Posts tagged ‘Paul Krugman’

January 8, 2013

Krugman: I’m Kinda of a Big Deal

by Eric T. Phillips

Krugman is very flattered that some people think he should be the next Treasury Secretary, but reminds his supporters that he already has more influence than “most senators.” He writes:

So first of all, let’s talk frankly about the job I have. The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?

(Hat tip EPJ)

November 4, 2012

Recent Austrian Articles, 11/4/12

by Eric T. Phillips

Maybe Obama Doesn’t Believe in Government, Either

William Anderson compares FEMA’s bungled response to Sandy to its disastrous response to Katrina. Paul Krugman blamed FEMA’s performance in the latter case on the Bush administration’s supposed hostility to government intervention. How has he explained this most recent debacle? “So far,” Anderson writes, “there is silence from the Great Man at Princeton.”

Gas Lines are Not Sandy’s Fault

Jeffrey Tucker analyzes the chaos caused by the government’s response to Sandy, especially its “anti-gouging” laws.

Gouging Reality

Donald Boudreaux explains the pernicious effects of anti-gouging laws to readers of the New Jersey Star-Ledger.

The System is Rigged: The Futility of Politics

Robert Murphy argues that education, not participation in the formal political process, is the most promising route for the libertarian movement. The Ron Paul campaigns were effective not because Ron Paul had any chance to be elected president, but because they served as vehicles for education about liberty, constitutionalism, and noninterventionism.

“Mises’ Calculation Argument: A Clarification”

Dan Mahoney identifies two facets of Mises’s famous argument on the impossibility of economic calculation under socialism. First, that no profit-and-loss calculations can take place under socialism since the prices on which these calculations are based would not exist. And second, that there can be no alternative means of allocation because of the subjective nature of value. Mahoney argues that these two points are distinct arguments and should not be conflated.

August 25, 2012

Krugman: I’m Ellsworth Toohey!

by Eric T. Phillips

He admits it.

July 17, 2012

Krugman, GDP, and Entrepreneurs

by Eric T. Phillips

The other day, Paul Krugman argued that successful businessmen and entrepreneurs are not drivers of economic growth. Here’s the relevant part of his July 9th post:

So, imagine a Romney supporter named John Q. Wheelerdealer, who works 3000 hours a year and makes $30 million. And let’s suppose that he really does contribute that much to the economy, that his marginal product per hour — the amount he adds to national income by working an extra hour — really is $10,000. This is, by the way, standard textbook microeconomics: in a perfectly competitive economy, factors of production are supposedly paid precisely their marginal product.

Now suppose that President Obama has reduced Mr. Wheelerdealer to despair; not only does the president waste money by doing things like feeding children, he says mean things about some rich people, which is just like the Nazis invading Poland, or something. So Wheelerdealer decides to go Galt. Well, actually just one-third Galt, reducing his working time to just 2000 hours a year so he can spend more time with his wife and mistress.

According to marginal productivity theory, this does in fact shrink the economy: Wheelerdealer adds $10,000 worth of production for every hour he works, so his semi-withdrawal reduces GDP by $10 million. Bad!

But what is the impact on the incomes of Americans other than Wheelerdealer? GDP is down by $10 million — but payments to Wheelerdealer are also down by $10 million. So the impact on the incomes of non-Wheelerdealer America is … zero. Enjoy your leisure, John!

Treating aggregates like GDP as the fundamental basis of economic analysis leads to terrible and misleading arguments like this. As William Anderson notes, Krugman’s former professor Paul Samuelson used GDP models to praise the planned economy of the Soviet Union, which he estimated would overtake the American economy in size sometime between 1984 and 1997. The problem with Samuelson’s argument was that it lumped together low quality and misallocated goods into a meaningless aggregate. Krugman makes a similar mistake by lumping together different types of labor, of equating the work of a productive entrepreneur with that of any other member of the economy.

Let’s make Krugman’s argument more concrete so we can trace out where he goes wrong: say John Wheelerdealer is the inventor and marketer of the ipod. And say, just as in the original example, he decreases his output from $30 million to $20 million. It’s true, as Krugman argues, that this action has no impact on the monetary incomes of non-Wheelerdealer America. But this does not mean that the economic well-being of non-Wheelerdealer America is unaffected. Ipods are by far the most popular type of portable mp3 player, and with our entrepreneur on vacation for 1/3 of the year, fewer of them will be produced. All else staying equal, their price must increase, and consumers on the margin will be forced to buy less desirable knock-offs. In other words, while the incomes of non-Wheelerdealer America do not change, the buying power of those incomes does.

The effect is obviously much larger when high taxes and onerous regulations decrease the output of entrepreneurs across the economy. The negative effects, however, are unseen. We can only talk about what could have been. And that’s why bad economists like Krugman can get away with using accounting tricks to argue the absurd.

July 13, 2012

Krugman v. Schwartz and Sanchez de la Cruz

by Eric T. Phillips

This video has been making the rounds; I’m re-posting it because it perfectly illustrates what I was talking about in my last post. On the one side you have Pedro Schwartz, a man who stands up and gives a passionate speech about economic topics in a language that is not his native one. And on the other hand, you have a defensive, mumbling, and condescending Krugman slouched back in his chair.

(Hat tip Manifest Liberty)

Also, see Krugman’s ridiculous response to Diego Sánchez de la Cruz’s question about his repeated calls for the Fed to create a housing bubble in the early 2000’s:

(Hat tip EPJ)

He was joking, of course! Everyone read Krugman’s funny joke:

A few months ago the vast majority of business economists mocked concerns about a ”double dip,” a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.

The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. 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.

Hilarious. We have a modern-day Jonathan Swift on our hands.

And just in case you think I’m leaving out the punch line, here’s the next paragraph:

Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman’s crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.

So unfortunately, 2002 Krugman argues, it looks like Greenspan won’t be able to inflate the housing bubble to save the economy.

No wonder he hates public debates.

July 11, 2012

Krugman: I’m Too Good for Public Debates

by Eric T. Phillips

That’s basically what Krugman says to this caller who asks him why he won’t debate Robert Murphy. Debates are just “public circuses” he says:

I guess for Krugman the Webster-Hayne debate, the Lincoln-Douglas debates, and the Nixon-Kennedy presidential debates were just useless public spectacles then. Or maybe he’s just defensive about his atrocious debating skills.

The ancient Greeks believed that a man’s rhetorical skills were directly related to his intelligence and wisdom. Socrates even criticized the invention of writing for “imparting forgetfulness in mens’ souls.” The idea was that for knowledge and wisdom to be truly internalized, it had to be remembered. The man who constantly has to refer to “external written characters,” according to this view, is not wise at all. He does not know the truth; at best he simply knows the truth is written down somewhere else.

As Brett and Kate McCay explain:

…if you were an ancient Greek and busted out some speech notes in the Assembly, you’d probably be laughed at and mocked as weak-minded. The canon of memory then was in many ways a tool to increase an orator’s ethos, or authority with his audience.

We need not be as strict as the Greeks to expect an important public intellectual to be able to defend his ideas in public. There is a time for writing technical articles in obscure peer-reviewed economics journals. But there’s also a time to defend the ideas developed in those journals in public, for an audience that hasn’t taken courses in differential calculus and matrix algebra.

June 7, 2012

Paul Krugman on Estonia

by Eric T. Phillips

Krugman put up one of his snide blog posts yesterday about Estonian austerity measures and their effect on the economy. Shockingly, Krugman is not impressed about the economic performance of this little Baltic state which, unlike other European countries, has actually marginally cut spending (by around 7% since 2010 based on OECD data). He does actually concede though, that Estonia has undergone a “significant but still incomplete recovery,” a concession that undermines the Keynesian theory he relies on as he endlessly calls for more spending and inflation. The 7% decline in government expenditures did not trigger the Keynesian death spiral where lower spending leads to lower profits, less hiring, and even less spending and on and on. The best Krugman can come up with is that the recovery is not complete. Okay. But imagine the prognostications of doom he would be posting if the U.S. government was considering actually cutting spending by 7%–would he argue that such a program would merely lead to an incomplete recovery? To ask the question is to answer it–he’d be predicting the onset of a new great depression.

Estonia is a small place, and what makes this issue more interesting is that its president is not above calling out a New York Times columnist on Twitter. Yesterday he tweeted:

Let’s write about something we know nothing about & be smug, overbearing & patronizing: after all, they’re just wogs:

Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a “wasteland”. Must be a Princeton vs Columbia thing [Ilves went to Columbia for undergrad.]

But yes, what do we know? We’re just dumb & silly East Europeans. Unenlightened. Someday we too will understand. Nostra culpa.

Let’s sh*t on East Europeans: their English is bad, won’t respond & actually do what they’ve agreed to & reelect govts that are responsible.

June 6, 2012

Even Obama’s Own Supreme Court Nominees Think His Administration Has a Warped View of Executive Power

by Eric T. Phillips

Ilya Shapiro of the Cato Institute points out three recent unanimous Supreme Court decisions that went against the Obama administration. In Hosanna-Tabor Church v. Equal Employment Opportunity Commission, the administration argued that a church violated the Americans with Disabilities Act by firing an employee who threatened to sue over an employment dispute instead of working out the problem internally as the church’s doctrine requires. In United States v. Jones, the administration argued that it has the authority to secretly place GPS tracking devices on suspects’ cars without first obtaining a warrant. And in Sackett v. Environmental Protection Agency (which I discussed here), they argued that people the EPA deemed to be in violation of the Clean Water Act had no right to judicial review.

The administration could not get even a single liberal justice to agree with its rationales for essentially unlimited power. “If the government loses in the health-care or immigration cases,” Shapiro argues, “it won’t be because its lawyers had a bad day in court or because the justices ruled based on their political preferences. It will be because the Obama administration continues to make legal arguments that don’t pass the smell test.”

Also on the Wall Street Journal’s website today, see James Taranto discuss Elizabeth Warren’s gaming of the affirmative action system to get a professorship at Harvard Law and see James Freeman on Paul Krugman and Larry Summers’s endless calls for more government spending.


June 4, 2012

How to Defraud Small People Out of their Savings

by Eric T. Phillips

I just translated an Austrian writer’s critique of Paul Krugman’s demand for ever more inflation in Europe. The inflation rate that Krugman demands, Christian Ortner writes, “is about as socially responsible as having child labor in uranium mines.”

Paul Krugman is the chief ideologue and torch bearer of the political and economic school of thought that eschews the idea of saving during a debt crisis, preferring to accrue still more debt and furiously run the printing press. Among politicians and voters, this ideology is obviously enjoying great popularity. The electoral victory of the socialist François Hollande in France ensured the triumph of this intellectual battle in large parts of Europe. In contrast to the supposedly misanthropic, cold ideology of neoliberalism, Krugman’s school of thought is seen as the more socially responsible and altruistic.

Krugman does not really deny that such a policy will lead to higher inflation and the devaluation of people’s savings; he simply thinks it’s justified. Thus, he regularly calls on the European Central Bank to give up its “obsession with price stability.” Although doing so would be flagrantly illegal and politically corrupt, that does not seem to be a valid counterargument to Krugman. He believes 3 to 4 percent inflation to be quite okay, and even more than 4 percent in Germany.

Read the rest.

May 23, 2012

Salerno on Horwitz

by Eric T. Phillips

A few days ago, I quoted Steven Horwitz’s blog post on government involvement in banking before the creation of the Fed, a time that Krugman ridiculously claimed represented an era of laissez-faire banking. The interventions Horwitz mentions are important enough, but as Joe Salerno points out today on the Circle Bastiat, they are tangential to the central issue–how the National Banking System then in existence operated as a quasi-central bank. Salerno explains:

Horwitz seems to imply that the panics were  isolated events that were somehow caused by sudden monetary stringency when in fact the very opposite was true.  As Rothbard shows in his masterful discussion of the National Banking era in A History of Money and Banking in the United States (pp. 132-79), every panic was preceded by an expansion of the money supply. And during the panic of 1873, there was no contraction of the money supply, while there was a very mild one in 1884.   As a free banker, I would have expected Horwitz to  counter Krugman’s nonsense by pointing to the inflationary, quasi-central  banking cartel that existed during the Gilded Age, rather than carping about minor regulations that may have curbed the ability of banks to inflate their way out of difficulties caused by previous inflation.  And why no mention of the banking cartel’s “clearing house certificates” as fostering systemic moral hazard and undue credit expansion among banks?  Doesn’t Horwitz ascribe to the oft-repeated free banker doctrine, “Every bank on its own bottom.” Finally, how does Horwitz square his idiosyncratic financial-regulation theory of panics and recessions with the Austrian Theory of the Business Cycle?  He sounds like a supply-sider to me.


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