David R. Henderson  

Krugman's Collectivism

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When someone accuses someone else of stupidity and the someone who does the accusing is generally pretty smart, I expect that the accusation, even if nasty, will at least hit the target. Not so Paul Krugman's attack on Ohio Republican congressman John Boehner. Before you accuse me of being in Boehner's pocket or even in his camp, you should know that for the entire time George W. Bush was in office there was little about Boehner I liked other than that he looks vaguely like the late Steve McQueen. In short, I hold no brief for Boehner.

So what, according to Krugman, was evidence of Boehner's stupidity? The following statement:

Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?

And in case you think Krugman criticized Boehner for thinking Fannie and Freddie were at the heart of the meltdown, that wasn't it. Instead, according to Krugman, because Fannie and Freddie are government-owned, they can't be rewarded with taxpayer dollars. Krugman makes explicit his belief that taxpayers are the government. That's not evidence of Krugman's stupidity. It's much, much worse. It's evidence of Krugman's collectivism. What collectivists, whether they were socialists, fascists, or communists, had in common was their view that society equals the state.


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CATEGORIES: Economic Philosophy



COMMENTS (12 to date)
liberty writes:

It is actually worse that that-- he makes two serious mistakes.

He conflates government and taxpayer, and he also fails to see that government can reward something that it owns.

In the Soviet Union, all firms were owned by the state. But they still had a choice (to the extent that they could determine profitability), to reward or abstain from rewarding failing firms with more money.

They could hold back on funds for firms that were performing poorly, to punish them, or they could keep the budget constraint entirely soft. Owned by government or not, they can be rewarded or punished by the controller.

Of course, that would still not get to the core of the problem. The firms are failing for good reason, and need to be allowed to fail.

John V writes:

Perhaps Krugman would like to apply his twisted logic to the our bloated and expansive Military. I wonder if he would be consistent.

Greg Ransom writes:

Note well that Ed Leamer did hit the target when he recently called Paul Krugman stupid:

http://economy.nationaljournal.com/2008/12/is-the-deficit-a-threat-to-a-f.php

"IDIOT SAVANT"

That's what the 1991 AEA Committee on Graduate Education called the "scientists" being produced by the economics graduate schools -- math and statistics drones with little knowledge of economics, no knowledge of the history of economic thought, no knowledge of the business world, almost no knowledge of the real economy, and almost no knowledge of any economics at all besides the fashion of the moment in their particular graduate school or in perhaps one or two economics journals.

If you look close, you become aware that Paul Krugman is very, very narrow minded -- and first class Idiot Savant.

David R. Henderson writes:

Greg,
You seriously misquoted Leamer.
David

Greg Ransom writes:

Let's quote him then:

"It is surprising indeed to see Krugman making an undergraduate error in thinking about the effect of a surge in federal spending on our future prosperity. This error helps to perpetuate the rampant neglect of the future that is going to make things very difficult for our children and grandchildren. Deficits really do matter.

In a closed economy, with the US the only country in the world, the size of future US GDP and thus our future collective prosperity is determined by the level of investment. It is therefore true that for a closed economy in which we owe the government debt to ourselves, there is no collective cost to a deficit that does not affect the level of investment. That is Krugman’s world.

But in the real world the US is not alone and relies heavily on borrowing from foreign sources to finance current spending by consumers, business and government. While more spending by the federal government is not likely to pull down current investment, indeed could do the opposite, it seems certain to increase our indebtedness to foreigners ..

It is more accurate and more intellectually healthy to think of ourselves as trading greater prosperity in the next year or two for less prosperity later on .. "

Characterize it how you will, but I'd say Leamer is pointing out a classic and well known "idiot savant" error identified by Nobel Prize winners Ronald Coase and Friedrich Hayek -- mistaking your blackboard model and the imaginary "givens" in your model for the real world.

What an economist of Leamer's stutus points out to an economist of Krugman's status that he's mistaking a "closed economy" economic model for the real world, it hard for me not to interpret that as a polite but incredibly pointed way of saying that other economist is being stupid.

You can't get around the fact that it's an undergraduate mistake -- a stupid mistake for any economist who isn't an undergraduate -- and Leamer is very pointedly calling attention to it.

Greg Ransom writes:

The 1991 AEA report on graduate education in economics can be found here:

Krueger, Anne O., Kenneth J. Arrow, Olivier Jean Blanchard, Alan S. Blinder, Claudia Goldin, Edward E. Leamer, Robert Lucas, John Panzar, Rudolph G. Penner, T. Paul Schultz, Joseph E. Stiglitz, and Lawrence H. Summers. 1991. “Report of the Commission on Graduate Education in Economics.” Journal of Economic Literature, 29 (3), pp. 1035-1053.

See also _The Making of An Economist_ by Arjo Klamer and David Colander.

Doug Adams writes:

Perhaps using the term 'understanding economics' is a misnomer. Macroeconomics is effectively studying a series of non-independent Markovian walks, with limited information. Beyond philosophy, I pity people who choose to study it as a science. Until we have infinite, unbiased information, macroeconomics will be a Rorschach test, see what you please.

Jonathan D. writes:

Mon Dieu! You dare criticize Nobel-prize-winning Prince Krugman. You sir, will not be invited to compete in the New York Times marshmallow eating contest. Nope.

I think it was Arnold Kling who once described the idea of Class C and Class M arguments and cited Paul Krugman as a classic Class M argmentarian. Class C arguments equally challenge cause and effect, while Class M arguments go tot the persons motives for invoking a thought, or an idea. Naturally, Krugman doesn't like Boehner, so, I suspect he tried to find the easiest sound bite to surround with his particular brand of prose.

I was expecting Krugman to go after Rick Santelli, but the battlefield of Krugman's mind seems to be a vast Waterloo, and Santelli is a bridge too far at the moment.

Bill Woolsey writes:

I don't think that the closed economy/open economy distinction is all that important. What is the impact of the U.S. budget deficit on the world economy? Oh.... I guess if you are a nationalist, then, who cares about the rest of the world. Perhaps there is a reason why there is all this talk about international macroeconomic coordination?


dearieme writes:

If Krugman goes to the person's motives, may I assume that he treats with equanimity any argument that goes to his motives?

Martin writes:

Why are our best economists are no longer familiar with actual great works, such as The Republic? Locke, Hume and Rousseau have steadily replaced Socrates, Plato and Aristotle. I constantly marvel at the fact that a bunch of scruffy old men, who were more than likely raving mad from want of generative communication... writing with blocks of wood and simple carving knives had a better time keeping reality in perspective. Neoclassical economics today is deprived of its full effectiveness by the liberal nation-state. We've come from believing in the strict demarcation and segmentation of society based on normative moral roles and pragmatic doctrine (Plato's functional-structural world) to that of contractual relationships between the organizers of society and those who wish to partake in it, and finally to modern classical liberalism, where nothing at all matters except the general public's spirited drive toward anarcho-syndicalism and what else. We've come full circle from Plato's criticism of his contemporary Athens to the total acceptance of all that was wrong with it when he began writing. It's not the people that should be afraid of the government, it's the structural integrity of government and the security it provides that is currently being affected for the worse by the people. It's unsustainable. We can't continually pocket our Treasury at the expense of the world. But wealth, it seems, is infinite in a conceivably closed world economy.

"It is therefore true that for a closed economy in which we owe the government debt to ourselves, there is no collective cost to a deficit that does not affect the level of investment. That is Krugman’s world."

Why not? I'd say that the opposite is slightly more naive. Isn't the world, in its present state, merely a periphery of American hegemony? I've come to believe we force the world to accept that our tax base alone is the total extent of the planet's fiscal capital. How do we sell securities at negative value? How exactly do we continually baff at growing deficits? How do we get away with disrespecting obviously beneficial free trade agreements, which the rest of the world so heartily adopts? Haven't we created a false dichotomy with the ever ubiquitous term "national sovereignty", the democratically justified diametric to international law? Am I to believe somehow all this is going to blow up in our faces, and that for some odd reason that U.S. military power, even as a last resort, would be incapable of preventing such a catastrophe? It has been clearly capable for the past two hundred and thirty three years. It's nice to be morally reasonable, but everyone knows it's not a viable strategy to treat people preferentially in some instances, as we inevitably do in a liberal nation-state, while at the same time engaging in a pseudo-Kantian exercise of categorical social morality. Krugman lives in the "real" real world, the one we choose to ignore so we don't risk subjecting our credibility to exposition of political incorrectness. Fortunately for him, he has a Nobel.

Preferentiality has been the bane of nation building for all of modern history (more or less depending on where you define its beginning). Conflict is inevitable and we do our best to contain as much wealth as we can, and where we can't there are varying degrees of cooperation. It's roughshod but it seems to work. Maybe this past one thousand days of unobstructed global peace we've just experienced has pushed us permanently into daydream land. Little wonder why the first world is looking all the less appealing nowadays from the outside looking in. It isn't the globalization of capitalism, but rather an expansion of the global purview of national politics that predisposes all exogenous judgment to the negative. Those who come from the first world happen to be capitalists, being the lucky few who were actually ever exposed to the system. It's coincidental at best.

Now, biologists concede that genetic mutations flourish when replicators are liberated from naturally selective pressures. As humans, we can qualify those mutations. On one hand, it's great to have lots of opinions in modern academia (and the same goes for liberal democracy), but it's very difficult to tell which ones are sound, and which actually benefit society in a positive way, as the replication of ideas becomes no longer historically functional but seemingly derived from random. So then we ascribe function, wherever rationality fails to address the discrepancy naturally, and there we have defined the purpose for the modern insurance and derivatives markets. And while mutation can't account for the development of "absolutely unique" information (the gene pool cannot get larger), I'll posit that people can't provide "absolutely unique" ideas anyway, which are both pragmatic and relevant to society in its present form. Instead, they are limited to variations of all the presently non-existent, potentially arising conflict equilibria within the limit of at first our rational biology, and then within the extensional dimensions of technology. It all has to be value self-relevant. But if even some of that is true then why is normative reasoning so frowned upon? Comte was a buffoon.

Anyway, I'm pretty sure Krugman understands geopolitics. I don't think he's being any more arrogant than most of you are in your critiques when he simply identifies a common theme of world history and puts it to use in policy that ultimately puts food on your tables... in the short run at least. Should I assume frankness is a quality that is uncharacteristic of academics? You know, there is a reason why politics is consistently reviled throughout history. It hasn't been a fun pass time since the ancient sophists transmogrified it into the first after dinner social event.

No one in their right mind is going to take the next step and suggest dismantling national sovereignty altogether. Yeah, and why not help create the ideal Platonic Utopian-dictatorship, founded primarily on the interests of neoclassical economics and the maximization of global utility while we're at it? Neoeudaemonia? Erhmm... No. I have a novel idea, let wealth follow productivity undisturbed. Right... I wouldn't bet on it. Not with all these fingers in the pot, not on the verge of systemic collapse. If I were the world, DARPA's latest unmanned, hypersonic stealth bombers would scare the living crap out of me.

"In scholarly discourse, it is a normal courtesy to give one's debating opponents the benefit of the doubt. If they say something that seems confused, one tries to find a charitable interpretation -- although it may seem that they are saying X, which is patently wrong, perhaps they are merely badly expressing their belief in Y, which could be right in principle (although it is inconsistent with the data)." -Paul Krugman

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