It was the conflagration over inflation! The bash over fiat cash! Ron "End the Fed" Paul vs. Paul "QE IV-VII" Krugman, heating up the pixels at Bloomberg News the other day:
The transcript for all my pre-McLuhanites in the house.
And the aftermath:
*Mediaite sees Krugman being a dick in his supercilious, fact-free response to Paul afterward at the New York Times website:
what's even more unnerving about Krugman's post is the way he describes Paul's rhetoric as "Gah gah goo goo debasement! theft!" This is how I imagine Nobel laureate Krugman hears all of his opponents. Dr. Paul, willing to engage a well-known popular economist, brings up serious points about monetary policy (points that have long been made by Nobel laureates like F.A. Hayek and Milton Friedman), and Krugman behaves like the child with his fingers in his ears: "Nah, nah, nah, I can't hear you!"
Krugman, nose firmly pointing upward, describes his debate with Paul as "the perfect illustration of a point I've thought about a lot, the uselessness of face-to-face debates." But contrary to what Krugman may think, the general consensus about the "Paul vs Paul" segment was that it was a truly thoughtful discussion, a refreshing break from the usual talking-heads banter.
He continues on:
"Think about it: you approach what is, in the end, a somewhat technical subject in a format in which no data can be presented, in which there's no opportunity to check facts (everything Paul said about growth after World War II was wrong, but who will ever call him on it?)."
No one will call Dr. Paul on it, because he was right about spending cuts after World War II. From 1944 through 1948, the federal government cut spending by roughly 75%. I don't know how that could be at all ambiguous to Mr. Krugman.
Krugman's own response to the debate, which Mediaite quoted above. My favorite from his comment thread:
Let's pretend for a moment that the face-to-face debate was useless and didn't allow you to present the facts to prove Ron Paul wrong. You certainly didn't use the opportunity in this blog entry to dissect Ron Paul's points and present your data. The video is available for your viewing. If you wanted to you could easily use the video to take out Ron Paul's quotes and prove him wrong with dates, charts, numbers and historical facts. You did not do any of that. If it matters so much, why have you not done so?
Especially on that growth after WW II point, on which see this essay by Richard Vedder and Jason Taylor. David Henderson, while thinking Paul more than held his own against Krugman, notes Paul was wrong on the "slashed taxes" part after WW II.
Krugman also later weighed in with more contentless insults about how his enemies only talk about ancient history and not recent history, not explaining what distinguishes his currency debasement desires from Diocletian's, and not mentioning the 20th century history of inflation and economic crises and ballooning debt that Paul thinks can be blamed on central bank and government policy.
Despite what Krugman says, Paul and Paul fellow travelers such as best-selling author Thomas "Meltdown" Woods talk far more about the past century's history of what they see as government mismanagement, mistakes, bubbles, and even hyperinflations than they do ye olde Romans.
*Tyler Cowen weighs in, with a fair amount of what seems to me like deliberate pretending not to understand where Paul is coming from. Of course, one can understand what he's saying and disagree, but then one has to argue why, and I do understand every blog post isn't sufficient space to explain, say, why you think Misesian business cycle theory doesn't hold up.
I agree with Cowen that Paul doesn't explain what he means sufficiently when he talks of the need for "liquidation of debt," which could mean anything from repudiating sovereign debt to jubilee style debt forgiveness, but I think from context of hearing him talk about this elsewhere, he means that rather than shifting bad debt onto taxpayers, just letting lots of people who are owed money take a hit by admitting that they aren't ever going to get paid back, and letting people make decisions, earn income, produce, from there without having a debt hole to get out of. This gets complicated (everything is complicated) by the fact that someone's debt burden, if they pay it, is someone else's income, and I agree it's never entirely clear what Paul is advocating or why or what good he predicts will come of it when he talks of "liquidation of debt."
But it was fun to see Cowen poke at Krugman as well, as per:
Christie Romer (!) has shown that economic volatility was not higher before WWII. (Somehow that's one Romer paper which isn't discussed so much anymore.) That's a major hole in K's argument. Relative to the evidence, he is overreaching when a more modest point would suffice….
Modern liberals have a bad and selective case of 1950s nostalgia. Krugman is significantly overrating the role of policy here. More overreaching….
Demographics, plus government gridlock and lower productivity growth, make a higher debt-gdp ratio more problematic than Krugman admits.
Bob Wenzel makes an impassioned and angry Paulite defense of Paul from Cowen.
*The New York Sun thinks Paul represented a victory of Hayek over Keynes in the debate:
The point at which Dr. Paul started leaving Mr. Krugman in the dust was when the Bloomberg interlocutor asked him what Dr. Paul would do. Dr. Paul said he wasn't pressing for ending the Federal Reserve in a fell swoop. He is, he said, for competition among currencies. At one point, Professor Krugman could be heard muttering "I have no idea what that's about."
It seems that Professor Krugman hasn't been paying attention to Congress. What Dr. Paul was talking about is a bill called H.R. 1098, which he introduced in Congress in September. It's known as the Free Competition in Currencies Act. It is based on the work of Friedrich Hayek, himself a Nobel laureate. Hayek, in the latter part of the 20th century called for the denationalization of money and the free competition of privately issued currencies. The editor of The New York Sun wrote about the legislation in a column that ran under the headline "Ron Paul, Upping the Ante in His Campaign for Liberty, Hoists the Flag of Hayek."
It would not be too much to say that what one saw unfolding on Bloomberg was the power of the assertion of the ideas of Friedrich Hayek against the ideas of John Maynard Keynes. …We would never gainsay the importance of fiscal and regulatory reform in igniting the growth our country is going to need to work itself out of debt. But neither of those strategies will suffice. They will have to be done in conjunction with a restoration of sound money. And the more debates we have like the one just aired on Bloomberg, the clearer it will become that no one in public life understands this issue as clearly as the congressman from Texas.
*My own reactions: Ron Paul is not a "pillar of economic thought" as he was introduced by Bloomberg–he is a remarkably effective political polemicist for the body of economic thought of which he is a student and supporter, the Misesian Austrian tradition. Krugman is in fact a Nobel Prize-winning economist. Given that, it is extraordinary how neither of them sounded like technical academic economists, speaking ideas or techniques above the ears of the average TV listener. That's probably deliberate. As Cowen noted, "given that Krugman is a Nobel Laureate in economics, and Paul a gynecologist, the score could have been more lopsided than in fact it was."
Paul I think was more sophisticated on points like economic imbalances caused by interest rate fixing, the dangers to the masses of inflation, the knowledge problems of planners, and the cronyism implicit in how the Fed makes its decisions about what assets to buy and how money enters the economy, and the value of competing currencies, and the actual realities of trying to use gold as currency in the current legal regime.
Krugman despite his airy attitude of "I'm too sophisticated for this" pretty much had one idea and one trick: we need much, much more government spending and debt to get us out of the Depression he thinks we are in. (I use language like that myself at times in blogging to reflect the continued employment problems, though the actual data don't support the belief that we are in a Depression and my Nobel Prize get lost in the mail.)
Paul believes that government actions actually launch or exacerbate recessions and Depressions, and are not necessary to get us out of them, because of his acceptance of Mises/Hayek business cycle theory, though it was something he chose not to talk about at length here (though he mentions it once and often talks about it at greater length in other contexts). Paul understands that real things are real and money is just money–you can't just create capital by printing money. Krugman wants to keep going higher with national debt. Would Krugman dare risk less government action and spending if that might get us out of the Depression? A trick question, because of course Krugman doesn't believe that's possible–despite the post-World War II example Paul brought up.
Other relevant links from my old blogging:
*Why some of us think Krugman did too essentially advocate a Fed-fueled housing bubble.
*Krugman's love for Asimov's scientistic central planning fantasy, Foundation.
Hey, I wrote a book about Ron Paul.