David R. Henderson  

Krugman on Favorite Books

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Sophie Roell interviews Paul Krugman on his five favorite books. A couple of highlights:

I think it's actually a point when you're quite vulnerable, because you are looking for someone who is going to offer you all the answers. Some people turn to religious orthodoxy, other people turn to Ayn Rand. One of my favourite lines - and I haven't been able to find out who came up with it - is that "There's an age when boys read one of two books. Either they read Ayn Rand or they read Tolkien's Lord of the Rings. One of these books leaves you with no grasp on reality and a deeply warped sense of fantasy in place of real life. The other one is about hobbits and orcs."

OK, Krugman haters, you've got to admit that that's pretty funny. I think it's important for us Rand fans to laugh at ourselves.

On a more serious note, what I've noticed is the strong overlap between libertarians and fans of Tolkien. In fact, when I was in an Industrial Organization class in graduate school at UCLA in 1974, Harold Demsetz made some comment about the hobbit. I had no idea what a hobbit was and I was one of those students who, when I don't understand a simple factual issue but think it might be important for understanding the professor's point, asks the question. So I did. "What's a hobbit?", I asked. Demsetz, normally unflappable, looked shocked. "You don't know what a hobbit is," he asked, "and you call yourself a libertarian? And, by the way, get that hair cut." (My hair was long and curly at the time. One of my graduate school colleagues, Kathy Classen (later Utgoff) said, "What's the matter, Professor Demsetz? Are you jealous?" This was all in good humor.)

I guess that wasn't a more serious note, was it?

Where I found myself at odds with Krugman on simply the facts about debate was over this statement:

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 sceptical. We have views that are different, but they're arrived at through paying attention. The other side has dogmatic views.

I've found the opposite. I'm not a conservative but a libertarian, but Krugman lumps us together, which, in itself, shows a failure to listen. But I have found that both conservative and libertarian economists (as opposed to grassroots activists) have done a better job of stating "liberal" arguments and Keynesian arguments (those are not necessarily the same) than liberal economists are at stating our arguments. I think there's a reason: we've seen ourselves as being in the minority for so long that we've had to learn the other side's arguments. Try this test: see if you can read Krugman's blog and NY Times column for two weeks and not find him, at least once, attributing motives to those economists he disagrees with that you are pretty sure are not their real motives.

HT to Tyler Cowen.


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CATEGORIES: Economic Philosophy



COMMENTS (35 to date)
Daniel Kuehn writes:

1. What the libertarian/LOTR overlap? I don't get that. Just curious.

2. On explaining the other side - I think there are a couple things going on. First, I think people often have fundamentally different views of who each side even is. You allude to this when you mention that libertarians get lumped in with conservatives (this is becoming less common over time I think - probably a good thing). But the same happens from you guys - from this blog even. Arnold Kling used to write a lot of posts where he talked about "liberals think X" (good examples are here: http://econlog.econlib.org/archives/2010/03/liberals_and_ma.html and here: http://econlog.econlib.org/archives/2010/01/teapartarians.html). Scott Sumner did this sort of thing on occasion too. When that video with the marshmallow eating kids came out, he said he's a Republican because the Democrats are the party of marshmallow eaters and the Republicans are the party of marshmallow savers. I had did a double-take when I read that, because when I first saw the marshmallow video I thought "this is why I'm a Democrat - because you've gotta save the damn marshmallow!".

We tend not to associate ourselves with the less savory people on "our side" and we tend to focus on the less savory people on "the other side". I pressed a commenter on my blog once who was refering broadly to "the left" as to who he was talking about holding anti-market views, exactly. He gave me two names: Naomi Klein and Michael Moore. Of course I don't even think of these two as being in the same camp as me. They're the far left, and they're really not relevant at all to the group that I'm thinking of when I talk about "liberals". They're too kooky to be taken seriously, and ultimately they're just activists. But that was "the left" for him.

I imagine the same goes on with libertarians. We look at "libertarians" and we see a wide range of people, including those you may or may not associate with personally.

Daniel Kuehn writes:

On the adequate interpretation of the argument thing... I lean toward Krugman on this, but I'm sure this is also likely to be something in the eye of the beholder. You see Casey Mulligan's summer employment posts and John Taylor's stimulus spending posts, and you really have to wonder if these guys are missing basic points how well understood the argument really is. Plus, when you get called a "statist" every other day and get told you think the government is able to make allocation decisions, it raises serious doubts that the accusers have any idea at all what you're claiming.

My favorite stumbling block, of course, is interest rates. I don't know how many times I've had a libertarian walk me through a simple loanable funds market model as if somehow the concept of supply and demand was lost on me and THAT was why we disagreed.

But I'm sure you all have equally frustrating experiences along these lines. Still... I think I've seen more Keynesians called "statists" in the last twelve months than I've seen libertarians accused of not caring about the unemployed.

Daniel Kuehn writes:

To future commenters: replying "but Keynesians really ARE statists" won't exactly help your case! I like my limited government and decentralized power, thank you very much :)

A. writes:

Completely ridiculous. His whole gimmick, along with his boy DeLong, is the realists vs. the stupid/evil people. But according to Krugman, he's just doing "straight economics."

Julien Couvreur writes:

I don't know about an overlap betweem LOTR and libertarian crowds, but there are definitely anti-statist themes in LOTR.

Ellis Weiner writes:

I think it's important for us Rand fans to laugh at ourselves.

I couldn't agree more!

http://www.smashwords.com/books/view/54707

tim writes:

Its a pretty old joke about Rand and LoTR. Having read both - at least Tolkien could write.

You can be a libertarian and still loathe Rand.

Caleb writes:

@ DK:

I generally agree with your assessment. I view this behavior as a form of straw man argument: Rather than understand and address what your opponent is saying, you simply associate your opponent with the nuttiest person who uses the same label as your opponent. That way, you only have to attack the nutty ideas, not the more reasonable, nuanced ones.

However, I would say that the Keynesian/statist connection less tenuous than you assert. There are many statists (most of them in politics/punditry, not necessarily economics) who indeed use Keynesian economics as a justification for central planning. I am not saying that Keynesian ideas necessarily imply statist policies. Nor am I saying that libertarians are justified in always assuming that connection. But when so many people in power want to use AS/AD as a justification for increasing their own power, it is easy to see why some people want to throw the baby out with the bathwater.

As for the connection between LOTR and libertarians: The one ring was a metaphor for power/will/corruption. It was the means by which one could enslave other beings to one's own will. Sauron was the embodiment of that power, and sought to use it to enslave the world. There was a pragmatic temptation (represented by Boromir) to use the ring, submit those individuals under the forces of "good" to one's own will, and defeat Sauron. Gandalf points out that there is no such thing as a "lesser evil" when it comes to the exercise of power over others. One who uses power to fight power will simply become corrupt as well. The hobbits represent the antithesis of power. They are small and weak. They desire nothing but their own well-being, obtained by the work of their own hands. Yet in that weakness there is strength, as they are the only ones able to resist the siren's song of dominating power.

Philo writes:

A good post!

By the way, to judge by your iconic photographs, Kling is the only one of the three of you who wouldn't benefit from a trim in the barbershop.

FiftySeven writes:

What's funny, to me, is how little these quotes tell me about Krugman's favorite books. This could just as easily be one of his rants on his blog. Is the whole interview like this, or does he actually talk about his favorite books -- you know, instead of how understanding he is and how crazy people who disagree with him are?

Matt writes:

Wow, that might be the most striking example of the pot calling the kettle black I have ever heard. I think a lot of people on any side of an issue use that same rationale- I understand them but they don't understand me, therefore I have the more rational position. Is there a name for this logical fallacy? If not I suggest we call it the Krugman Fallacy.

It reminds me of an episode of Futurama where Leela tries to fight a duplicate version of herself. She thinks she has the upper hand because she knows all her opponents moves, but like the professor points out, "Perfectly symmetrical violence never solved anything."

James writes:

Daniel Kuehn,

It's puzzling that you complain about getting "told you think the government is able to make allocation decisions." Is the problem that you don't actually think this? If you don't, why on earth would you favor policies which call upon the government to allocate resources which could be allocated by people outside of the government?

For what it's worth, one reason why conservatives and libertarians think that liberals are anti-market is that there seem to be many cases where liberals favor an increased role of government to remedy problems in markets. There seem to be few cases (NAFTA and welfare reform under Clinton come to mind) where liberals favor a decreased role of government in order to realize the advantages that markets have over governments.

But maybe our side has failed to listen. Why don't you put together a list of policy proposals from liberals which call for less government involvement and more reliance on markets?

Scott Sumner writes:

It's very simple; do Canadians know more about Americans, or do Americans know more about Canadians? The minority group always knows more about the majority group, than vice versa. Are most intellectuals liberal or conservative?

BTW, Krugman doesn't even know that Lucas accepts Friedman and Schwartz's interpretation of the Great Contraction of 1929-33. He seems to think Lucas believes nominal shocks don't matter.

A. writes:

He also thinks that John Cochrane believes velocity is always constant, and doesn't understand the savings/investment identity.

David R. Henderson writes:

@Scott Sumner,
Good analogy with Canadians and Americans. As a former Canuck, I see that instantly. Thanks. And thanks also for the point about Lucas. Do you have a cite on that you would share?

Patrick R. Sullivan writes:

Daniel Kuehn, can you name any libertarian or conservative econblogger who deletes comments from people who disagree with him or her? DeLong is notorious for that, and Krugman announced (at least he was honest enough to state it aloud) his intention to do so not long ago.

twv writes:

I've long liked the Rand/Tolkien joke. I've never been much of a Rand fan, and I could plausibly argue that Tolkien (and, more importantly, T.H. White) influenced my developing political philosophy.

I've had some trouble understanding the overwhelming cultural dominance of Rand amongst libertarians. Economics became centrally important to the way I think about the world. Rand, alas, almost consistently ignores the marginalist idea. Her world is of binary choices: good vs evil, freedom vs totalitarianism, self-interest vs. the horrifying sacrifice of caring about others (oops: "altruism"). In the real world, people choose a bit more of this, a bit less of that. "Compromise" is in our nature. It explains a great deal. She tried to ground liberty without reference to such choices at the margin.

Wrong from the start.

Tolkien's insight was simply that power corrupts. T.H. White questioned the legitimacy and beneficence of monopoly territory in governance. These ideas flow nicely into libertarian policy.

The Randian ideal of a never-swaying individualist spurning the crowd? It resonates, especially in the context of a world that deprecates the freedom of the individual, but it's not as integrally related to the functioning of a free society as many libertarians think. Mostly it curdles into a sort of personal pigheadness and (too often) assholery.

For what it's worth, Krugman often comes across as pigheaded about his ideology, like Rand was about hers. Sometimes we hate in others that which is strongest in one's self.

Foobarista writes:

I often wonder if there's a variant of argumentum ad hominem where you're exalting yourself to prove your points? Basically, "I'm right because I'm wonderful".

David Friedman writes:

For what it's worth, I was a very early Tolkien fan--I had to wait for _The Two Towers_ to be published before I could read it.

And my observation is also the opposite of Krugman's. I was an undergraduate at Harvard from 1961-1965, and over and over had the experience of arguments where I was familiar with the other side's position and the other side was almost completely ignorant of mine--I think because mine was very much the minority position.

I think the same pattern helps explain my father's reputation, within the economics profession as a superb debater. He was very fast and very articulate--but he was also engaged in arguments he had had many times before with opponents who had never encountered them.

jc writes:

Along the lines of @Caleb's suggestion, most people I know (or know of) that identify themselves as Keynesians are not, imho, actually Keynesians.

They are, instead, self-described liberals who see Keynesianism as a convenient surface-level justification to permanently increase government spending, grow the state, and centralize power. And they are quick to reject Keynesianist prescriptions, such as tax cuts, that run counter to their tribe's ideology. (If we limit our universe to serious academics, maybe the tally is different. But often, we do include pundits, politicians, people we simply know, etc.)

Anyway, if my experience is at least somewhat typical, with many, if not most, self-described Keynesians choosing to selectively apply (and misapply) tenets that support their goals while rejecting those that don't, is it accurate or not to claim that Keynesians are statists? Should I automatically filter out self-described Keynesians who, imho, are not actually true Keynesians (even if, imho, the former constitute a majority)?

On the other side, if, say, Glenn Beck calls himself a Libertarian and convinces a multitude of followers to do the same, and if they then support a policy that traditional Libertarians usually do not, would it be proper to say "Libertarians believe (what Glenn Beck believes)?" What if they come to outnumber traditional, old-school Libertarians? What if he selectively applies (or even misapplies) Hayek, w/ him and a whole slew of people identifying themselves as Hayekian?

Maybe inserting a simple example would be a good rule (e.g., saying, "My problems with Keynesians like Paul Krugman...", or "My problems with Hayekians of the Glenn Beck variety...") is the way to go.

Bob Murphy writes:

I think it's really tough for people so hip-deep in the debates to be saying which side is fairer. Of course we see "our side" as fairer, because (by definition) we don't see the big deal when somebody on our side botches the other side's position in a critique. But when they do the same to us, it seems like a really big deal.

When it comes to Krugman, I thought it was funny in his response to my article on ABCT that he pointed to evidence showing the central bank could influence the real economy, as if that was somehow a problem for ABCT! More generally, what are the chances that the real fair guy in this debate also wrote the following?

"Some have asked if there aren’t conservative sites I read regularly. Well, no. I will read anything I’ve been informed about that’s either interesting or revealing; but I don’t know of any economics or politics sites on that side that regularly provide analysis or information I need to take seriously. I know we’re supposed to pretend that both sides always have a point; but the truth is that most of the time they don’t. The parties are not equally irresponsible; Rachel Maddow isn’t Glenn Beck; and a conservative blog, almost by definition, is a blog written by someone who chooses not to notice that asymmetry. And life is short..."

Rand showed potential socialists that you didn't need common sense to support capitalism.

Daniel Kuehn writes:

re: "Daniel Kuehn, can you name any libertarian or conservative econblogger who deletes comments from people who disagree with him or her?"

1. Yes - Greg Ransom.

2. If you actually read Delong's comment thread he has comments up there that disagree with him. He has a lower tolerance for people who disagree with him in what he considers an unproductive way. Part of the reason for this is that he uses his blog as a resource for his classes. He's pretty up front about his comment policy, so I'm not sure why everyone gets bent out of shape over the fact that he moderates it more. I've unfortunately had to delete comments too on my blog - I don't like it, but I also don't like getting comments raving that the progressives were racists and deliberately caused black poverty on a post commemorating Martin Luther King's assasination. There have been a couple other really bothersome instances like that. Maybe libertarian bloggers don't get that sort of traffic and therefore don't have the need to delte.

Daniel Kuehn writes:

re: "It's puzzling that you complain about getting "told you think the government is able to make allocation decisions." Is the problem that you don't actually think this? If you don't, why on earth would you favor policies which call upon the government to allocate resources which could be allocated by people outside of the government?"

Care to be more specific?

So I usually don't support government allocation of anything. I do often support public demand for certain goods or services, or subsidization of goods or services. This is only in cases where the market is biased somehow, such as through an externality (and not even in all of these cases).

But I can't think of a situation where I want a government to allocate things. Usually I want the government to enter the market, but of course the price mechanism is still the allocation mechanism. Government doesn't make a very good allocator. It is occasionally appropriate for the government to enter the market and demand certain goods or services, but the allocation mechanism oughta always be the market (at least in all the cases I can think of off the top of my head).

Evan writes:

On the topic of libertarians and LOTR I think there's another reason besides the whole "One Ring can represent political power" idea. Libertarians tend to be people who like studying society and how things are connected, that's why so many of them are also into economics. Libertarians enjoy speculating on the nature of the world and how it would be different if you changed aspects of it. That's one of the reasons their libertarians, their ability to conceive of other societies makes them immune to the status quo bias.

LOTR is one of the most triumphant examples of world-building, it portrays a whole society that's different from ours and show in great detail. This naturally stimulates the minds of libertarians, who enjoy thinking about such things. Not uncoincidentally, I think, science fiction tends to be very libertarian. There are tons of science fiction writers who are libertarians, Heinlien, Vinge, L. Neil Smith, Poul Anderson, and so on.

In response to Krugman's comment, I generally have noticed the opposite of what he says, a lot of liberals don't seem to have a good grasp of conservative and libertarian positions. In particular they often use the reasoning "I think policy X will have bad consequences. Other person favors policy X, therefore other person must be a psycho who finds bad consequences desirable." That being said, I have noticed conservatives who do the same thing.

Chris Koresko writes:

Scott Sumner: It's very simple; do Canadians know more about Americans, or do Americans know more about Canadians?

Very nice way to explain it. Hope you don't mind if I borrow that one!

Daniel Kuehn: I pressed a commenter on my blog once who was referring broadly to "the left" as to who he was talking about holding anti-market views, exactly. He gave me two names: Naomi Klein and Michael Moore. Of course I don't even think of these two as being in the same camp as me. They're the far left, and they're really not relevant at all to the group that I'm thinking of when I talk about "liberals".

May I ask who you have in mind as representing your camp?

We've seen that libertarians and conservatives are often indistinguishable to liberals. It may be that non-liberals are guilty of the same error with regard to liberals.

James: There seem to be few cases (NAFTA and welfare reform under Clinton come to mind) where liberals favor a decreased role of government in order to realize the advantages that markets have over governments.

If memory serves, the Clinton-era welfare reform was basically a Republican initiative that Clinton chose to go along with in the aftermath of the 1994 elections. It's been one of the most successful social policies in decades. It's also a policy which was essentially reversed following the 2008 elections.

jc: On the other side, if, say, Glenn Beck calls himself a Libertarian and convinces a multitude of followers to do the same, and if they then support a policy that traditional Libertarians usually do not, would it be proper to say "Libertarians believe (what Glenn Beck believes)?" What if they come to outnumber traditional, old-school Libertarians? What if he selectively applies (or even misapplies) Hayek, w/ him and a whole slew of people identifying themselves as Hayekian?

If any individual becomes a prominent representative of any movement, he will inevitably bring a lot of his own ideas to the party, and some of those won't accord with its mainstream. I don't think it's possible for Glen Beck or anyone else to popularize libertarianism without altering it, and it's natural for mainstream libertarians to be a little miffed when that happens.

Patrick R. Sullivan writes:
If you actually read Delong's comment thread he has comments up there that disagree with him. He has a lower tolerance for people who disagree with him in what he considers an unproductive way.

You couldn't be more wrong, Daniel. I was present at the creation of DeLong's policy. In fact, I'm probably the single commenter most responsible for it, and it wasn't because I was ranting or raving; I was winning too many arguments. His acolytes didn't like that and made their displeasure clear. Then one fine day my comments began to disappear. No explanation was ever offered. It happened to others for the same reason; we were too effective.

Maybe DeLong's students could benefit from a little disagreement with the Great Man. And, Greg Ransome is hardly in the league of DeLong and Krugman.

Shane writes:

I don't understand the attraction with Ayn Rand. I read Atlas Shrugged without knowing who she was or what to expect. There were some clever ideas but she seemed incapable of understanding how people thought. Christians, trade unionists, socialists and post-modernists were all lumped in together, ignoring the bitter disagreements between such groups in reality. There seemed to be only two kinds of people: people who agreed 100% with Rand and bad people.

It was also too long, Galt's speech at the end was one of the most boring things I've ever read.

I've come across libertarians online who argue far more eloqently than Rand, including any of the economists on this blog!

As for the openness of left or right-wingers, I've found mindless adherants on either side along with some more open and introspective sorts.

Keith writes:

David, do you have any examples of right-wingers' correctly characterizing a left-wing position, and then left-wingers' claiming that their position was mischaracterized? That would seem to support your claim.

Also, you say that Krugman attributes base motives to his opponents. That may be true, but that doesn't mean he gets their positions wrong.

John Goodman writes:

David you are absolutely right and Krugman is completely wrong. In the health policy field you are even more correct. Liberals have no idea what free market types are talking about and when the try to explain it, they almost always get it wrong.

Rick Hull writes:

One classic example of Krugman's broad brush: the "Pain Caucus" label. In response, I choose to characterize his characterization thusly:

America is chugging along, running to the top of the hill. America's support team is providing performance enhancers. Whoops, America twists an ankle. No worries, says the support team. We don't have to slow down. Here's a cortizone injection. America keeps chugging. Perhaps overcompensating for the twisted ankle, America goes into back spasms.

Here, the support team is divided. One says, America needs to recover and heal. It will be painful, but with proper physical therapy and ending the addiction to performance boosters, she can get back up to a healthy 100%

No, no, no, the other says. There will be no painful recovery. We can mask the pain, boost the performance, and keep going as though nothing happened.

Now, it is very easy to dismiss this analogy as meaningless. But if the "Pain Caucus" indeed holds this analogy, regardless of one's own beliefs, it is petty and disingenuous to label them as such.

Scott Sumner writes:

David, What Lucas said, as described by the FT:

"His description of how the US fell into recession in 2008 is fairly standard, though with some new twists. In his view, the recession was caused by a rush to liquidity after the failure of Lehman, with those who had funded the surge in investment bank and shadow bank activity in the 2000s suddenly suffering losses and stampeding into government debt for safety. Lucas says that this event was the modern day equivalent of the failure of commercial banks in the early 1930s, when there were severe losses of bank deposits as the Fed failed to provide the banking sector with enough liquidity to prevent a cascade of banking failures. This time, says Lucas, the Fed correctly injected very large amounts of liquidity into the financial system, so the blow to the economy was much smaller than it had been in the 1930s."

In the paper (actually PP slides) the FT links to it's very clear that Lucas attributes the steep drop in GDP in the early 1930s, and in late 2008/early 2009, to a demand shortfall.

Here's how Krugman characterizes Lucas, after linking to the FT piece:

"What Davies doesn’t say is that there’s a good reason Lucas won’t even consider the obvious explanation in terms of a shortfall in demand. More than 30 years ago, in a burst of radically premature triumphalism, Lucas and his colleagues declared the “Death of Keynesian economics”. As cited by Greg Mankiw (pdf), Lucas wrote that Keynesian theorizing was so passe that people would giggle and whisper if it came up in seminars.
Since then, as is obvious to everyone but the hermetic inhabitants of the freshwater world, the attempt to explain business cycles in terms of rational expectations and frictionless markets has failed;"

I don't think anyone can argue that Lucas saw either the 1929-33 crash or 2008-09 as being caused by anything other than a sharp drop in NGDP. Indeed he recently argued it was important for the Fed to prevent sharp drops in NGDP. That means preventing sharp demand shortfalls (Lucas generally doesn't use the term "aggregate demand."

Scott Sumner writes:

I forgot to link to Krugman

http://krugman.blogs.nytimes.com/2011/06/01/whispers-giggles-and-epicycles/

James writes:

Daniel Kuehn:

You neglected to answer my question. Why?

To answer yours, any agency that has a budget, spends money, or tells other people how to spend money allocates resources. Just because there are prices doesn't mean that resources aren't being allocated. It should trouble you that your defense of your views rested on your unawareness of something this simple.

As a concrete example, someone in my local government makes decisions which determine how many person hours should be spent conducting classroom instruction for second graders.

CLS writes:

I've never read Tolkien, in fact I have very little time for fiction, which is why I read very little Krugman as well.

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