David R. Henderson  

Hummel on Krugman, Keynes, and Patinkin

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Indeed, Krugman's presentation doesn't incorporate any of the more sophisticated arguments about the financial system of such old-line, hard-core Keynesians as James Tobin. He moreover completely ignores any possible complications arising from Ricardian Equivalence, essentially knocking down straw-men objections to fiscal policy. No other Krugman article has come closer to convincing me that John Cochrane is in fact right: Krugman doesn't actually know or understand much modern macroeconomics, as Krugman himself comes close to admitting at the article's beginning.

. . .

Nor do I think, if you really want to get a perspective on Krugman's article, that the way to go is to get into Talmudic distinctions between Say's Law and Say's Identity, as Pete [Boettke] suggests. Instead I would recommend slogging through Don Patinkin's massive classic, Money, Interest, and Prices: An Integration of Monetary and Value Theory, the second edition of which was published way back in 1965. It had become the standard fare in all graduate monetary theory classes before the New Classical revolution swept the profession with dynamic stochastic general equilibrium models. Patinkin actually considered himself a Keynesian, which is why his careful, rigorous, and exhaustive comparisons between classical and Keynesian approaches are so telling and insightful.


This is from Jeff Hummel's recent post, "Krugman and Macroeconomics."

The whole thing, which isn't long, is well worth reading.


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CATEGORIES: Macroeconomics



COMMENTS (3 to date)
Lars P writes:

I think Krugman today is best understood as a Democratic operative, possibly aiming for elected office, rather than as a truth seeking scientist.

Paul writes:

"He moreover completely ignores any possible complications arising from Ricardian Equivalence"

So what? Ricardian equivalence is a neat little model with absurd assumptions. One could argue that Cochrane etc. are guilty of a fallacy of the exact opposite nature (i.e. they ignore complications arising from the fact that Ricardian equivalence might not be how the world actually works).

Jonathon Hunt writes:

@ Paul

So what? Cochrane wasn't arguing that Ricardian equivalence was true but just pointing out Krugman does not even try to validate his argument against the possibility of Ricardian equivalence being true! I.e., Krugman allegedly would not do the "academically honest" thing and be objective and unbiased about his suggestions.

Anyways, I believe Cochrane and company are being too hard on Krugman. Although I entirely disagree with Krugman on nearly every economic issue I've read about, he is probably the best representative of the New Keynesian. And I mean "best" as the most intelligent and careful to make noncontradictory arguments; that isn't to say he hasn't committed something like that before as Bob Murphy has pointed out again and again.

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