David R. Henderson  

Krugman Killer Quote

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Last week, I highlighted parts of my favorite Paul Krugman book, Pop Internationalism. Here's another of my favorite quotes from Krugman. I used it in a sidebar for the Frank Levy article, "Distribution of Income," in the first edition of my encyclopedia of economics. Here it is:

One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don't work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)

--Paul Krugman
The Age of Diminished Expectations, 1990, p. 22.

Here's part of what I wrote after Krugman won the Nobel prize in economics:

Indeed, he has even gone the opposite way, blaming the top one percent of the income distribution for how badly (in his estimation) the bottom 90 percent are doing. Only twelve years ago, he thought that pretty much everyone was doing pretty well. In a 1996 Slate column, "The CPI and the Rat Race," Krugman wrote, "[M]ost families in 1950 had a material standard of living no better than that of today's poor and near-poor." He confirmed this with direct measures of how people's living standards had improved: indoor plumbing, telephones, cars, and TVs. If we were to use the Krugman methodology today, as economist Michael Cox and economic journalist Richard Alm have done, we would point to wide-screen televisions and cell phones.

Unfortunately, although his writing in the 1990s was highly educational, Krugman's columns in the New York Times have often been the opposite. He often heaps scorn on and challenges the motives of those who disagree with him. For example, in a September 14, 2003, article titled "The Tax-Cut Con," Krugman took a lot of space to attack the motives of those who advocated tax cuts, but very little to actually analyze the 2001 tax cut. The closest he came was to point out that most of the benefits of the tax cut went to the highest-income people. But he didn't mention two other relevant facts: (1) almost everyone got about the same percent tax cut; and (2) high-income people pay a disproportionate share of taxes. Those two facts together mean, mathematically, that the highest-income people will get a large percent of the benefits of the tax cut. This is the kind of simple arithmetic point that the Krugman of the 1990s would have made. I miss him.

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CATEGORIES: Income Distribution

COMMENTS (12 to date)
ardyan writes:

Perhaps this post of a few months ago reveals that he hasn't completely changed. There's still some hope yet.

kingstu writes:

Take a look at some of the comments at the link ardyan posted. It was one of the few times I didn't read "Dr Krugman you are a God, a genius, the only one on Earth who understands economics...blah...blah...blah."

It really hadn’t occurred to me until right now that Krugman doesn’t believe anything he writes in the NYT. All that populist nonsense is just red meat for the hard left fans of his from the NYT. I understand Krugman used to be quite an economist…what happened to him?

Justin Ross writes:

You are like Luke Skywalker trying to convince everyone that there is still good in Darth Vadar.

Nerdiest thing I've said all day.

Andy writes:

It is a shame, isn't it? It just goes to show the power of incentives -- he's telling people what they want to hear, and he's much more popular for it.

El Presidente writes:

Let that be a lesson to you economists who might think about questioning assumptions. Sure you could win a Nobel, but other economists will hate you for undermining their authority. It's your choice. You can have your integrity or their support, but not both.

El Presidente writes:

It happened to Ricardo too. So, maybe you'd be in good company. Good and dead, that is. People just don't pay for truth like they pay for fantasy. That's good news for Disneyland though.

The Sheep Nazi writes:

Oh, piffle. Krugman's no martyr. As a pundit he's done very nicely for himself, by what appears to be the bog standard method of adjusting his rhetoric to what his audience approves of. Henderson is hardly the first to notice that drift. I also have to say it takes a considerable weight of brass for anyone to hold Krugman up as a victim of his own integrity, on this website.

El Presidente writes:

The Sheep Nazi,

I never said Krugman was a martyr or a saint. I said that people who have sincere and legitimate objections to the prevailing dogma should be aware that those who embrace it and preach it are not fond of being undermined. So, while we're speaking about what's acceptable or unacceptable in the academic community of economics, why don't you tell us why we have a production function that omits land as a source or productivity? Could that perhaps be because there is no willingness among economists to address the issues of distribution that are unavoidable when we incorporate land in the production function? And why do we never entertain the notion of the declining marginal utility of growth in output? If every component of output has declining marginal utility, why is it that aggregate output is treated as a Giffen good? Could it be that we don't want to have to ask what sort of distributional disparity would create a majority opposed to the specific type of growth encouraged by particular policies?

When Krugman criticizes the BS tax cuts, I mean CG tax cuts that were supposed to make things better for everybody, he does so with integrity. He told the truth and was berated for it. It's not about being a martyr. I'm not crying tears for Krugman. I just get a little pissed off that we would rather make it about Krugman than the principles we are dealing with. The principles are the threat, Krugman's just the messenger, and he's not the first messenger. I mentioned Ricardo. I would add Henry George to that list. Who's Henry George, you say? You should look him up in the EconLib library. Go ahead and shoot Krugman (metaphorically, of course). It won't change the fact that the discipline of economics has an enormous blind spot it refuses to investigate with any diligence or rigor. David posted a link to an entry in the Encyclopedia of Economics he edited, and it dedicates about half a page to the notion of income distribution. How can we possibly believe that is sufficient treatment of the subject? I hope he gives it more attention than that.

You're gonna need a bigger scale if you wanna weigh my brass.

The Sheep Nazi writes:

Prez: there's a specter haunting the economists, the specter of the neo-Marxist production function? That's very silly. Economics as a profession is in a heap of trouble right now for a pretty simple reason: it didn't know as much about finance as it thought it did, and so it got caught flat-footed by yet another good old-fashioned speculative boom, bubble and bust. You may wish to believe that our sinful GINI coefficient is to blame for this. But that would have to mean that Americans wigged out and started building half-million dollar houses in the middle of the smoking hot Nevada desert because they were denied their just distribution of income. Somehow I don't think that's why they did that. Sorry, just too blinkered I guess.

El Presidente writes:

The Sheep Nazi,

Prez: there's a specter haunting the economists, the specter of the neo-Marxist production function? That's very silly.

That's fine. Economists can pretend that poorly accounting for output isn't a problem and financiers can pretend that poorly accounting for risk isn't a problem and we can both feign ignorance and deny complicity. Sounds great to me. It's not neo-Marxist to hold neo-Classicals to their own framework. I believe "complete" is a more appropriate adjective for such a production function, but it's quite a bit less visceral so it probably wouldn't suit your argument. I didn't define the three factors of production and I dind't specify a production function that only counts two of them. Neo-classicals accept these as cornerstones of their discipline. You have other people to thank for that, but not I. Until neo-Classicals follow their own dogma through to its logical conclusions they will refuse to recognize the flaws in their otherwise brilliant work. They can't fix what they won't see. The emperor has no clothes.

You may wish to believe that our sinful GINI coefficient is to blame for this. But that would have to mean that Americans wigged out and started building half-million dollar houses in the middle of the smoking hot Nevada desert because they were denied their just distribution of income.

Not exactly. Our tax system, taken as a whole, favors the ownership and development of land, its use for intergenerational transfer of wealth, and disregard for its highest and best use in favor of its after-tax profit (rent minus taxes). So we use it less efficiently than we should, build infrastructure that we cannot sustain, and teach people that the only way to get a seat on the gravy train is to buy a ticket (a house). The GINI coefficient doesn't begin to decribe our internal rot from ill-conceived incentives and imprudent investment, and all without concern for the productivity of land.

The Sheep Nazi writes:

Well, of course. It's not just the economists, is it? The whole thing has to be thrown down and replaced, and people have to be re-taught. All I can say is at this point is, God bless rot. You've just demonstrated better than I ever could why people are so grimly determined to get a bit of land with their name on it, and to pass the gift on to their kids, and why they react with such fury when someone tries to tax that land out from under them.

El Presidente writes:

The Sheep Nazi,

Then why don't we do something about our perverse system of taxation and align it more closely with the neo-Classical dictate that taxes, whenever enacted, should be crafted to produce the least distortion and efficiency loss? If we taxed the factors of production equally, we would not influence their proportional use and we would leave it to markets to settle on the most efficient use of them. If we furthermore made those taxes progressive, we would counteract the tendency of free markets to work themselves into highly disparate income distributions by virtue of consolidation of ownership and attendant application of leverage over time absent the necessity of added value. It is because we refuse to tax land equally that the taxes on capital and labor seem so terribly onerous and their expenditure so much less productive than we would want, and it is because they are onerous that we tend to shy away from sufficient progressivity.

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