Paul Krugman is NOT a raving Marxist. If you were to follow the back-and-forth in the blogosphere about the importance of the Keynesian paradigm, whether the stimulus was big enough, whether we are in a liquidity trap, whether the FED has any power to reflate the economy right now, whether this is an appropriate time to do fiscal expansion, whether we ought to worry about who owns the US debt, whether the US debt is too large, how to create jobs, what is causing unemployment to remain high you will very quickly find two things:
- That you wished you had a real macro course in college, or knew a way to begin learning it properly now.
- That the arguments very rapidly devolve into nasty, vituperative, uncharitable, ad hominem attacks, and they come from both sides.
The nature of the discourse is seriously discouraging. If the stakes were not so high I would probably just turn off my computer and focus on the one or two issues that are most important to me. But these are important issues. The problem as I see it is that many debates get tied into one. Implicit in almost any of these debates is an argument about how big government should be, what the empirical evidence in economics says, and the personal preferences of those engaging in the argument. The arguments get contentious because these are all conflated, and also because there is a lot of mistrust out there. Not only do people not trust one another, I am not sure they understand one another.
I’ve seen libertarians, classical liberals, conservatives and Republicans all make comments like, “Krugman is left of Obama,” Krugman is a Marxist” and so forth. He is not. Nor was Keynes. What Krugman and Keynes see is that there may be structural problems in market economies that may be hard to resolve themselves, and they also know that an institution with the power of a government does, theoretically, have the ability to remedy some macroeconomic problems. Neither Keynes nor Krugman is saying that government ought to employ all 150 million people who are currently in the labor force. Neither Keynes nor Krugman, to the best of my knowledge disavows the role that prices play or the importance of property rights for organizing economic activity. What they are saying is that when there is persistent unemployment and that which exceeds some “natural rate” (google the term NAIRU for some information) then it is possible for policy to improve things. If 15 million people are unemployed solely because of a coordination error or some inexplicable fall in “aggregate demand” then they see it as a moral responsibility for something to be done. They view the unemployment of 15 million and the falling wages of others as a tragedy, a needless tragedy and I suspect they are completely unglued at the idea that some people do not see things that way.
By making that observation above I am not subscribing to their moral view, nor to the prescriptions they are proposing. But those views do not imply ipso facto that they are anti-market statists. Now, I have my own view on why so many people are unemployed, on what appropriate public policy would be, whether said unemployment is a national tragedy, on the implications for liberty in all of this and so forth. But this is not the point of the post.
Let me be clear here. What Krugman and others nominally on the left are arguing right now is that we have an aggregate demand problem. Now, I abhor the entire notion of aggregate demand as a meaningful concept, but be that as it may, they are talking about policies that would largely be consistent with what Hayek himself would have permitted in Constitution of Liberty. As a way of stimulating the economy they are not suggesting a nationalization of farms, grocery stores, and the like. They may be discussing higher taxes on the rich – but that is a byproduct of other awful policy, some of which the right is responsible for. They are talking largely about a new direction for monetary policy that would have central bankers target nominal Gross Domestic Product. This is something Milton Friedman would have advocated, and while I can make a strong Austrian case for why this is offensive to me and my liberty, it is not exactly what one conjures up when they think of leftism. Indeed, a nominal GDP targeting policy would be a move toward greater liberty than what we have today. The other thing that Krugman is talking about is whether fiscal policy expansion makes sense right now. This does seem to have a more statist twinge to it. But fiscal and monetary policy are now closely related and one does not have to be a left wing zealot to argue that the fiscal policy moves being proposed are really monetary policy tools in disguise. And to be quite honest, had we had a massive targeting of nominal GDP starting in 2008, we would have avoided even having the debate today, and we probably would have had a better chance of getting other micro-policy right. But, those on the right generally conflate all kinds of government actions. Look, I want everyone to read Human Action, I want everyone to read the Road to Serfdom, and so on, but that does not imply that knee-jerk anti-government sentiment is the right way politically to get to a freer, safer and better world. I could tell a long story about the health care debate to illustrate my point. And no, I am not “caving” in to giving up a little liberty now, not at all. So here we are having massive, nasty and wasteful food-fights. Any good ideas held by any political opponents will never be uttered or considered seriously by opponents, and we end up grafting new public policy onto an already Frankenstein-freakish array of existing policies which make future reform even more difficult.
It is almost nauseating to have to be called an economist today. I want a new name. It is even worse that because I happen to cherish my liberty, and because I do not believe that everything out there today is a cosmic national tragedy, that I am a reactionary zealot that is in the pocket of some nefarious force. If I didn’t know better I think we’d all be matrix programmed into a really bad movie.
I’ve been following your posts for a few months now and have had the chance to sit down and talk to you in person about various subjects, but of all I’ve discussed with you or have heard you lecture about, this topic is probably the most important to me. Because of the nature of debates, seldom do I (or likely does anyone) get anything worthwhile from them, even when it’s a debate between two “academics,” let alone those that actually end up making our policy decisions in government.
I hope that you soon try to get a piece like this published in a major newspaper or other form of media so that rather than this just be a short opinion piece on your blog, it can turn into a real discussion about the nature of discourse (and a good example of what it should look like).
I happen to agree with you on every point you’ve made here.
I’ve always thought the problem stems from armchair “economists” who have marginal knowledge on the subject, but treat it as if its an engineering science. Both sides are guilty of this, but I find the Ron Paul fans particularly unreasonable (1. because I agree with a lot of what they say, and 2. because they should know better). But that is human nature. We do the same thing on every other topic. Economics just happens to be expansive enough to cause problems when we do.
There is a difference between creating a job by giving someone a government paycheck, and someone creating a job to employ someone who does something that at the root provides wealth, even indirectly.
The whole aggregate demand theory depends on the idea of stimulus, another way of saying that if you create money, you will get prosperity for free. What Paul Krugman believes is almost beside the point, except for his influence among government. What his theories are or are not I do not care.
What matters right now is whether we choose growth, which employs people, and gets us out of the whirlpool. Are we going down into the same abyss that is the UK or Europe, where a failing economy makes unemployed people, who are coddled at age eighteen, going on the dole, as ignorant as any human can be? That is going down the drain to entropy.
The facts are clear: wise men have led, or forced, people to ruin.
A while ago wintercow speculated about using a lottery to elect our rulers. I assume he assumed some rules like property rights, and some rulers to enforce them and some civility. Wintercow is on the right track.