Why Economists Shouldn't be Listened To

It's not that Paul Krugman has taken time off, it's just that I tried, I really did, to get off that ship.  But here he goes again.

Please read this.  And don't get thrown.  It is not "wonkish" unless wonkish means deliberately obfuscating some pretty simple concepts.

Krugman presents the following graph:

He writes the following: "Now, in a perfectly competitive economy (don’t worry, we’ll talk about what happens "if not"* in a minute), we would expect the labor force to achieve full employment by accepting whatever real wage is consistent with said full employment. And what is that real wage? It’s the marginal product of labor at that point — which, graphically, is the slope of the aggregate production function where it crosses the vertical blue line." (* quotes added for clarity and emphasis added by me)

This is, so far as any economic theory can be, correct.  Krugman then goes on to make the point that under certain circumstances, technological improvements can lead to lower real wages.  This, too, is correct.  The workers may not share fully in the productivity gains.  So the next logical question is "so what?"  So long as the wage matches the marginal product of one's labor, then we're good.  Unless some people think it better to pay people for work they are not doing so long as those wages for unproductive labor are being paid by someone else, but who would be so damn fool as to think that's a good idea?

But before I come across as callous about people being paid less money for less work (yes, I understand fully the problems and pressure a family can face if, through no fault of one's own, if wages are lower in real terms in succeeding years), let me address what Professor Krugman skips over with an all-too-casual afterthought.  He writes: 

Start with the notion of an aggregate production function, which relates economy-wide output to economy-wide inputs of capital and labor. Yes, that sort of aggregation does violence to the complexity of reality. So?

Furthermore, for current purposes, hold the quantity of capital fixed and show how output varies with the quantity of labor.

In the first part he explicitly acknowledges that the aggregate models has no real bearing in reality.  Will that stop him?  Of course not.

In the second part, he “hold[s] the quantity of capital fixed” in order to show how his spurious function using a bogus model will affect real wages.  The problem is that in any real economy, the quantity of capital is not fixed.  And in a thriving free-market system (which ours isn’t, but if he can live in a fantasy world, why can’t I) far more capital is created than destroyed and everyone is better off.  Further, technological improvements affect positively all of the factors of production, if not there would be no increase in efficiency and thus it would not be considered a “technological improvement.”  Does a technological improvement increase all factors of production evenly?  No, of course not.  But productivity is increased.  And this benefits the economy as a whole, however marginally.  And that is reality.

On First Thought

After four years of mulling things over, Paul Krugman comes to the conclusion that he is, in fact, the smartest man in the world.  But woe is him, the world just won't listen.

Liars

It appears as though the 2000 election was what "radicalized" Paul Krugman. Because George Bush was lying during his campaign and the "media" wouldn't call him on it.

A presidential candidate making spurious claims during his campaign combined with a pusillanimous (and ignorant) press? This is what drove Krugman over the edge?

We are to believe that he was the Big Kahuna of reasonableness prior to 2000?

This after eight years of Bill Clinton, the physical embodiment of pure and puerile prevarication.

This coming from the same man who endorsed John Edwards for president.

The question becomes, which is greater, Krugman's insolence, his naivete, his disingenuousness, his dishonesty or the depths he will plunge to find any sort of ad hominem?

Big Lies

In a post titled "Romney's Big Lie," Paul Krugman places the following hypothetical in Mitt Romney's head:

Mitt Romney believes that corporations are people, and that only corporations and the wealthy have a right to be paid for the efforts. He wants to reduce middle-class Americans to serfs, forced to accept whatever pay corporations choose to give them.

His point being that Romney would be excoriated if he said such things. But the policies Romney favors would actually amount to this statement.

Romney's belief that corporations are people is not quite as nutty as Krugman would have his readers believe. I've asked before, why should a voluntary arrangement of several people have fewer rights than an individual person? At what point, at what critical mass, are rights forfeited? And how does requiring wealthy people to continue to pay more to the federal treasury, just not as much as the Obama administration and Krugman would like, constitute reducing middle-class to serfs? Who has been forced to accept the wages chosen to be given to him? A person may not like the wages being offered in return for his labor, but as far as I can tell these are still voluntary exchanges of labor for wages. If the genius professor has any evidence to the contrary, I'd love to see it.

He then quotes Romney directly to contrast it with his imagination and then writes, "But nothing Obama has ever said and none of his actions bear any resemblance to Romney’s portrait."

But Obama did say, "I think that when you spread the wealth around, it's good for everybody."

This supposes that elected officials and bureaucrats are less self-interested than their private sector brethren. They aren't. It also presumes that the "fair" distribution of wealth that is generated and earned by other people is a legitimate function of government. It isn't.

Beyond being completely wrong about everything, another spot-on piece by Professor Krugman.

Let Us Count the Ways

An idiotic post from the increasingly idiotic Paul Krugman regarding the Solyndra Scandal. This company was given more than $500 million of taxpayer money bankrolling a company that just happened to back the Obama campaign. Relativists will rightly point out that Republicans give sweetheart deals to companies that back them all the time. Libertarians will point out that government shouldn't be in the business of trying to determine which products will receive any form of subsidy; a pox on both their houses and the fact that both sides do the same thing doesn't make it less noisome.

Anyway, Krugman's post in its entirety:

The Solyndra Scandal

Haven’t written about this. But it is indeed a terrible scandal, because the private sector never ever puts money into ventures that end up failing:

That is the whole post.

He fails, of course, to realize the difference between private investors betting on what consumers will get behind via voluntary exchange in the market and government using money taken from individuals under pain of law and giving it to select individuals as political patronage. The failure of a private concern is equivalent to the government giving a half billion dollars of other people's money to a private firm in return for political support, regardless of the fact that the firm's business plan was fatally flawed from the start. In February, the government also gave up its "first lien" position in an asinine bid to attract more private investment into the failing company. So the chances of American's getting any of their money back is not virtually nil. It is absolutely zero.

Creative destruction, innovation, the beauty and power of the market are lost on the Progressive. Government deciding what is best for you, determined by base political calculus, is the way of things. And anyone else who disagrees with this worldview is just too stupid to realize how right, how brilliant. the Progressives are.

If Only You Knew Better

"if you just can’t believe I’m saying the things I say, at least consider the possibility that you’re the one who just doesn’t get it."

--Paul Krugman.

Missing the Point

Paul Krugman posts videos from time to time on his blog that he thinks...well, for some reason Paul Krugman will post a video on his blog and tonight he picked "Don't Give Up" by Peter Gabriel and Kate Bush.

I can't know this for sure, but there is a very good chance that I have listened to this song more than any other human being alive. I know it was written about a man facing economic uncertainty. But the message of the song is, quite obviously, that one shouldn't give up. It is a testament to the resiliency of the human spirit and an homage to the beauty of friendship.

Press on in the face of hardship...

don't give up
'cause you have friends
don't give up
you're not the only one
don't give up
no reason to be ashamed
don't give up
you still have us
don't give up now
we're proud of who you are
don't give up
you know it's never been easy
don't give up
'cause I believe there's the a place
there's a place where we belong

Pretty simple and yet powerful. And beautiful.

Which is why it is very weird that it is used by someone of the likes of Paul Krugman. You see, you don't need an indomitable spirit or friends and family to love and support you when you're down. In Krugman's universe, the government is just a giant insurance company with an army, not an institution created by men to insure their rights to life liberty and the pursuit of happiness (which includes the pain and learning brought by failure).

In his world, it is not the "us" who support you and your friends and family who know and love you and care about you. It is the collective "us", who support you because, well, if we don't buck-up when the hat comes around we're going to end up in jail.

It is the compassion and support that is done by the force of law that is so beautiful.

So don't give up...because there are some rich people out there who have too much of their own money. We're going to take it from them and make everything all right.

War is Peace; Freedom is Slavery; Ignorance is Strength

and....

Medicare Saves Money

I'm just going to cut to the chase on this one. Professor Krugman notes that Medicare "spending per beneficiary" has risen 400% from 1969 to 2009 adjusted for inflation. He counters this with the "inflation adjusted premiums" on private insurance which has increased 700% over the same time period.

• Notice he conflates "spending per beneficiary" with "private insurance premiums." Apples to apples would be spending per beneficiary of a patient with Medicare compared to a patient with private insurance. That's not what he's comparing and it is, at best, deceptive.

• He fails to mention that any costs for patients that will not be covered by Medicare are passed along to other patients. Not that this should ever be a problem because states are complicit with health care providers to defraud the federal government (that is, us) to keep the money flowing.

• Most importantly, private health insurance premiums are paid for by the individual and the firm he works for, whereas Medicare spending per beneficiary is a wealth transfer scheme, paid for by other people with money taken by the federal government under pain of imprisonment.

Professor Krugman is a disingenuous snake.

The Wonderfulness of Always Being Right

I'm always interested in books that other people like. I don't think it gives any significant insight into someone's soul or anything like that. Perhaps it does a little. But I just like to see what other people are reading, and a little blurb as to why or what they got out of it is always interesting. To me anyway.
And I don't limit this interest only to those with whom I agree. Which brings us to the crux of the post...
Our good friend Krugman had an interview where he was to name his five favorite books. I already knew about his affinity for Asimov's Foundation books. But it still creeps me out, his rationale. He admires the psychohistorians in the story, which is fine so far as it goes. But then he admits "I was probably 16 when I read it and I thought, 'I want to be one of those guys!' Unfortunately we don’t have anything like that and economics is the closest I could get."

The study and application of economics can save civilization. Especially if you're Paul Krugman.

But other parts of the interview stood out to me also.

"The purpose is actually to make a better world. So yes, I do feel that I am trying to do something that goes beyond just the analysis." Sorry, bud, but I can't think of anything you have done that has made the world a better place. Your work on international trade was great good stuff. But it hasn't changed the world in any significant way. And considering your articles trade mostly in half-truths, sanctimonious pablum and argumentum ad hominem, how exactly would this make the world a better place?

"Then I read Hume’s Enquiry, this wonderful, humane book saying that nobody has all the answers. What we know is what we have evidence for. We do the best we can, but anybody who claims to be able to deduce or have revelation about The Truth – with both Ts capitalised – is wrong. It doesn’t work that way. The only reasonable way to approach life is with an attitude of humane skepticism." Unless, of course, you are skeptical about Keynesian economics, progressive taxation, government intervention in the market or of the concept that the government is just a big insurance company with an army. Because if you don't agree with any of those things, then you're an idiot or you hate other people or both.

But the best is:

Wouldn’t some people accuse you of having an extremely strong belief system? Isn’t there a sense among liberals that, “We’re in the right so we don’t have to pay too much attention to conservative or Republican arguments”?

In my experience with these things – which I find both within economics and more broadly – is that if you ask a liberal or a saltwater economist, “What would somebody on the other side of this divide say here? What would their version of it be?” A liberal can do that. A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at. The reverse is not true. You try to get someone who is fiercely anti-Keynesian to even explain what a Keynesian economic argument is, they can’t do it. They can’t get it remotely right. Or if you ask a conservative, “What do liberals want?” You get this bizarre stuff – for example, that liberals want everybody to ride trains, because it makes people more susceptible to collectivism. You just have to look at the realities of the way each side talks and what they know. One side of the picture is open-minded and skeptical. We have views that are different, but they’re arrived at through paying attention. The other side has dogmatic views.

So the people, those presumptuous fools, who don't agree with Krugman and the like, those are the ones who are closed-minded. Progressives, Keynesians, et al. are the reasonable ones. They have perused all of the evidence and know the arguments coming and going, weighing everything carefully and judiciously and come to their convictions honestly. The people that don't agree with us? It is obvious that they haven't done all of the same things that we have because they don't agree with us. You see, we're right. We know we're right because we know what we think and what the others think (or at least have been told to think...dogmatically). We came to our conclusions after thinking.

I can't believe that I can still be surprised by the man's obnoxiousness, but there you have it.

How Big is Big Enough?

The great thing about Keynesian economics is that it purports to treat the thoroughly social science of economics as if it were a "hard" science like physics. Every problem can be expressed as an equation. The individual actions of millions of people can be expressed with self-fulfilling identities and oh-so-elegant graphs.

The funny part is that the economists come up with equations after the fact in order to explained what just happened, none of which is, ceteris paribus, repeatable. This is like scientists getting thrilled about predicting a solar eclipse after it happened. And then showing, in no uncertain terms, when it will happen again.

And being completely wrong.

Except, just like their brethren who pretend to predict the weather, economists never seem to be held accountable for all of the times that they are not just wrong, but fabulously wrong.

For illustration, we will take as a case in point the Smartest Man in the Universe, Professor Paul Krugman, Nobel laureate and professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University.

Dr. Krugman has said time and again that the reason that the stimulus passed by President Obama and the Democratic congress in 2009 didn't work was because it was too darn small. To refresh your memories, the administration advocated for and received a "stimulus" package that totaled $787 billion. This was less than 12 months after the Bush administration asked for and received a stimulus package of $152 billion. For those of you at home, that is $939 billion in spending and tax "stimulus" and does not include the two rounds of quantitative easing and other monetary tricks and levers that have been pulled by the Fed, nor does it include the bailouts of the auto industry or the TARP bailouts. Remember also that we were told (by very smart people) that absent this second stimulus package, the unemployment rate would climb up to 9% through the first three quarters of 2010 before edging down slightly and moving toward the "natural" unemployment rate of about 5%. If the stimulus were passed, though, unemployment would top out at about 7.9% in the 3rd quarter of 2009 and then drop slowly towards the natural rate.

I don't think I'm being too out of line to note that we are tip-toeing toward the end of the 2nd quarter of 2011 and unemployment is at 9.1%. So that would mean, not to put too fine a point on it, that they were astoundingly wrong in their projections.

Sherman, set the WABAC machine for November 2008. Our friend Krugman said the stimulus needed to be...how big, Dr. Krugman? "My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion." This was right after President Hope & Change was elected. And, as noted, the stimulus was significantly larger than what the Nobel laureate said it would need to be. Which was already "huge."

But 55 days later, it was too small. And this time, after the basic amount of the stimulus was hashed out, he had some math to show that it just wasn't going to cut it. Where was the math in November? Who knows?

But I do know this...Keynesian economics has been proven wrong. Again. For what would appear to be the thousandth time. Government spending does not "boost" demand. It takes it from elsewhere. What does Dr. Krugman say we should do now? Cut government interference in the market and let prices settle and clear?

Nope. Spend more money. Because even though deficit spending has all sorts of negative consequences, "the United States is able to borrow as of today at 3% interest rates for ten years." He wants to have another round of stimulus, equal to the first round. A total of $1.5 trillion of spending. What should the money that must taken from future generations be spent on? WPA style programs. "Hire a lot of people to people fill potholes." Please see here from about 16:00 to 17:30. The whole thing is a train wreck, and if these gentlemen are really influencing policy (they are), we are doomed. It should be noted that the US economy did rather poorly between Summer 1935 and early winter 1941.

The notion that the "stimulus wasn't big enough" is non-falsifiable. It is, in my opinion, wrong and no government intervention can mitigate or cure an economic bust. But I will readily admit that this is an opinion. So is Krugman's logic. But he doesn't see it that way. None of the Keynesians (and a lot of the monetarists, too) see it that way. Something that is non-falsifiable is not testable. If something can't be tested under controlled circumstances, it can't be proven true or false. That means it isn't science. And I don't care how many equations you come up with after the fact.

Eh, Canada?

Not to pile on, but our friend Professor Krugman also says that Medicare in the United States is "sustainable" because Medicare in Canada is sustainable. Let's get one thing out of the way quickly and agree with the premise that if you increase taxes and restrict consumer choices ("less open-ended and more serious about cost control" is how the Super Genius euphemistically presents it in his piece), then the program can be shown to be sustainable. On paper. I will glide by the fact that Canada has no need for any significant defense spending because she happens to enjoy the rather extraordinary free rider benefit of being attached to America.

I will instead focus on this line: "Now, Canadian health care isn’t perfect — but it’s not bad, and Canadians are happier with their system than we are with ours."

There are a few problems with this position. First, how exactly can we measure this? I'm sure there are polls out there, but seriously think about how this can be compared in any meaningful sense. To be able to have a preference, one needs to be rather familiar with both options. Just showing data that says x% of Americans are "somewhat dissatisfied" with healthcare compared to y% of Canadians is useless as far as comparison goes. I may not like my broadband provider. But that doesn't mean I necessarily prefer another broadband provider with which I have absolutely no familiarity, right?

Also, there also this:

More Funny Math

I'll skip the humorous tut-tutting Professor Krugman does in this post about another person's lack of civility. I'll disregard his almost pathological need to misrepresent facts and insult the intelligence and good faith of those not smart enough to agree with him. Par for the course.

I'll focus on one tidbit, Krugman writing: "He repeats the idea that nobody collected benefits in the beginning because life expectancy at birth was only 63 (life expectancy at age 65, which is what matters, was almost 80 for women and 78 for men)." emphasis added.

Retirement was set at 65 when Social Security was started because you were expected to die by then. Yes, it was well known that if you lived to 65, which you weren't expected to do, then the actuaries did account for the fact that you would live a few years longer. Good genes, non-risky behavior, diet and, again, good genes all played a roll in deciding how long after 65 you would live had you made it. But, and here's a very important point that Professor Super Genius* not only knows but purposely and maliciously misrepresents, you were not expected to live to see the age of 65. A majority of people would live (to 63), working usually 2/3 of that time and having a percentage of their wages taken from them and given to those lucky enough to keep going past the median mortality rate. This number has gone up significantly over the decades since it was instituted while we have only nibbled around the "retirement" age.

Why? Because it is politically risky to mess with a program where you take a little bit of money from a whole lot of people (via the payroll tax) and give it to others, but under the guise of the federal government "saving" it for you. An idea that was known all to well by the man we have to thank for this poorly run Ponzi scheme, Franklin Delano Roosevelt:

"I guess you’re right on the economics, but those taxes were never a problem of economics. They were politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my Social Security program."**

Krugman knows he is full of blarney (trying to keep it clean). And FDR knew he was creating a system that would be impossible, politically, to fix. It was established to create a political class of citizens who would then be beholden to and dependent upon, the federal government. The workers will feel trapped into continued support because of the money already taken from them and "invested" into the system.

*

**Arthur M. Schlesinger, Jr., The Age of Roosevelt, vol. 2, The Coming of the New Deal (Boston: Houghton Mifflin, 1958), p. 308-309

Funny Math

Glutton for punishment that I am, I was looking over The Universe's Smartest Man's blog and stumbled upon this little gem, titled Zombie Tax Lies (the idea being that the concept should be dead, but it keeps coming back, get it?).

His ire was gotten up, or rekindled anyway, by this post by someone named Jonathan Chait and this little ditty put out by an organization known as Citizens for Tax Justice.

Here's the re-cap: usually about tax time every year, people point out that the "wealthy" pay more in taxes; other people point out that, 1) that's only fair, because the wealthy steal their wealth from the surplus value of the laborers that they exploit and, 2) the wealthy really don't pay any taxes and really should be paying much much more, and the lying cheating bastards really should feel honored to do so.

The Smartest Man in the Universe, Mr. Chait and the Citizens for Tax Justice all fall into the "other people" category, and all throw out the same tortured logic to prove their point.

They do not contest that the top 1% of earners pay 38% of the take on federal income taxes, though none of them repeat the exact statistic because it would rightly disgust anyone of sound mind that 1% of the population would pay more than a third of the income tax collected. They all use the dodge that the federal income tax isn't the only tax paid. That state taxes and the "contributions" made to social security and medicare are regressive and therefore spread the tax burden more equitably...which of course justifies their belief that the rich aren't paying enough and should pay more.

On this, two points. First, the way progressives, liberal, communists, socialists, Marxists and Leninists use the word "regressive" when it come to taxation is fatuous. The thinking that someone making $20,000/year and pays 12.5% in social security taxes pays a higher burden than someone making $100,000/year and pays 12.5% in social security tax is regressive completely disregards what regressive taxes are: a decreasing rate as the base increases. Flat taxes are not regressive. Now, if in the above example the person making $20,000/year pays a $1,000 tax and the person making $100,000 pays a $1,000 tax, that would be regressive. People making more than $109,000 don't have to pay social security and medicare taxes, er, sorry, contributions because the benefits paid out are also capped.

Second, the federal budget is bigger than state and local budgets. Paying 38% of $1,366,241,000,000, which is $519,171,580,000*, is a whole lot more than whatever is paid in state taxes by the two lowest quintiles of income distribution. In the chart (above) that accompanies the three articles by the three "make them pay more" group, the top three quintiles still pay more as a percentage of all tax collected than they collect in total income, even with them gerrymandering the numbers in favor of their own argument.

No kidding. This is the evidence used to rebut the argument that the rich don't pay too much in taxes. This is the zombie that the Smartest Man in the Universe, for all of his intelligence, just can't slay. Why? Because you, you dolt, just aren't as smart as he and his friends are.

*numbers are from 2007, via wikipedia here.

Big and Getting Bigger

A great article by Robert Murphy on the growth of government under the current and previous administrations where he refutes evidence to the contrary promulgated fatuously by the World's Smartest Man.

The conclusion:

Experienced readers know that being a self-styled progressive means never
saying you're sorry. I know full well that Krugman's fans will be able to
explain away the above as a perfectly consistent record of economic
analysis.

Nonetheless, it's useful to periodically explain just how Krugman and other
proponents of big government try to frame the debate. Quite clearly, government
has been growing, particularly under the administrations of George W. Bush and
Barack Obama. Just as it is foolish for Krugman and other Democrats to deny the
obvious facts of the Obama record, it is likewise absurd when many conservative
Republicans make excuses for the Bush years. The only way to arrest this trend
is for Americans to oppose big government, period, regardless of an "R" or "D"
after a president's name.

Krugman, Yet Again

Paul Krugman tries to show the world again how he and other (like-minded, of course) economists are just smarter that those knuckle-dragging capitalists pigs that actually make the world go 'round.
Macroeconomics is hard, far too hard you regular folks to understand. Firms, he claims, are "open systems" The macro-economy is bound by the identity Y=C+G+I+NE* and companies are free to do whatever they want.

He forgets that firms are also bound by an identity, A=L+OE. Assets are equal to liabilities plus owner's equity. Spending money today either comes from cash on hand or you pay a premium (interest) and amass liabilities to borrow money. This liability is someone else's asset. While there is interdependency, just like there is in the world economy, there are no fully closed systems or fully open systems.

But to his main point, one that many of his commenters agree with, is that macroeconomics is just too hard for businessmen to understand is horsefeathers. Macro is relatively straightforward. To be sure it was been grotesquely over-complicated by those who try to make a social science based mostly on individual preferences (billions of times over) and mostly rational expectations into a hard science that has the complicated predictability of, say, physics, which ain't going to happen (one of the reasons Austrian economists eschew neoclassical mathematical models isn't because they aren't good at math, they have passed the same calculus classes as any other professional economist, it's because all of the models that have ever been designed only explain things after the fact when data have been manipulated and have never predicted anything).

*Y=C+G+I+NE is GDP. Production (Y) is equal to Consumption (C) plus Government spending (G) plus Investment (I, which is equal to national savings) plus Net Exports. From this relatively simple formula there are spin-offs galore, caveats, not-reallys and other obfuscations. But for (very) general purposes, it works. Stating broadly what a nation's worth is (GDP) where being off a few hundred million is inconsequential (and I'm not being a smart alek here) is one example.

Krugman on Libertarianism

Paul Krugman writes that Libertarianism won't work because it requires "incorruptible politicians."

Er, no. Libertarians seem to get the fact that politicians are just as corruptible and self-interested as everyone else, which is why the bishopric of politicians should be strictly confined and closely monitored. Libertarians would block an increase in the level of damages on a tort. Libertarians would realize there is no need for legislators to get involved in the business of the judiciary.

It seems to me that Progressives and Liberals like Krugman are the ones who wish to give politicians ever more power and responsibility. Which is funny, because he seems to realize that politicians are corruptible.

Don Boudreaux and David Boaz weigh in, basically saying the same thing. And, of course, he is taking Friedman out of context, because he is a lying, disingenuous prick.

Bad Policy Advice

Posted in its entirety from mises.org:

Krugman's Intellectual Waterloo

Mises Daily: Monday, June 22, 2009 by J. Grayson Lilburne

Last Monday evening, Lew Rockwell, from a tip by someone named "Travis," posted this damning quote of Paul Krugman's from a 2002 New York Times editorial:

To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Krugman. 2002. Calling for a housing bubble.

What's more, by explicitly calling for a new bubble to replace the recently burst one, he anticipated by 6 years the Onion's hilarious "report" that "demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income." Except Krugman was being serious.
The quote caught on in the blogosphere, to such an extent that Krugman actually responded in his New York Times blog Wednesday morning:
Guys, read it again. It wasn't a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that's just what happened.
So with a deft little two-step, Krugman paints himself as a doctor who gave an excellent diagnostic, and not a disastrous prescription. One of his ditto-heads posted on his blog that saying Krugman advocated or caused the housing bubble was "Like saying Nostradamus caused the rise of European fascism."

The Lone Gunmen
At the same time, with his headline of "And I was on the grassy knoll, too" he paints his critics (especially the Austrians) as conspiracy theorists, akin to the Lone Gunmen (the Kennedy-assassination theorists from the X-Files TV show). Just like with the matter of Jekyll Island and the events leading up to the creation of the Fed, an obvious conclusion from a matter of public record is portrayed by establishment sophistry as unmoored crankiness. And once again, it works: another ditto-head dismissively remarked "no need to reason with those folks."
Even economist Arnold Kling bent over backwards to interpret the column in a benign light:
He was not cheerfully advocating a housing bubble, but instead he was glumly saying that the only way he could see to get out of the recession would be for such a bubble to occur.
Krugman thanked Kling for his "gracious, sensible explication". I can just imagine Kling running around his office in glee at having been nodded at by a celebrity Nobel Laureate, exclaiming, "He likes me! He likes me!"
Mark Thornton on the Mises blog followed up with a devastating collection of 2001 Krugman quotes clearly documenting his support for inducing a housing bubble. The most damning of this batch is the following from a 2001 interview with Lou Dobbs:
Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. [emphasis added]
How the hell can anyone spin that as a purely academic musing, and not a policy recommendation for artificially inducing housing spending?
Ignoring the other quotes for a moment, and just judging from the 2002 column, did Krugman support pumping up a housing bubble or not? Given that, even in his recent blog defending himself, he explicitly stated his belief that "the only way the Fed could get traction would be if it could inflate a housing bubble," there are only two possibilities:
He did not support inducing a housing bubble, and wanted the Fed to not fight the recession.
He did support inducing a housing bubble.
Anyone even somewhat familiar with Krugman's attitude toward Fed activism should know that proposition #1, that Krugman supported a do-nothing policy, is preposterous. So, especially after bringing back in the quotes gathered by Mark Thornton, the case for proposition #2 is overwhelming.

And what about his strawman protests that he didn't cause the housing bubble, much less the Enron scandal or Kennedy's assassination? The man is willfully missing the point. What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven't fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then.

Me: If he hasn't made a habit, in his polemics at least, of being so fabulously wrong and pig-headed, I would give him the benefit of the doubt as to being misinterpreted. He's a Keynesian on steroids (everything can be fixed by more manipulations); he wrote what he wrote; he's been wrong on so many items and he was wrong on this one as well.

This One's Not My Fault

I'm really trying to leave Paul Krugman behind me. I really am.

But then he goes and writes something beyond the pale, even for him:

All of this goes far beyond politics as usual. Democrats had a lot of harsh things to say about former President George W. Bush — but you’ll search in vain for anything comparably menacing, anything that even hinted at an appeal to violence, from members of Congress, let alone senior party officials.

As Greg Pollowitz writes at National Review, just google "Kill George Bush" and see what you come up with.

Also, I stumbled upon this article recently. It appears the little Paul is more like John with his own little Yoko pulling his strings (or a Jonah Goldberg put it: "It seems fair to say that in the battle for Paul Krugman's brain, his wife is winning.") And the names they gave their cats. Yeeesh.

All right. That's it. I'm really hoping this is it. I almost don't think he could write anything dumber than what he wrote, and I seriously doubt there could be anything more preening and yet explanatory of his thinking, behavior and distortions all at the same time.

My Stars & Garters

In what I hope will be the last post I ever write concerning Paul Krugman, let's close with a bang.

I agree whole-heartedly with this column.

Here are the key points:

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission.

Many progressives were deeply worried by this proposal, fearing that it would turn into a kind of Trojan horse — in particular, that the commission would end up reviving the long-standing Republican goal of gutting Social Security. But they needn’t have worried: Senate Republicans overwhelmingly voted against legislation that would have created a commission with some actual power, and it is unlikely that anything meaningful will come from the much weaker commission Mr. Obama established by executive order.

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

This is the main reason I made the switch to the Libertarian Party. Sure, my guy will never have a chance to win. But when one of them get elected, they do (or try to do) what they say they're going to do. The Republicans during the 90s & 00s were a joke. They talk big when out of power and spend just like the Democrats when they're in power--except they have tax cuts, which I like, but if you continue to cut taxes and never cut spending you then raise future taxes while throwing the interest rate off kilter and crowding out private investment. In other words, they end up doing exactly what they accuse the Democrats of doing.

80% of federal agencies (and workforce) should be eliminated with an across the board 20% cut in staff (and budget) in every agency that remains (a la Jack Welch). And yes, you can cut the size and amount spent on the military while not hating America, loving communists and letting the terrorists win.

Anyway, Krugman is right. The Republicans have never specified what should be cut. When W proposed partially privatising Social Security (pusillanimous sod should have called for the elimination of it) there was one small problem. Right now the feds still collect more in FICA "contributions" than they pay out--they have since the program was started, though they won't be for long. The overage is spent on other things and "replaced," if you will, with IOUs (debt sold to other countries in the form of interest bearing bonds. Bush never proposed how the "hole" in funding should have been filled, or what was to be cut to make up the difference. So it wasn't a serious proposal and was treated as such. And this is only one of several thousand examples from the last 20 years.

Then again, Democrats keep promulgating taxes on "the rich" and then punch it full of loopholes so that only the very dimmest of wealthy people would actually pay the tax. And guess what happens? Revenues usually drop. They add the loopholes so that neither they nor their friends or patrons actually have to pay the tax--only the "bad" rich people will pay it or be excoriated for avoiding the tax; never mind that tax avoidance is not only legal and logical, but responsible behavior (anyone who didn't exercise every legal option to retain as much of his legally obtained property and avoid having it confiscated would be considered mad, or at least "irrational" in the jargon of economists).

So there it is, Paul Krugman and I are in agreement...Republicans are just as scummy and self-serving as their Democratic brethren. Screw 'em all. Now if Krugman would only go away.

Krugman Don't Know Health Insurance

I could have told you that, but this guy does it so much better. (More here).

I love the video he links to...