Monetary Policy

Krugman's Inflation Incoherence

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Why is anybody still listening to Paul Krugman? Why is anybody still listening to any macroeconomist?

Every macroeconomist believes in higher prices until he's served an overpriced Belgian craft brew in a tiny glass.

The New York Times columnist makes his umpteenth case for inflation at his blog. According to Nobel Laureate Krugman, Federal Reserve Chairman Ben Bernanke's bold experiment with effectively negative interest rates has not been bold enough to cause the radical devaluation of the dollar recommended by studies Krugman or one of his assistants has read:

I would add, however, that there's another case for a higher inflation rate — an argument made most forcefully by Akerlof, Dickens, and Perry (pdf). It goes like this: even in the long run, it's really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis.

D'jever notice how sometimes when columnists dumb down their language ("…even in the long run, it's really, really hard to cut…") it doesn't make anything simpler, but just makes it more dumb? When Krugman wants to complain about stagnant wages and income inequality, he relies on real wage measures, because they show that the Working Poor Families of Our Vanishing Middle Class are Working Harder For Less. Yet now, just when nominal wage figures are at their least relevant, he has a plan to save and create jobs by inflating consumer prices, based on a theory about nominal wages. Yes, it's true that nominal wages are downward-sticky. It's also true that we have 10 or 20 percent unemployment right now. America (everywhere except in the public sector) has reined in what it is paying on wages. Even now that we seem to have completed the first stage of the real estate devaluation, consumer prices are not falling rapidly enough to keep pace with the drying up of disposable income. If they were, the shopping malls and the Sunday afternoon looky-loos would not be empty. The idea that Krugman and a bunch of other geniuses are going to help out the poor by doubling the cost of a gallon of milk, well, tell that to the tourists.

But I don't want to argue against Krugman with macroeconomics, a pseudoscience in which he is just one of a million witch doctors. Krugman doesn't need to be wrong in theory because he's wrong in reality. Nobody's lending because nobody's worth lending to. We are all worse credit risks than we were believed to be just a few years ago. That epiphany is going to take a long time to sort out. Runaway inflation will definitely make banks desperate to find places to put their money, but it will not suddenly make Americans into better credit risks. That can only be done through reducing borrowing, upping savings and employing policy that encourages frugality—or actually, just policy that fails to punish frugality. The good news is that a big chunk of that work has already been done, despite the best efforts of the Keynesians in charge of U.S. economic policy. The bad news is that, just as he famously did in 2002, Krugman is arguing for the creation of another asset bubble, and too many people still take him seriously.

NEXT: Maybe If the White House Just Repeats Its Health Care Reform Plan One More Time, Everyone Will Suddenly Like It, and It Will Pass!

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  1. Why is anybody still listening to Paul Krugman?

    There’s still a lot of nostalgics out there…

    Plus – the guy is a Nobel laureate! That must count for something, fer cryin’ out loud!

    1. Goddam right!

      1. There is no Nobel Prize for Economics. But there is a Nobel Peace Prize, which I so richly deserved….

        1. No! Is that so?

          1. It’s officially the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”, established by the Sveriges Riksbank in 1968 rather than in Alfred Nobel’s 1895 will.

        2. YOU LIE!

    2. At least Paul Krugman didn’t help South American caudillos throw dissenters out of airplanes.

      1. Neither did any of the members of the Austrian School.

        You are, I assume, are referring to the Chicago Boys of the Chicago school of economics. The Chicago school is sometimes, wrongly, labeled a free market school. How can you simultaneously defend central banks and be a consistent supporter of free market economics? You cannot. Members of the Austrian School are consistent supporters of the Free Market and would never ally themselves with a dictator.

        You can learn more about the Austrian School here:
        http://mises.org

        1. Learn about the Austrian school by also reading Marx and Hoover, because they are all in the “Marx-Hoover-Hayek Axis”

          1. Please tell me this is an attempt at humor.

      2. Of course, neither did the Chicago School.

        Pinochet invited Chilean economists who had studied under Friedman to advise him after his initial fascist command-&-control economic policies didn’t work out as expected.

        And, I should point out that by convincing Pinochet to loosen his grip on the people of Chile, the Chicago boys actually did Chileans a great favor…

      3. Perhaps if I take some Howard Zinn tracts, roll them into a tube and shove them up your ass, you will learn to tell the difference between agit-prop and history.

        Including when it is written by dishonest cunts like Naomi Klein.

    3. And Ben Affleck won an Oscar. Sort of tells you what both these prizes are really worth. For some reason I feel compelled to watch Krugman whenever he is on TV. It has the same cringey appeal to me as does watching To Catch A Predator.

      1. He did? Wow, that award really is meaningless.

  2. BLAH BLAH BLAH STICKY WAGES BLAH BLAH BLAH.

    1. Do you ride a Harley?

  3. “Have you tried the cat urine?”

  4. But I don’t want to argue against Krugman with macroeconomics, a pseudoscience in which he is just one of a million witch doctors.

    Well, finally someone said it. A long time ago, while I was studying for my MBA, I asked my Economics teacher why would economists think that in the Macro, the laws of economics apply differently than in the micro, and he told me that countries act differently than people. I remained silent but I really wanted to reply to him that that his was a question-begging notion.

    1. ” asked my Economics teacher why would economists think that in the Macro, the laws of economics apply differently than in the micro, and he told me that countries act differently than people.”

      Apparently your teacher was unaware of the fact that countries are made up of people.

      1. Not really any different than the notion that Corporations are anything except groups of people.

        1. Corporations are simply groups of people. Individual people have the right of free association. “Corporations have rights” in the sense that every individual within that corporation has the right of free association.

          1. Actually, corporations are government sponsored agencies granted special priviledges.

    2. Er, macroscopic objects like rocks and baseballs don’t behave according to the same laws that the protons and electrons of which they are composed do. That doesn’t turn physics into witchcraft.

      1. To be more precise, I should say that it’s not useful to treat macroscopic objects as just a bunch of particles. No engineer is going to design an air pump by figuring out the motion of each air molecule in the pump — they use statistical mechanics and other tools developed for dealing with large numbers of particles using bulk quantities like temperature, pressure, and density, none of which make any sense when you’re talking about a single molecule.

        1. I missed this earlier earlier, but well said.

        2. If you want to study emergent behavior in economies and societies, I’d suggest you turn to Hayek instead of Krugman. PK is actually trying to manipulate the emergent behavior of society into something it is not, nor can ever become. He has a pre-conceived notion of what he believes is right and just, and f*ck you if you disagree. He would rather trash the economy and the currency, than face reality.

    3. Countries are hard to put in jail for counterfeiting.

  5. It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis.

    The idiot Krugman is simply rehashing the already debunked Phillips curve. What a MAJOR moron he is.

    1. It is even dumber than that. First, he assumes that by definition wages won’t rise with inflation. That makes no sense. As prices go up, workers will demand higher wages which of course creates higher prices and thus an inflationary prices. Wages are based on productivity. Inflation won’t reduce real wages. It will just destroy everyone’s savings and lower the wages of those on fixed incomes. Krugman really is insane.

      1. Historically wages are sticky on the upswing and on the downswing.

        Inflation harms people who’s income is primarily wages and deflation benefits those same people.

      2. It’s not just that but even if wages did lag inflation, he’s basically arguing that everyone in the country should see their real wages fall. Which not only contradicts his earlier complaints about real wages falling, but is sort of a WTF position for a supposedly left-leaning economist to tak: Keep wages down so that more people will be able to find jobs.

        1. That is actually a pretty common crackpot liberal position. That is what they do in France. It is against the law to work more than 35 hours a week. That way there is more incentive to hire.

          1. That’s not really how it works. The hiring incentives are already reduced because it’s extremely difficult to fire someone. So if times are good and you hire a bunch of people, but then times get bad, you can’t fire your dead weight. So companies in France are very, very reluctant to hire unless they feel the person will be a solid acquisition.

            1. joe or someone was pointing out a few years ago that France’s per worker productivitiy was very high. I had to explain that France invested heavily in automation, because you can’t fire anyone. And the per capita productivity is in the toilet, because of the very high unemployment is in the immigrant population.

            2. They also have quite a lot of people who work as contractors, without many protections or benefits.

        2. Even more comical, he criticized this very idea when he assigned it as a strawman argument to the Austrian school’s prescription for recovery from recessions.

          The fact that Austrians argue that a bust is merely a sign that a boom invested in the wrong mix of capital goods to satisfy existing consumer demand apparently went right by his head.

        3. “…he’s basically arguing that everyone in the country should see their real wages fall.”

          This is wrong. His idea is that with higher inflation, we’ll see less (real) wage stickiness in general. Productive workers and workers in growing industries should expect no change to their real wages. Everybody else — less productive workers and workers in shrinking industries — would see effective wage cuts. Which sucks for them, but if companies can cut wages in this manner it undermines the need for layoffs and therefore keeps unemployment relatively low.

          It’s an interesting idea. Personally, I think it would be unwise to try such an experiment in the US, as the payoffs are by no means certain. Taken as serious policy advice I agree that this is pretty bad. Taken as a thought experiment it provides food for thought.

          1. Re: Emperor Norton,

            The idea of using inflation to “fool” people into not thinking in real wage terms comes from Keynes himself. The fact is that the idea does not work – Krugman and his acolytes do not believe people are intelligent enough to figure it out, which is exactly what has happened everywhere the idea has been tried.

            1. Well, I’m not sure I’d call this “fooling.” The idea is that the psychological effect of having one’s wages not keep up with inflation is different from the effect of having one’s employer impose cuts directly, even if you know in some sense that they are equivalent. It sounds plausible, at least, but I would like to see some empirical basis for this idea.

              1. Just as income tax withholding keeps people from being shocked by receiving an enormous bill at the end of each year.

          2. I don’t think there’s a guarentee that productive workers or workers in growing industries would see their wages keep pace with inflation, or unproductive workers would not. A lot of wage “stickiness” is caused by union contracts which keep their wages pegged to inflation.

            Plus a worker might be less likely to get promotions and raises because of race or sex discrimination, or some other personality factor, rather than lack of productivity. Everyone realizes that office politics plays a role in salary levels, not just productivity.

          3. “His idea is that with higher inflation, we’ll see less (real) wage stickiness in general. Productive workers and workers in growing industries should expect no change to their real wages. Everybody else — less productive workers and workers in shrinking industries — would see effective wage cuts.”

            Won’t those be the low skilled workers that Progs like Krugman suposedly care about?

            Why can’t this crew see that all of the government regulations on industry lead to less jobs and lower wages for poor people.

        4. Keep wages down so that more people will be able to find jobs.

          The funny thing is, he’s tacitly admitting that raising the minimum wage increases unemployment.

  6. I think people study economics the same reason they study politics, to learn how to screw other people out of money and make it look like a favor.

  7. Alfred E. Krugman is also desperately trying to put forth the humorous argument that these European countries going bankrupt has nothing to do with their bloated bureaucracies and lavish welfare systems.

    I almost feel sorry for poor Alfred; it has to be tough to see your entire belief system melting down like Chernobyl right before your eyes.

  8. Gonna start another inflation cycle?

    Please hold on a minute while I maximally leverage some income producing assets with some long-term fixed rate loans.

  9. Something else Krugman fails to see:

    Inflation is very difficult to control at whatever rate he thinks would be “beneficial.”

    Couple a policy of intentionally devaluing the dollar with unsustainable deficits, and you have set up the kind of hyperinflation that comes when people, here and abroad, lose faith in the dollar as a currency.

    1. +1

      We tried this experiment already, it was called the “70s”; how’d that work out for us?

      1. Depends on your situation. If you have a good job in an important industry, then salary/wages tick upwards quickly with inflation. And if you’re a spendthrift with lots of cool stuff bought on credit and no personal savings, then fuck yeah. Crank up the inflation machine.

        1. For the great majority of Americans, by the end of the 70’s they were worse off under almost every measure: real income, real wealth, employment, etc.

          “good job in an important industry” mostly describes government union workers – their salary will go up in nominal terms, and so will the deficit.

          As to your second point: out of control inflation may devalues debt, but it also causes creditors to refuse to lend or only do so at onerous rates. That isn’t exactly a great formula for keeping the economy going.

          So, yes, any really bad policy is going to have some small group of winners, but that doesn’t justify screwing the vast majority of society.

          1. Exactly. Krugman is advocating high interest rates, impossible credit and destroying of people’s savings as a sollution to unemployment. It is just bizare. Even if it worked and real wages went down, firms still would not be hiring because the cost of getting credit to expand would be so high. It is called stagflation. And to think that Krugman once wrote a book called “Peddling Prosperity” that in part talked about these very issues and how stagflation disproved much of the liberal macroeconomic thinking in the 60s and 70s. He really has sold his soul.

            1. He really has sold his soul.

              True, but to who? That’s what I can’t figure out. He must know how his proposed policies played out in the 70s, but here he is advocating them. I really wish I knew what his aim was. Or maybe I don’t.

            2. He really has sold his soul.

              True, but to what end? He must know the policies he’s advocating failed in the 70s, but he steadfastly holds to them. I wish I knew what his aims were. Or maybe I don’t.

              1. Re: Evil Teabagger,

                He really has sold his soul.

                Krugman is like Cypher – except that Krugman never left the Matrix and loves it.

              2. I wish I knew what his aims were.

                Make money capitalizing on his Nobel by writing columns pandering to leftists by endorsing their ideas, even though virtually every competent economist recognizes those ideas as foolish?

                1. It could be, but I doubt the Nobel crowd would approve of today’s column, where he bashes the Euro and claims the EU should function more like the US. Is this column written so he doesn’t always appear to appeal to this crowd?

                  http://www.nytimes.com/2010/02/15/opinion/15krugman.html

          2. I remember the Carter years.

            1. I only remember them when I wake up screaming in a cold sweat

          3. The important point is that this policy rewards societies fuck-ups. No savings and lots of debt — steady, moderate inflation is your friend.

    2. Bingo. He also never mentions that officially the Fed (and I believe other central banks) never give a specific inflation target. Of course, they do have nice ballpark estimates of whereabouts they want inflation to be, so he’s probably right to speak of inflation targets. But there’s a damn good reason they won’t give out a specific number.

      1. Unofficially, the Fed used a variant of the Taylor rule (and the EU does also). The key issue is what “inflation” measure is used.

        Bernanke has expressly disavowed this and has even gotten into a public pissing match with Taylor

  10. “Try the Black Champagne.”

    “Why do they call it that?”

    “Because I eat a lot of aquarium filters. Just fucking drink it, Ezra.”

  11. No Exit in Sight for U.S. As Fannie, Freddie Flail
    …On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion….

    Krugman: Fannie, Freddie and You
    …So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works….

  12. Krugman: Fannie, Freddie and You

    http://www.nytimes.com/2008/07/14/opinion/14krugman.html

    …So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works….

    1. We just have to make sure to get the regulations right next time. We’re gonna figure it out, promise!

  13. But I don’t want to argue against Krugman with macroeconomics, a pseudoscience in which he is just one of a million witch doctors.

    I prefer “Keynesian clowns” as Mish Shedlock calls them.

    1. Agreed, but see plagiarism post below. Also, I think Mish should spell it “klowns.”

      1. Keynesian Klown Krugman? I like it.

  14. As usual, Krugman advocates a grand scheme carried out by omniscient government planners.

    The Ministry of Plenty should be setting wages and prices. That would fix everything.

  15. We need The Smart People to control both the economy and the climate. The same Smart People at the same time. I nominate MNG.

  16. Shut the fuck up, Paul Krugman.

    1. Yo, fuck your stealing my catchphrase.

  17. You left out a ‘Yo’.

  18. What I like about Krugman is his chutzpah: For years he called for an asset bubble (in housing), and after it popped, he had the gall to say he predicted the bubble!

  19. Krugman doesn’t deserve the courtesy of a “yo,” Johnny L.

  20. there she was

    sittin’ in the corner

    a little bleary

    worse for wear and tear

  21. In some ways I kind of but not really feel sorry for Krugman. He is paid to give his readers justification for their beliefs that central planning is the sollution to all our problems. He must at all times advocate for the sollution that involves smart people intervening to save the market from itself. The simple sollution would be to stop injecting money into the economy, get the fed to do its job and worry about a stable dollar, cut taxes, government spending and regulation, and let the market heal itself.

    But that idea is off the table. I mean some economics undergrad from Iowa named Ronald Reagan figured that out. That idiot Sarah Palin would give that sollution. No, Krugman can only give big intervention kinds of sollutions.

    The problem is that all the obvious forms of intervention (big spending, taking over industries and the like) have already been tried. And worse still the social Deocracies in Europe that Krugman and his leaders worship are going broke. So, just what the hell is the resident economic genius of the upper West side supposed to advocate? When you think about it that way, it is no surprise his writing is getting increasingly bizare.

    1. There was a time when, as a loyal reader of Reason, I thought it was terrible that so few people knew anything about economics. “Take Econ 101!” I thought to myself. But since 2008 one thing has been made abundantly clear to me: the people who HAVE taken Econ 101, but have not otherwise made serious study of economics, are fucking worse than anything. It’s the old Socratic problem: people just don’t know how little they know on this subject.

      1. I never had Economics 101 or any college economics, but I did take high school economics which I figure is pretty much the same thing. The teacher was quite a dumb shit, and I made her job difficult any chance I got. But most of the class was how to pay your taxes, love the “consumer protection” regulation, collect social security, and be a good economic sheep. The best part was how houses are an investment, not an expense.

      2. I’ve never taken Econ 101, but from what I gather they try to jam a lot of nonsense in your brain. Stuff like pure equilibrium, symmetric knowledge, helicopter drops, etc.

      3. One of the things I found after learning economics is that Economics is actually a very easy subject to understand, once you grasp the logic. It is the de-programming that is HARD! Years of having fascist/socialist propaganda browbeated into my young brain really took a toll.

        1. If you think that economics is easy, I daresay that EITHER you are one of the great geniuses of the age, who can effortlessly cut through difficult subjects, or (rather more likely) you’re doing it wrong. Once you begin to delve into its subtleties it becomes clear that it is a field of tremendous complexity. As with physics, weird stuff happens when you take it to very large (macro) or very small (behavioral) scales, but really, there’s a ton of strange shit that happens somewhere in between as well.

          Take government planning/regulation: as good free marketeers, we know that these things lower economic efficiency…except that there are numerous situations where game theoretical considerations imply that regulation may lead to the least-bad result. (The vulgar libertarian notion that planning is nevah evah the best option is, frankly, incorrect.) So you have to do the very difficult legwork of finding out where this is likely to hold. How can we quantify the inefficiency of central planning, and how can we compare that to the losses associated with a situation in which individual market participants each face a prisoner’s dilemma? Then the specifics: what kinds of regulations? What sort of bureaucracy to enforce them? Et cetera ad infinitum.

          If this is easy for you, I imagine that you must be the Alexander of the age. If, instead, you mean that the basic framework is easy to grasp and yields valuable insights, well, that’s certainly true. But the point of my original post is that too many people (on this board, for instance) who grasp that basic framework have no conception of how little of the elephant they’ve felt. Econ 101 is easy. Economics is hard. But people don’t know how little they know.

          1. Norton, you are in libertarian country, where externalities and game theory do not exist, because, well, they are inconvenient to their simple-minded theories.

            You are exactly right. The real issue is how to decided between nearly-free markets, harnessed market forces, and government, all of which have serious flaws.

            1. Fuck off slaver.

            2. Please take a game theory course before commenting on the supposed incompatibility of libertarianism and game theory.

              Then come over here and let me beat you across the face with one of my game theory textbooks.

            3. simple-minded theories.

              Proposing more debt as a way to avoid the problems of too much debt is about as simple-minded as it gets, Choad.

              -jcr

          2. The vulgar libertarian notion that planning is nevah evah the best option is, frankly, incorrect.

            Incorrect. Freedom is more important than efficiency, so even if it is more efficient, planning is never the best option.

            1. Religous cultist alert

          3. The vulgar libertarian notion that planning is nevah evah the best option is, frankly, incorrect.

            Incorrect. Freedom is more important than efficiency, so even if it is more efficient, planning is never the best option.

            1. Well, OK. That’s a legitimate viewpoint. But now we’re talking about questions of ethics and political philosophy, not of economics per se. And even if you establish that as your foundational axiom — that freedom is the ultimate good — you still face very difficult tradeoffs. So I suppose I would say that a) from an efficiency perspective, planning is sometimes best (or least-bad), and b) that setting liberty as your very top priority doesn’t suddenly make everything easy.

              1. Well, economic theoreticians can come up with all sorts of theoretical considerations where omniscient central planners can use regulations to get marginal improvements over a non-centrally planned free market.

                The sticky problem is that in the real world, central planners are generally fuckups and corrupt and self-interested people, and so those theoretical improvements in practice turn out to yield suboptimal results.

                1. From a theoretical standpoint, a lot of the potential gains from planning aren’t “marginal,” if by that you mean “minor” or “of no great significance.” But indeed you’re right that central planners often possess all of the vices that you’ve named. This adds myriad new complexities. How do you quantify the failings of those in charge? How do you increase the efficiency of the organization in charge of the planning, or create the right incentives to align the interests of the bureaucrats with those of the people? Man oh man are these hard questions. What’s the alternative? To abandon the idea of using government to solve any of these problems (i.e., problems relating to externalities and unfortunate game theory outcomes), ever. In some parts of the world this might be a vast improvement! But, in fact, without answering these hard economic questions we can’t know that minarchy is the practical optimum; we would be acting on a (decently well-founded) hunch.

                  I must revise my original statement. I said that economics is hard. I have now convinced myself that economics is really fucking hard.

                  1. Re: Emperor Norton,

                    From a theoretical standpoint, a lot of the potential gains from planning aren’t “marginal,”

                    Unfortunately, EM, they’re not NOT marginal or marginal – they are non existent. The problems with the notion that planning leads to “rational” results resides in the following:

                    a) The notion that planners are omniscient so as to know the possible outcomes of every single voluntary transaction.
                    b) The idea that people seek rational results for every single actor. This is utterly false – each actor looks to maximize his own utility.
                    c) The idea that the interventions in the market do not produce unexpected results (for the simple reason that people are NOT fools).

                    How do you quantify the failings of those in charge? How do you increase the efficiency of the organization in charge of the planning, or create the right incentives to align the interests of the bureaucrats with those of the people?

                    You don’t seem to see the answer that’s in front of you:

                    YOU DON’T. You DON’T seek to “maximize” the efficiency of the central planning organization, you DON’T create it in the first place – the knowledge problem will always prove to be insurmountable, because a few guys cannot possibly know what myriads of people are THINKING at any single time.

                    Man oh man are these hard questions. What’s the alternative? To abandon the idea of using government to solve any of these problems (i.e., problems relating to externalities and unfortunate game theory outcomes), ever.

                    Just for starters, you’re talking about an answer looking for a problem.

                    I have now convinced myself that economics is really fucking hard.

                    It is not hard once you UNlearn what you have “learned.”

              2. No one said life was easy.

                Also, all decision making is economics, so it is a question of economics.

                1. “No one said life was easy.”

                  This…is not a great response to the problems I’ve mentioned, if your goal is ever to convince others. But I suspect that many libertarians have no such goal. Hey, whatever floats your boat.

                  “Also, all decision making is economics, so it is a question of economics.”

                  That’s a mildly intriguing philosophical statement, but I’m not sure it means anything. Can you deduce your axiom about the primacy of freedom from economic principles? I suppose you could say that holding that belief is utility-maximizing for you, but I don’t think you could go much further than that.

                  1. Axioms are axioms, they arent deduced from anything. I chose freedom as the highest value and then decisions are made maximizing it. The belief isnt utility maximizing itself, its the measuring stick.

                    1. Also, saying all decisions are economic isnt that intriguing at all. What is a decision but choosing which of two or more things you value most?

                    2. Right, so, what I’m saying is, do you regard your decision to value freedom so highly as an economic decision? It sounds like you do. But that really underlines the subjectivity of your values.

                      What I mean is, originally you said the following:

                      “Incorrect. Freedom is more important than efficiency, so even if it is more efficient, planning is never the best option.”

                      Are you saying that this only applies to you, based on your own personal value judgments? At the time I thought the statement “freedom is more important than efficiency” was intended as an objective ethical statement applying to all mankind. But in your last few comments it seems that you view it rather as a matter of personal preference. Yet I don’t think that you can plausibly refute my statement about central planning sometimes resulting in the best results with a statement of mere personal preference, except perhaps insofar as the planning/freedom trade-off applies to you personally. But that doesn’t necessarily imply that any of the rest of us should care.

                    3. Edit: I didn’t mean to be rude by my last line. I just mean that if we take freedom to be a subjective value, well, people hold all sorts of values that end up getting compromised because we’re stuck with one another, no man is an island, blah blah blah. So then we have to ask why this particular value should be immune to compromise. And then it becomes a huge philosophical Gordian Knot and I remember why I quit being a philosophy major.

                    4. do you regard your decision to value freedom so highly as an economic decision?

                      No, it is an axiom. Since it is my (well one of them) measuring stick for economic decisions, then it cant be used to choose the stick too.

                      Is valueing freedom subjective or objective? I would say it is objective, but really, are any axioms objective? I was claiming a universal statement but I realize others dont agree with the axiom.

                      So take that as you wish.

          4. The problem is that the people deciding on economic policy in this country are by and large not economists, they are politicians. So while it’s probably true that there are specific instances where regulation actually increases efficiency, the chances of those instances being exactly the ones where regulation occurs are practically nil. Also, you have to factor in the fact that politicians and bureaucrats have every incentive to over-regulate, so they can pick winners in the marketplace and thereby reward their benefactors.

            So, I’ll stand on the side of eschewing regulation and central planning, even in the scattershot cases where it would result in increased efficiency. It’s not going to be done right no matter what, and better to have underregulation than overregulation.

            1. I’m not quite a libertarian anymore, but as a lib-sympathizer I think I can agree with you that as a general rule of thumb freedom-maximization tends to be our best option. But my original point was about the vast complexity of economics as a field.

              If you’ve ever read the Platonic dialogues, you may recall that Euthyphro was certain that he knew what piety was, but in the course of a conversation with Socrates, it became clear that he knew not. Similarly, Reason commenters tend to be rather more certain of their grasp of economics than is justified by their actual knowledge.

              Anytime Krugman gets mentioned on Reason, the vast majority of posts boil down to, “pshaw! Krugman! What a moron! What a hack!” and “economics is e-z, if Krugman doesn’t agree with my trivial observations he must be corrupt!” I don’t need to agree with Krugman to find this irritating. Krugman is not a hack, he’s not a moron, he’s not corrupt. He’s done a ton of good work, and even his bad ideas are often interesting. And people who wouldn’t think to quarrel with a scientist in any other field based on what they got from a college intro course here read one book of Mises and think that everything is obvious and simple.

              1. Krugman is not a hack, he’s not a moron,

                Absolute. Bullshit. The man looks to China as enviable. He has not the slightest clue that it is simply beyond the scope of human beings to make decisions for tens or hundreds of millions of others.

                Continue to suck Krugmans dick at every opportunity, if you must. No matter how many times you repeat it, he isn’t a fucking “scientist”, any more than Phil Jones or Michael Mann, apparently.

                1. “He has not the slightest clue that it is simply beyond the scope of human beings to make decisions for tens or hundreds of millions of others.”

                  It’s clearly possible for a man to make decisions for millions of others. I think you mean “optimal decisions.” Generally I agree, but it’s a bit more complicated than that.

                  1. I think the idea is that it’s impossible for human beings to produce some desired result by making decisions for large numbers of other human beings — there will always be unintended consequences that either foil the achievement of the goal, or mitigate its impact. And producing positive results by fiat is the essence of “benevolent” central planning, is it not?

                    1. I would say that it depends on what exactly one is trying to achieve, and the sort of organizational technology one can bring to bear, among many other factors. Unintended consequences flow from individual decisions as well as group decisions, though I would agree that the more remote the decision-maker the greater the chance that these consequences come to have an overwhelming impact.

                      “Impossible” is a strong word, which I am loathe to use. One example that comes to mind is the tigers of east Asia, those nations which enjoyed an incredible surge of prosperity over their last half-century. These were no free-market utopias; state intervention was a prominent part of their economic story. But it’s a complicated story, and it’s difficult to quantify the effects of government intervention.

                  2. It’s clearly possible for a man to make decisions for millions of others. I think you mean “optimal decisions.” Generally I agree, but it’s a bit more complicated than that.

                    Krugman believes that a group of “enlightened” can, hence his designation as something slightly less than a “scientist”.

                    Certainly a tyrant can make any decisions for any reason. If pleasing the political class is the definition of “works”, then central planning can “work”.

                    One of the biggest reasons that central planning doesn’t work is the ability to collect, store, organize and utilize knowledge effectively. Knowledge, however great in the central planner, is limited. How could 1,000,000 bureaucrats have as much knowledge as 300,000,000? They can’t.

                    Thomas Sowell was talking about people like Krugman when he said “People with more knowledge than the average person are very often unaware that they do not have 1/10th of the knowledge of the average people combined. In this situation for the intelligentsia to impose their notions upon the general populace is the imposition of ignorance upon knowledge.”

              2. Reason commenters tend to be rather more certain of their grasp of economics than is justified by their actual knowledge.

                I think that most reason commenters are rather certain that Krugman et al dont know what they are doing, not that we do. We are much closer to the socratic position. Let everyone decide for themselves without assuming they will necessarily be rational individually.

          5. Oddly enough, when you make individuals play prisoner’s dilemma games, most of them freely choose to cooperate without the state putting a gun to their head and forcing them to do so …

            And strangely enough, that happens because we’re not perfectly rational optimizers.

            Wonder if A explains B.

            1. Can you cite literature? That is interesting, if true, but I can’t drop that nugget in conversation without at least read the relevant study with my own eyes.

              It’s a fact that in general people are rubbish at games, though. I shouldn’t really be surprised if that turns out to be true.

              1. There is extensive research on the subject. I read a bunch of related stuff in a cognitive science class a couple years ago.

                Here’s one example ….
                http://www.faculty.jacobs-univ…..ials/Dawes Messick 2000.pdf

                You can go through the bibliography. I think Dawes 1980 was the one I read for the class.

                It’s pretty tied up with the selfish gene theory and the longstanding issue of how to explain human altruism. So there is a LOT of research on it. Lots of people doing game-theoretic experiments putting people in prisoner’s dilemma games and seeing how they behave.

                This paper deals with in-group biases.
                But the angle I think is interesting is that humans appear to behave in these irrational ways precisely in situations where the Nash equilibrium is sub-optimal.

                1. Also, we read
                  AG Stanfey, ‘The neural basis of economic decision making in the ultimatum game’ (2003)

                  Also:
                  http://www.chem.arizona.edu/co…..shment.pdf

                  Altruistic Punishment in Humans

                2. Thanks for the link, you are a gentleman (woman?) and a scholar. I was certainly aware that people are often interestingly irrational when they play these games, but if I can find backing for your claim that “most” people act this way I’ll have learned something new and fascinating.

                  1. Thanks. (Girl. )

                    This one looks like a pretty good paper:
                    http://www.cos.ufrj.br/~jano/C…..k-1998.pdf

                    Cites Elinor Ostrom’s work on commons dilemmas.

                    1. Thanks again. I don’t have time for any of these now, but I’m saving them all to my desktop. The difference between game theory and game practice is potentially fascinating. I’d like to see a cross-cultural analysis that examines the question of which nations of the world have the most optimizing populations. It’s a pure hunch, but I suspect that Anglo cultures would do better than most.

                      (Also, I would say that this goes back to my original point, which is that economics is actually really freaking hard and that people who claim that it’s so very easy should in most cases be beaten to death with their own limbs.)

                    2. people who claim that it’s so very easy should in most cases be beaten to death with their own limbs.

                      Lets start with Krugman.

                    3. Oh yeah, I’m not one of the people claiming it’s easy.

                      I think people like Krugman get themselves tied in mental knots though because of the complexity of it. But there are many things that can be boiled down to a simpler formulation that makes you realize that a lot of macroeconomics is wrongheaded.

                      For instance, I’d wager that most Keynesians don’t even really understand Keynes. I’ve heard people make the argument that we’re better off “spreading the wealth” because then people have more money to buy your product – which they THINK is what Keynes argued. But if you boil that down to a two person interaction, it just amounts to a roundabout way of giving away your product. Why would giving my money to the government, to redistribute to other people, so they can buy my product, be any different?

                      Keynes’s actual argument was NOT the kind of “money bomb” bullshit that modern politicians like to do with “stimulus” packages. But to get unemployed workers doing something productive and thereby adding to the GDP. Once you realize that, you realize that Keynesianism could only work in very limited situations where there’s a lot of unproductive capital and labor sitting around underutilized. And that’s leaving out whether the government could actually do a decent job getting people employed in some productive task without producing all the rent-seeking and other perverse consequences with that we’ve been dealing with since the Great Depression.

                      Personally, I think it’s too problematic in terms of incentives and conflicts of interests. Keynesianism might work in a benevolent dictatorship – the dictator could just fire everyone when the recession ended – but in a democracy they turn into entrenched interests and you can never get rid of them.

                    4. I tend to agree with everything you’ve said. My only complaint — ultimately, the source of my original post — is that this sort of reasoned discussion is becoming increasingly uncommon around these parts.

                      It seems to me that we can think that Keynesians are wrong, but still have interesting conversations about why they’re wrong, and perhaps in so doing advance our own understanding. But these economics threads are becoming more and more of a circle-jerk as time goes on.

                    5. That’s why we need trolls. They stimulate discussion.

                      Anyway, think I found the citation on cooperation in PD games under experimental settings:

                      Selfishness examined: Cooperation in the absence of egoistic incentives.
                      Caporael, Linnda R.; Dawes, Robyn M.; Orbell, John M.; Van de Kragt, Alphons J.Behavioral and Brain Sciences. Vol 12(4), Dec 1989, 683-739.

                      Couldn’t find a link with a PDF. So you’ll have to use your (I assume) library access.

                    6. You can think Keynsians are wrong.

                      But thinking does not make it so.

                    7. I’d wager that most Keynesians don’t even really understand Keynes.

                      To quote Keynes himself: “I was the only non-Keynesian there.”

          6. Re: Emperor Norton,

            If you think that economics is easy, I daresay that EITHER you are one of the great geniuses of the age, who can effortlessly cut through difficult subjects, or (rather more likely) you’re doing it wrong.

            You should consider the OTHER possibility – that what YOU learned so far has been wrong.

            Once you begin to delve into its subtleties it becomes clear that it is a field of tremendous complexity. As with physics, weird stuff happens when you take it to very large (macro) or very small (behavioral) scales, but really, there’s a ton of strange shit that happens somewhere in between as well.

            There is nothing strange about it, only for those that rely too much on equilibrium models and regression models.

            Take government planning/regulation: as good free marketeers, we know that these things lower economic efficiency…except that there are numerous situations where game theoretical considerations imply that regulation may lead to the least-bad result.

            Do tell! The “least bad” result! The government, populated by soothsayers and psychics! What a wonderful notion!

            (The vulgar libertarian notion that planning is nevah evah the best option is, frankly, incorrect.)

            You don’t say?

            Notwithstanding the knowledge problem? Why, these regulators must be omniscient!

            So you have to do the very difficult legwork of finding out where this is likely to hold.

            Of course you would – knowing what people want every single second is difficult work . . . Not even Deep Thought could muster the power . . .

            How can we quantify the inefficiency of central planning, and how can we compare that to the losses associated with a situation in which individual market participants each face a prisoner’s dilemma?

            Well, my oh my! We can’t have that! Nash’s Equilibrium and all that!

            Except, of course, when the Prisoner’s Dilemma does NOT apply to cooperative interactions, which are what makes the market.

            If this is easy for you, I imagine that you must be the Alexander of the age.

            I would not go that far – Alexander was only a military genius.

            If, instead, you mean that the basic framework is easy to grasp and yields valuable insights, well, that’s certainly true.

            Oh, you surely made me blush!!

            But the point of my original post is that too many people (on this board, for instance) who grasp that basic framework have no conception of how little of the elephant they’ve felt.

            Oh, your teacher showed you that picture of the blind men touching an elephant, too? I told my teacher that the blind touchers were fools for not taking their blindfolds away. He told me that that was not the point, and I answered with: Of course not – since Economics is not represented by such whimsical allegory.

            But people don’t know how little they know.

            And that’s a fact, Emperor Norton!!

            1. Thank God! I was having such interesting discussions with well-mannered, reasonable people that I thought I would surely die from lack of hostility and sarcasm. And ridicule. And arrogance! Phew, that was a close one.

              I think I can boil down the information content of your post:

              1) You are ever so smart.

              2) Knowledge problem! (It’s A problem, not THE problem that demonstrates that government can do no right under any circumstances. You love your straw men, but if all plans presupposed omniscient planners, nobody would support planning of any kind. But most people understand that good decisions can be made with imperfect information.)

              3) Erroneous dismissal of game theory as it affects the market.

              4) You are just so, so smart.

              5) Yup, adorably clever. Look how you twisted that metaphor in such a flattering way! I readily admit that the mysteries of economics are vast and inviting, but I am a mere unenlightened fool! You, you see the whole elephant! Surely, economics keeps no secrets from a great man such as yourself!

              Actually, when I write it all out like that, it seems sort of paltry. But perhaps self-adoration brings greater joys than intellectual modesty.

            2. Except, of course, when the Prisoner’s Dilemma does NOT apply to cooperative interactions, which are what makes the market.

              The market is NOTHING BUT Prisoner’s Dilemmas. Every single transaction involves the opportunity to cheat: sell rotten food, pay counterfeit money, and collect the benefit.

              Yet, amazingly, 99% of the time nobody cheats. And without armed guards at every cash register.

              Not that cheating doesn’t happen occasionally … in Axelrod’s experiments you could never get to 100% cooperation without being colonized by defectors. But you do get mass levels of cooperation with very little intervention.

              Even Adam Smith’s observation about the Butcher’s self-interest is a formulation of the prisoner’s dilemma. And the fact that you don’t need a government to elicit cooperation.

  22. 300 posts, here we come. I eagerly await the input of my Lord and Savior, the Anon-Bot.

    1. NO! Go post on a Suderman thread. Poor chap’s been missing the Weekly Top 5 for ages. Help him out.

      Spare post?

      Spare post?

  23. bughouse professors, sweating fourth-dimensional economics-Mencken

    seems appropriate

  24. As I mentioned about this article in another thread , Krugman basically says that the government should fuck the people with higher inflation so that during economic bad times they can reduce inflation a bit and appear to be “working”. He basically claims that if Steve Smith would rape you more, it would be great when he raped you a little less.

    1. EVEN STEVE SMITH NOT RAPE KRUGMAN! STEVE HAVE SOME STANDARDS AFTER ALL! NOT LIKE WARTY!

      1. Endeavor to persevere, my drooling friend. Endeavor to persevere.

  25. “He basically claims that if Steve Smith would rape you more, it would be great when he raped you a little less”

    It’s sad that governments are chiefed by the double tongues. There is iron in your words of death for all Comanche to see, and so there is iron in your words of life. No signed paper can hold the iron. It must come from men. The words of Ten Bears carries the same iron of life and death. It is good that warriors such as we meet in the struggle of life… or death. It shall be life.

    1. Krugman’s beer’s not fer drinkin’. It’s just fer lookin’ through.

      1. I didn’t surrender, but they took my horse and made him surrender. They have him pulling a wagon up in Kansas I bet.

  26. Apparently the “conscience of a liberal” is “fuck you poor people”. Chad? Tony?

    1. It’s patently clear that liberals don’t give a fuck about poor people – inflation really hurts the poor. It’s the most regressive tax of them all. And even better, it funnels money to the rich and well connected. Everyone wins!

      1. Biden: NYC Officials Inflating 9/11 Terror Trial Costs…

        http://wcbstv.com/topstories/s…..95846.html

        1. Collapse of the euro is ‘inevitable’: Bailing out the Greek economy futile, says FRENCH banking chief

          http://www.dailymail.co.uk/new…..risis.html

          1. In a note to investors, SocGen strategist Albert Edwards said: ‘My own view is that there is little “help” that can be offered by the other eurozone nations other than temporary, confidence-giving “sticking plasters” before the ultimate denouement: the break-up of the eurozone.’

            He added: ‘Any “help” given to Greece merely delays the inevitable break-up of the eurozone.’
            The alarming claim came a day after European Union leaders promised ‘determined and co-ordinated’ action to shore up Greece’s tattered public finances, but disappointed traders by failing to provide specifics.
            Further details are expected early next week, but markets were in high anxiety yesterday amid fears political divisions among rich eurozone members could derail any rescue.
            The euro slid almost 1 per cent to $1.357 yesterday, meaning it has lost 10 per cent of its value since November. The pound rose to 1.14 euros.

          2. But, but, but…..Europe is run by The Smart People and not a bunch of teabaggers. They cannot fail.

            Next you’ll be telling me CA and NY are in trouble.

            1. Clearly a case of deregulation run amok!

            2. Yet another failure of the free market system.

            3. And, ya’ know, they have all that great and efficient health care, equitable taxes and fantastic government services.

              What could go wrong?

          3. A popular German newspaper did a poll which showed that two-thirds of Germans are adamantly opposed to bailing out Greece. Shocking, I know. It’s looking more and more each day like it’s not going to happen.

            1. I wonder what proportion of the German public was pro-euro at adoption/expansion …

              I’ve always been anti-euro and keep my cash in non-euro banks!

              1. The majority of ordinary Europeans were against the euro and the entire E.U. concept to begin with.

                But the geniuses at the top running things wanted it, and that’s the only fucking thing that seems to matter anymore nowadays.

  27. wow, it looks like nail clippers have already inflated beyond his ability to afford.

  28. The dollar is not going *up*; the Euro is going *down*.

    Good time to buy a Porsche.

    1. Perhaps.

    2. Since 2008 the dollar is still up vs. real estate, U.S. and international equities, oil, platinum, grains, collectibles, and yes, Porsches. Seems like it’s been a pretty good time to be holding dollars to me.

  29. The reason people listen to Krugman is he is a scientist and bases his conclusions on measurable data.

    Whereas, the so-called “reason” bloggers present ideas formed by blind allegiance to religious platitudes.

    The reason you don’t like his conclusions, because you cannot accept the facts.

    So you put on your religious blinders. Worship away, suckers.

    1. You have got a little Krugman cum still on your chin, you need a tissue?

      In case you hadn’t noticed, the article in question used completely speculative numbers. The turd himself even admitted he didn’t know if it would work. So it appears you are the one experiencing “blind allegiance to platitudes”.

    2. Not a lot of substance here (if any); try again (or not).

    3. I love it when people accuse others of doing exactly what they are doing themselves.

      1. Zeb, your accusing Marshall of having cum on his chin?

        1. Zeb, your accusing Marshall of having cum on his chin?

          Science, you got this far but couldn’t understand a post made only one minute after mine wasn’t a response to me?

          Welcome to the intertubes! Don’t worry, you will get the hang of the whole timestamp thingy real soon.

          1. Let me redo this for you. Marshall the following is a joke: “Zeb, your accusing Marshall of having cum on his chin?”. Now you laugh.

            1. BTW Marshall, how close were you to Frank when you saw the cum on his chin?

    4. Heh. Stick around, Frankie. We’ll have some fun with you.

      1. Oh, I hope so. I would really like to have a real punching bag around here, as opposed to sockpuppets like Choad and Tony. Even when they’re well done, it’s just not the same. And Xeones doesn’t count; beating on him is like beating up one of the girls from Full House. Sure it’s fun, but it’s ultimately too easy to be satisfying.

        1. Oh, you know you love me.

          1. Fap fap fap Tony, Chad, where is Joe? fap fap fap

          2. We’ve drifted apart. But it’s not you, Choad. It’s me. I’ve changed; I guess I’ve become less…

            Oh wait, no, it is you.

    5. His theory of quantum econo-dynamics is indeed quite excellent.

    6. Whereas, the so-called “reason” bloggers present ideas formed by blind allegiance to religious platitudes.

      Umm, drink?

    7. Economists are not scientists
      -and-
      Krugman is not a fucking economist.
      He can take his PHD and his Nobel Prize, put his dick in it, fuck it, and go “AHHH!”

      I am a better economist than Paul Krugman.

    8. Just because someone does some good research and forwards some insightful theory, it doesn’t necessarily follow that everything (or even much of what) he believes is SCIENCE and TRUTH.

      Newton co-invented the calculus. Pushed science forward on every front from optics to physics.

      He also was a quack who spent as much time trying to turn lead into gold as he devoted to working out the mathematics of the calculus.

      Fucktard

      1. Much more time, actually. And, awesomely, he also personally hunted down and captured counterfeiters when he ran the Royal Mint.

  30. What would happen if Al Gore and Paul Krugman had a baby?

    1. You’d get a Barack Obama.

  31. Frank Thomas = Thomas Frank

    Joke sockpuppet. Not mine.

  32. The idea of using inflation to “fool” people into not thinking in real wage terms comes from Keynes himself. The fact is that the idea does not work – Krugman and his acolytes do not believe people are intelligent enough to figure it out, which is exactly what has happened everywhere the idea has been tried.

    You mean that even the cattle, as stupid as they are, notice prices going up and their wages not?

  33. Frank Thomas,

    The problem with Krugman is that he believes economics is an empirically measurable science. Name one Krugman argument that hasn’t been proven wrong over time, vs. every boom/bust predicted by the Austrian Business Cycle theory? See this article for the details http://mises.org/daily/4097.

  34. You can take the boy out of the cult but you can’t take the cult out of the boy.

    1. You can get the President out of Chicago, but you cannot get the Chicago out of the President.

      1. You are right.

        That is the problem.

        Obama keeps listening to Milton Friedman and the Chicago school. It is his Chicago nature.

        Obama is not a lefty. But at least he has does not carry water for the Australian school. The Marx-Hoover-Hayek axis would take America down worse than the Great Depression.

        1. Dumbest. Sockpuppet. Ever.

  35. “But I don’t want to argue against Krugman with macroeconomics, a pseudoscience in which he is just one of a million witch doctors.”

    Krugman: “Ooo eee, ooo ah ah ting tang
    Walla walla, bing bang
    Ooo eee, ooo ah ah ting tang
    Walla walla, bing bang…”

    (This is so much more fun and pertinent than quoting him as “blah blah blah…”)

    1. no shit sherlock

  36. “You can take the boy out of the cult but you can’t take the cult out of the boy.”

    Frank Thomas, still lacking substance.

  37. Guys, Frank Thomas is a joke sockpuppet. I don’t know which H&R regular it is, but its satire.

    1. Why can’t we get some real opponents around here? It’s amazing, but Obama has been so bad that basically no one will defend him. And there aren’t even prominent GOP people to wail on right now; it makes for somewhat dull discussions.

      1. Maybe if we stop bitch slapping MNG so much….but it’s so much fun….

        1. Well, it’s tough for a lefty out there. Obama is an unmitigated disaster; AGW has taken some most-likely-lethal body blows; and more.

    2. no, if it was satire, Sarah Palin would call you a fucking retard.

  38. Allow me to chum the waters a bit….

    Paul Krugman For Fed Chair!
    …Paul Krugman is an expert on monetary policy ? he wrote the classic paper on balance of payments crises (and probably could have got the Nobel Prize just for that), his work on Japan in the 1990s shaped everyone’s thinking of how to handle potential deflation, and his assessment of the crisis and needed response in fall 2008 was right on the money.

    Krugman is known to many academics as a trade theorist and as a pioneering modeler of growth with increasing returns. But just because Keynes wrote eloquently on Indian currency reform did not prevent him from also understanding what had gone wrong with the world economy ? and how to substantially fix it.

    Krugman also has exactly the paper trail that you would like to see from any potential Fed chair. He has written pointedly and with complete clarity about all the leading policy issues of the day. …

  39. Krugman is an outstanding statistician, an excellent mathematician and a lousy economist, which means exactly the wrong type of person you would want to pay attention to on any policy argument. He will drive you into a hole cleanly and quickly.

  40. Giving this asshole a Nobel is like giving a toddler a loaded, cocked handgun.

    1. I find the results of the former much less hilarious than those of the latter.

  41. Serious question:

    If the Euro is doomed to fail (looking like the way to bet), is the EU going to fail as well (I mean the trade deals, immigration stuff, etc.)?

    And if the Euro/EU fails, does that bode well for the US dollar/economy?

    Where is the profit play?

    And what happens as those countries try to re-value their brand new/old currencies?

    1. From everything I’m reading, the euro still isn’t likely to fail. But it will be a rough road.

      Right now with the major currencies they all have problems.

      USD, EUR, Yen GBP ALL have huge problems. So it’s pretty much a game of who’s the worst at the moment.

      Long term bets are to go long AUD or maybe Brazilian real against the majors.

      1. Well, isn’t this Greece thing basically going to make the more productive countries re-think their involvement?

        And if Spain or Ireland demands a bail-out next year (hey, Greece got one!), are the more productive countries gonna figure their better off alone?

      2. Long term bets are to go long AUD or maybe Brazilian real against the majors.

        Basically a bet on rising commodities prices into a potential global depression. Good luck with that.

  42. Actually Krugman has a point at least in the short run.

    Problem US is to large in debt. Solution make dollars worth less when paying them back.

    This avoids having to raise taxes or cut benefits, both of which it’s easy for the admittadly dumb public to notice.

    But the inflation tax is more subtle, and thus more likely to go under the radar. Especially if they just have inflation go up from say 2-3% to 5-6%

    1. and also is a big fuck you to poor people.

    2. The public might not notice, but our T-Bill buyers will. We still need them to finance the Boomers’ SS and Medicare.

  43. I don’t have much use for Krugman or this support for higher inflation, however, your failure to grasp any basic macroeconomics leads you to make any number of foolish statements.

    Some base macroeconomic truths:

    For every buyer there is a seller.

    For every borrower there is a lender.

    For every debtor there is a creditor.

    The production of goods and services generates an equal income.

    Money that isn’t held is spent.

    Think about some of those before you claim that too much debt explains why production and employment is depressed.

    1. …. plus … there is more scoring at a Star Trek convention than there is here!

    2. production is not depressed due to lack of manufacturing capacity. that is why inflation is not a big risk

    3. Will keep it in mind if I ever claim too much debt is the reason production and employment are depressed. Which I never claimed.

    4. Some base macroeconomic truths:

      Sorry to burst your bubble there Einstein, but all those macroeconomic truths are actually microeconmic truths.

  44. “For every buyer there is a seller.”

    I’m in the market for a working time machine. Let me know when you find a seller.

    1. You’re a potential buyer, but you aren’t a buyer until there’s a seller.

      1. If this is the correct interpretation of that line then it is a tautology: a semantic null that adds nothing to this discussion or any other.

  45. The thing that bugs me the most about Krugman’s solutions are not that he hasn’t found the right problem (the need for wage movement to find a market clearing equilibrium), it’s his dumbass suggestions: it’s like suggesting the best way to get to the next room is to crash your head against the wall rather than using to door.

    If the problem is that wages will not adjust to a market clearing level, then take away impediments to wage adjustments. What are those: (i) minimum wage; (ii) union contracts; (iii) numberless extensions of unemployment insurance and (iv) high taxes on employment – I could go on.

    But in every case, these are things that Krugman wants MORE of, not less of. He can’t face that fact, hence the dumbass solution of raising inflation. This is truly the burning down the village to save it solution.

  46. “Why is anybody still listening to Paul Krugman? Why is anybody still listening to any macroeconomist?”

    Morbid curiosity.

  47. Canis Major

    The great Overdog
    That heavenly beast
    With a star in one eye
    Gives a leap in the east.

    He dances upright
    All the way to the west
    And never once drops
    On his forefeet to rest.

    I’m a poor underdog,
    But to-night I will bark
    With the great Overdog
    That romps through the dark.

  48. The production of goods and services generates an equal income.

    What macro book did you get that out of, hmm?

  49. Lots of gold bugs here right? Well why are you guys hoping for deflation? the only pay your loonjob investments will pay off is if we get the real inflation Krugman is recommending. Why worry about the poor? the scrambled brain set is so ignorant that they voted for OBAMA! they deserve to have their money stolen from them by the people they worship. This is nature at work. I agree that it is really sad to see a poor child who has ignorant parents freezing cold at night because they have no heat or jackets due to hyperinflation…yes those kids will die because of government theft and their need to pay for prostitutes, but that is just as sad as a fast lion killing a cripled zebra….the dunfit/umb trust the governemnt or have no knowledge of monetary scams…the fit have knowledge and we protect ourselves with gold and guns and a smattering of other commodity investments.

    1. Did you lose the string tied to your potato, granpa?

      1. honestly, I was just trying to offer opposition. Espiarch requested it.

        1. No worries. I had a good line and MNG wasn’t around to use it on. Your post sounded close enough to ‘way back in ’37 I was with the Pinkertons, beaten up on the Unions’ for my misbegotten purposes.

          Sorry, just plain, Bart. Didn’t see you up there, earlier.

  50. the elite actually view those they will kill as unfit sheep as well. Read John D Rockefeller in 1890…he had to constantly deal with harassment from the masses he was giving light to. They wanted to use the governemtn to steal his wealth. He grew to hate those masses and turned his power into the government and these forces never did lose their disdain for the masses. They hate the ignorant masses and really believe they should die. sad but true.

  51. I have a question. Was Krugman always this much of a crackpot even before his Nobel Prize? He is beginning to rival Al Gore for the most likely to dilute the prestige of the Nobel Award.

  52. Why not end all taxes except inflation tax? That would be the fairest…..oh, I guess I answered my own question there.

  53. The last paragraph is argument based on macroeconomics. It doesn’t matter if it was prefaced with “but I don’t want to…”

  54. Chad|2.15.10 @ 8:20PM|#

    Norton, you are in libertarian country, where externalities and game theory do not exist, because, well, they are inconvenient to their simple-minded theories.

    You are exactly right. The real issue is how to decided between nearly-free markets, harnessed market forces, and government, all of which have serious flaws.

    Oh my, game theory. Is that a term you over heard while emptying the trashcans? Or, were you mopping the floor of the break room and what the scientist coming in from that area you are not allowed near were talking about sounded really neat?

    What words and terms are you putting out there next? Chaos theory? Fuzzy logic? Just plug in the pop science word of the day and you’ll keep them fooled, Chad.

  55. I favor a stable, 3 percent growth path of nominal expenditures. That should result in stable prices on average.

    Currently, nominal expenditure is about 9% below its long term trend. And so is real output and employment.

    There is reason to believe productive capacity is low, so returning to previous growth path of nominal expenditure probably will result in higher inflation for a time. Wages and other nominal incomes can (and should) go back to their previous growth paths, but prices will be a bit high for a time, as the pattern of production shifts to reflect demands.

    While I have little doubt that housing was overbuilt, what that means is that resources were used to build homes that could have been used to produce something more valuable.

    Nearly all expenditure is financed out of current income. There is always enough income generated to purchase current output.

    No credit at all is necessary for there to be sufficient expenditure to purchase everything that can be produced. The point of credit is to shift funds between and among households and firms, hopefully shifting resources to more valuable uses.

    The purpose of credit isn’t to create enough demand so that we are able to sell more.

    When loans are repaid, those receiving the loan repayment have more funds to spend. It is a shifting of funds.

    It is only desirable for people to save more if resources are used to produce capital goods–machines, buildings and equipment. If there is no need for such resources, (or not enough people want to buy them,) then interest rates should be low enough to discourage frugality because it isn’t valuable.

    The notion that people want to save, so people should work less is irrational.

    The notion that we must adjust all the prices and wages in the economy in order to have enough real money and real expenditure to buy what we can produce is wrong. We could do that, but we don’t have to do that.

    The notion that we got too much in deb, so we all have to spend less to pay off the debts is wrong. The notion that we can’t produce as much because we cannot buy because we have to pay off our debts is wrong. The notion that we will just work less for a while until the debts are paid down–isn’t common sense. It is blindness.

    1. I favor a stable, 3 percent growth path of nominal expenditures. That should result in stable prices on average.

      Great! When you get those levers working without all of the problems that have occurred with the last ten thousand attempts at doing so, I personally will demand that you have Bernanke’s job.

      Nearly all expenditure is financed out of current income. There is always enough income generated to purchase current output.

      So, there can never be a glut of fiat paper? I admit that is an interesting application of Says Law there.

      While I have little doubt that housing was overbuilt, what that means is that resources were used to build homes that could have been used to produce something more valuable.

      So, if the bubble didn’t happen, economic activity of equal value would have occurred? If this were the case would it not have been apparent on its face with depressed value occurring else where?

      The point of credit is to shift funds between and among households and firms, hopefully shifting resources to more valuable uses.

      There isn’t really a social function to the credit industry that can be separated from the actors involved. This is the sort thinking that says, ‘we must bailout the banks so they will loan again’, while not realizing you have satisfied the motivational requirement of profit seeking of the first action.

      It is only desirable for people to save more if resources are used to produce capital goods–machines, buildings and equipment. If there is no need for such resources, (or not enough people want to buy them,) then interest rates should be low enough to discourage frugality because it isn’t valuable.

      When I studied the failures of IMF policy and the societies effected by it, one fact stood out, those members of ethnic groups that had the tendency of time preference favoring the deferment of gratification, i.e., easy and immediate consumption, and who also hoarded in order to accumulate the personal capital necessary to have a broader array of life choices later, were the ones that succeeded, and obviously in the aggregate brought a greater degree of success to their communities than those who treated life as a full time Carniv?le.

      Undermining the natural tendency of frugality in some cultures was just one of many of the IMF’s crimes.

      While, Keynes would argue that personal savings is self defeating (theoretically, of course, since the prosperity I mentioned was historical fact) given low consumption patterns have a negative impact on employment, it was one of Von Mises insights that the actions that economist describe as a cycle all actually occur concurrently, e. g., one family hoards to build assets, another down the road spends to build a new dry cleaning service. Only when there exist macro level manipulations (monetary policy, tulip fever) are these concurrent actions interrupted and the pattern of recession is formed.

  56. Episiarch|2.15.10 @ 6:19PM|#

    Why can’t we get some real opponents around here? It’s amazing, but Obama has been so bad that basically no one will defend him. And there aren’t even prominent GOP people to wail on right now; it makes for somewhat dull discussions.
    reply to this

    While libertarians come in all shapes and sizes, and degrees of mental soundness that reflect the population, the lefty troll who is so obsessed with hatred of libertarian doctrine or the idea there are those who disagree on the political economy of human organization but who can’t be dismissed as religious fundamentalist or stuck in mud traditionalist comes in only one type of mental state of mind. Bat shit insane.

    You’ll occasionally get one like Chicago Tom or joe who though bat shit insane as the rest possesses a passive aggressive veneer holding their insanity in check long enough for you to make some level of human contact, but when they explode they tend to be much, much worse to deal with than the MNGs.

    1. Libertarian: an anarchist with a credit card.

      1. I know it is a little past Valentine’s Day, but I just wanted to say thank you for being you. You can go back to condescending to the wee little people in middle America now that you have had your fun with libertarians. Run along now. Scoot.

      2. BTW, land owner and slum lord here. Cut up my cards a mere two years out of college. You couldn’t have been more wrong if you were the real Franks describing Kansas.

      3. Frank, Please stick around. I think you will be very entertaining.

  57. I find it quite funny that since the start of the crisis, Krugman has argued how much better off the governments in Europe are than us because they are willing to spend money. Then Greece spends itself into bankruptcy, the EU goes to hell in a handbasket and now Krugman is saying a.) European nations would be better off if they were like American states and b.) this is not proof that debt actually matters. Look how stable these big spending European bureaucracies were before the crisis!

    The funny thing is that the crisis actually shows the folly of macroeconomics, because government is always expected to sustain spending even if revenue drops dramatically – exactly the reason why the European countries and big-government American states are totally broke.

    1. source please?

  58. I would add, however, that there’s another case for a higher inflation rate ? an argument made most forcefully by Akerlof, Dickens, and Perry (pdf). It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis.

    Converted to the peasant vernacular, basically he’s saying people are overpaid in buying power, and that inflating the money they earn is a good way to cut back on the buying power of the proletariat mob without numerically exposing the fraud on the rubes’ paychecks.

    That’s basically what the guy is saying in so far as I can tell. A guy who Enron paid $35,000 dollars for three days of work.

    Given this guy has got a Nobel, he enters quite a Pantheon of softies winning Nobels in the so-soft Nobel categories (can’t give Physics Nobels to morons without people booing instead of clapping) of “peace” and “economics”: Barack, the IPCC, Kofi, Goreacle, and…a tiny round Jewish guy who has too many cats? Mel Brooks should’ve won it for econ by those merits, and it would’ve made as much sense.

    1. the free market has spoken.

  59. Economists are always clamoring for inflation. It’s sort of like a quack doctor who recommends a lobotomy as a solution to any ailment, because he doesn’t know how to do anything else.

  60. I have to wonder, when the collapse of the dollar finally occurs, will the raging crowds burn Krugman and Bernanke on a fire made from bundles of federal reserve notes?

    -jcr

  61. Corporations are created by government and granted special priviledges by that government. They aren’t really private associations at all.

  62. And this got posted in the wrong place when the site ran it through a spam filter. Sorry.

  63. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis.

    In case it wasn’t already stated above, the biggest mistake that Krugman is making is that these working aren’t just getting the wrong wage, they are in the wrong jobs. Unemployment is the market’s way of moving them to different employment. (Therefore, preventing unemployment merely sustains the wasting of scarce resources that misplaced working are currently engaging in.)

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