Bryan Caplan  

Since You Asked, Scott

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Ask and You May Learn... Morning Commentary...
How can any economist - even Krugman - advocate job subsidies and work sharing?  Krugman's answer is that it's a "third-best" solution.  His top three:

1. Sumnerian monetary policy.  Seriously, but without the hat tip.

2. More fiscal stimulus.

3. Job subsidies and working sharing.

His rationale is political: Since politicians are too evil/stupid/cowardly to do #1 or #2, #3 is all we have left.*  Scott Sumner's got a typically great reply:
This is a foolish game to play.  There is zero chance Congress would spend enough money on these "third-best" options to make a dent in unemployment.  God only knows what his 4th best option is.
I'm willing to take a guess.  Since Krugman's largely forgotten his free-market labor economics, I fear that his 4th best option is going to be protectionism.  If Krugman's idol Keynes could warm up to protectionism during the Great Depression, why couldn't Krugman do the same?

* Of course, if Krugman were truly a political animal, he wouldn't propose bold new ideas and then immediately insult them as "third-best."  Dare I hope that the good Krugman could still make a comeback?


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COMMENTS (8 to date)
Brandon Reinhart writes:

I misread #1 as "Sumerian" monetary policy. Which I guess would be a silver standard? :P

Frederick Davies writes:

Can Nobel prizes be recalled, I wonder?

chipotle writes:
Dare I hope that the good Krugman could still make a comeback?

No. Next question.

Krugman has an ideƩ fixe: that all bad policy is the result of right-of-center prescriptions. Anything that doesn't fit that template is summarily discarded.

Dogma consumed a beautiful mind.

David R. Henderson writes:

Bryan,
Your link to Sumner's reply is actually a link to Krugman's book.
Best,
David

david writes:

I venture that Krugman's approach to policy recommendations was shaped heavily by the Iraq war - being carefully rational and making only first-best recommendations only resulted in being ignored or dismissed as "shrill".

Given that the neoconservative case for war was politically negligible compared to mass mis-perceptions as the case for war (particularly over the link, or rather lack thereof, between 9/11 and Iraq), it's become clear that political tenability rather than rigorous reasoning is the primary driver of US policy. If your intellectual purity permits you no allies, then nobody is going to listen to your arguments to begin with.

I venture that the new Krugman has more influence on policy than the entire libertarian intelligentsia combined. He certainly has more influence than the old Krugman. Like it or not, the demos is more influenced by political compromise than by first-best rationality.

John Fast writes:

david writes:

I venture that the new Krugman has more influence on policy than the entire libertarian intelligentsia combined. He certainly has more influence than the old Krugman. Like it or not, the demos is more influenced by political compromise than by first-best rationality.

Not necessarily by political compromise, but by political appeal.

Good politics trumps good economics every time. This is why public choice is the queen of economic disciplines (and why I'm a political theorist as well as an economist).

caveat bettor writes:

@ Brandon: Scott Sumner says to target expected nominal GDP growth. Here is a post that is recent and indicative:

http://blogsandwikis.bentley.edu/themoneyillusion/?p=2914

Lord writes:

DeLong offered a policy catagorization that helps clarify talk on these, monetary (interest rates and reserves), fiscal (spending), quantitative easing (Sumner's), and bank (what the Fed has done with corporates and mortgages). It helps prevent confusion.

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