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Isn’t there a Paul Krugman in all of us?

December 6, 2011


While he’s denied all resemblance to the above Mr Clooney, there’s no doubt that Krugman’s been on the war path as of late.

I like Krugman. I sure don’t agree with all of his theories – like many New Keynesian economists, he brings to mind Lisa Simpson’s classic “as usual, the playground has the facts right, but missed the point entirely” (or perhaps more correctly: New Keynesians get the point of what to do, they just completely miss why) – but there’s no doubt he’s a rational man and an excellent scholar, and one whose opinions have developed over time. Those who cast him as some kind of socialist big government apologist should really remember that Krugman considered fiscal policy as largely unnecessary for a good portion of his life (incidentally: Keynes himself was never a socialist, and much of his motivation in writing the General Theory was so as to avoid any potential socialist or fascist revolution). Indeed, there are many huge disparities between Krugman’s theory and Keynes’, to the extent that one wonders if Paul ever read the General Theory before he wrote an introduction for its new publication, but I’m willing to forgive all of that. After all, the left should really avoid making enemies of its friends.

At any rate, between pointing out the completely false predictions of economic gurus and strangely prolific utter falsities, it’s clear that Krugman is on the right side of the facts and unfortunately the wrong side of institutional power. You’ve got to feel for him, having to endure the same old nonsense that’s repeatedly proven to fail, when all the solutions lie right at our fingertips. Sure – there’s no pleasant way to get out of our current predicament, but there’s one way, in which we destroy speculation by reforming long-term budget issues through government-led economic growth, restoration of unemployment and the establishment/maintenance (depends country to country) of a proper safety net, which commits the US and EU to full employment and better welfare for all, and then there’s the other way, in which we increase speculation by not allowing for any inflationary processes to occur in the core of Europe (to compensate for the inflation that the PIGS countries experienced: this kind of stuff has to be balanced when you share the same currency) or the US, force people into unemployment through a reduction in government demand and subsequently investor expectations, and subsequently into poverty through the cutting of safety nets, forcing the Euro to collapse. Oh and did I mention that deficits will immediately balloon, as they have in the UK already? Look:

The other thing this graph demonstrates is how much worse the UK’s predicament was 70 years ago than it is now. It’s a real credit to the media for failing to call out any of the nonsense purported by the German government and the European Central Bank

Most importantly of all nowadays, he’s one of the few mainstream commentators (I’ll give credit to some MSNBC hosts who also seem to recognise this) that understand the false dichotomy of the modern media: both parties are not in fact, just as valid as each other. When one diverges from facts, their argument also diverges from relevance, as he explains so well here:

As we wait to see whether the GOP nominates the guy who claims that his health plan was nothing like Obamacare, oh no, or the guy who claims that Freddie Mac paid him $1.6 million as a historian, one thing is obvious: this election is going to pose a major challenge to the news media. How will they handle the lies problem?

I’m not optimistic.

Back in 2000, George W. Bush made a discovery of enormous consequence: you could base a whole political campaign on claims that were flatly untrue, like the claim that your big tax cuts for the wealthy went to the middle class, or the claim that diverting Social Security funds into private accounts would strengthen the system’s finances, and reporting would never point this out. That’s when I formulated my doctrine that if Bush said the earth was flat, headlines would read Views Differ on Shape of Planet.

All indications are, however, that Campaign 2012 will make Campaign 2000 look like a model of truthfulness. And all indications are that the press won’t know what to do — or, worse, that they will know what to do, which is act as stenographers and refuse to tell readers and listeners when candidates lie. Because to do otherwise when the parties aren’t equally at fault — and they won’t be — would be “biased”.

This will be true even of those news organizations specifically charged with fact-checking. Yes, they’ll call out some lies — but they’ll also claim that some perfectly reasonable statements are lies, in order to keep their precious balance. This is already happening: as Igor Volsky points out, one of the finalists for Politifact’s Lie of the Year is a Democratic claim — that Republicans want to abolish Medicare — that happens to be entirely true.

This will not be a fun year.

Thank you Mr Krugman, you’re doing Poseidon’s work. Even if your microfoundations are based on complete disproven lala-land nonsense, your macro is always delightful.


From → Economic, Political

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