and probably incomprehensible even to those who do.
But here’s what the model says: when monetary policy is up against the zero bound, the optimal fiscal policy is to expand government purchases enough to maintain full employment.
My comment: The data show large tax cuts had powerful and immediate positive effects on GDP (under Kennedy, Reagan, and Bush II twice). A large tax cut was needed (rather than a $13 a week reduction in withholdings and tax credits a year out), because of high household debt.
A $700 billion tax cut (or up to $5,000 for 150 million workers) with the $700 billion in TARP late last year would've likely resulted in a shallow recession and a stronger recovery. Taxes could have been raised when the recovery was underway.
Some say that would've been risky. However, what's risky about giving workers some of their own money back?, particularly when they most need it.
..But what's really scary ? what makes a fixed-rate mortgage seem like such a good idea ? is the looming threat to the federal government's solvency." (March 11, 2003)
Well I take back my doubt. He's making sense here and clearly foretold the 2009 deficit beating the prior record by $1 trillion, followed by a few more slightly smaller deficits.
I'm sure he's lately been advocating smaller government to reign all this in. He was clearly freaked in 2003, so must be almost paralized with fear now.
Krugman states: "When monetary policy is up against the zero bound, the optimal fiscal policy is to expand government purchases enough to maintain full employment."
However, he ignores the lesson from Japan's Lost Decade (article):
"Don't try to spend your way out of an economic trough. Japan ramped up government spending on public works projects, including bridges and river "improvement" programs that literally lined many waterways with cement. But it didn't work, and today the only evidence of this spending binge is the ugly slabs of cement that mar the Japanese countryside."
My comment: Today, Japan still hasn't completely recovered from the 1990 bust and has the second highest debt to GDP ratio in the world (Zimbabwe is first). Consequently, Japan is severely constrained.
Thank you, Mark, for a good belly laugh. Thank you fellow posters for some excellent documentation of many contradictory prognostications from Mr. Krugman.
He lost my respect when he did a postumous hachet job on Milton Friedman. Krugman seems to be a cautionary tale that partisanship seldom improves the quality of logic or the civility of discourse. Anger makes fools of us all.
Well I take back my doubt. He's making sense here and clearly foretold the 2009 deficit beating the prior record by $1 trillion, followed by a few more slightly smaller deficits.
I'm sure he's lately been advocating smaller government to reign all this in.
It's important to look at the dates. The point of the juxtaposition is that in 2003, when Bush was president, deficits were cause for alarm, while in 2009, when Obama is president, much larger deficits are no big deal.
Krugman is a political hack.
Anonymous said...
It's important to look at the dates. The point of the juxtaposition is that in 2003, when Bush was president, deficits were cause for alarm, while in 2009, when Obama is president, much larger deficits are no big deal.
Krugman is a political hack.
Yup, I noticed the date and even referenced the year in my last sentence. I imagine by that article date that he was concerned about the 2003 tax cuts bringing on that insovency.
He's clearly only concerned when government "revenue" might be cut and not when government spending is out of control. I guess insolvency through increased spending is ok.
Krugman's policy suggestions have nothing to do with reality.
His two paragraph statement above was written on December 29th, 2008-"Optimal fiscal policy in a liquidity trap (ultra-wonkish)" Krugman stated: "When monetary policy is up against the zero bound, the optimal fiscal policy is to expand government purchases enough to maintain full employment."
However, it was impossible to maintain full employment, because the unemployment rate was 7 1/2% in Dec '08, up from 4 1/2% in '07, and was expected to rise. Also, it should be expansionary fiscal policy instead of "expand government purchases." Fiscal policy reflects allocations of taxes and government expenditures.
These comments are VERY helpful in showing that the pod people have replaced the real Krugman with a mindless, robotic political hack.
But it would be helpful if posters would include the URL's or other references for their quotes. I'd hate to get suckered into putting out false info. After all, this IS the wild and woolly Internet!
Hey Richard Rider the link to what PeakTrader is commenting about is this one: Optimal fiscal policy in a liquidity trap (ultra-wonkish)
December 29, 2008, 8:27 pm
It comes from Krugman's drivel tube: The Conscience of TARd
Anyway, Keynesian economics is too generalized. Expanding government spending tends to be slow and inefficient, unlike tax cuts. Moreover, there are many false assumptions, e.g. "in a liquidity trap, once the interest rate hits zero, people will just hoard any additional cash." However, the U.S. may not be in a true liquidity trap, because if people could actually borrow at zero interest to pay off higher interest debt, and lower their monthly payments, then consumption can resume.
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