At 14 mins, he is asked a pointed question about Keynesians and Austrians
Source link: http://blog.mises.org/9443/krugman-rattled-on-c-span/
Krugman rattled on C-Span
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For a second, Krugman realized he had no clothes — he actually looked naked, almost pathetic. I’m certain he’s thankful the caller wasn’t allowed a follow up.
Wow. Busted! It’s a shame that people who have no idea what Austrian Econ is all about will never really appreciate how skillfully he changed the subject.
Then he goes on to say how he saw the parallels between the beginnings of today’s crisis and the 1929 US crisis and late 20th-century Japan crisis. He further implies that he was the among the only economists to do so.
Again, he’s relying on the fact that nobody will actually look up anything on Austrian thought and find out that the Austrians were pointing out the parallels all along since even before the 9/11 stimulus package.
Austrian theory, or what little I have read of it, gives a thorough outline of how financial bubbles form and pop. It also explains as clearly as I’ve seen how capital consumption during credit-fueled booms leads to high unemployment upon the bust. It not only draws parallels between the crises of today and yesterday, it exposes how the crises were caused and prolonged by following the same kind of plan advocated by Krugman.
I do have to give Krugman his due. He’s way too smart to actually try and debate against the Austrian position. He wisely dismissed the whole line of thought and changed the subject in less than 15 seconds. Nobody who’s not already aware of Austrian economic thought could have had time to notice.
Krugman was actually lucky the caller was rather weak in his argumentation. The caller jumbled a few errant thoughts together and didn’t really throw a clear at point at Krugman that would have been more difficult to shy away from as Krugman did.
Also, no offense against Ron Paul and Peter Schiff (to a lesser extent…seriously, none at all…but it’s too bad the caller didn’t have some more edifying sources who are real PhD economists on hand. Mentioning any of the economists by name who write for Mises or teach at Universities would carried more weight and clout that would have been even more difficult and uncomfortable for Krugman to deal with.
Putting aside the questions and the quality of the callers:
Krugman the writer seems to have been replaced by Richard Drefus playing the role of an economist who is out of his element.
I thought he stumbled over the problem of rising intrest rates on credit cards! His answer was to save rather than use credit.
Hmmm. We need to open up the credit markets, but the most practical advice he has for the average Joe is to save. Later on he says saving is the wrong thing for people to do…..
What a putz.
I thought he stumbled over the problem of rising intrest rates on credit cards! His answer was to save rather than use credit.
Hmmm. We need to open up the credit markets, but the most practical advice he has for the average Joe is to save. Later on he says saving is the wrong thing for people to do…..
What a putz.
i’m not sure if i heard him correctly, because he said it very fast, but did he say that he didn’t want to get into the austrian view because it isn’t a “major school”? that is a remarkable admission of his close-minded economic perspective.
Sounds like you got Krugman’s mumble right, cs.
Krugman amazes me. In the first half of the video he is saying that the economy is slumping because people aren’t spending, and that the Government needs to spend to keep the economy going.
Than, at about 22 minutes into the video he is saying that people need to return to saving, and “thrift and prudence”.
This is clearly a contradiction which, thankfully, weakens the Keynesian argument.
Also, when he talked about the toxic assets problem, (answering the question that was shown on screen on a piece of paper), he seemed to not realise that no one wants to buy these toxic assets because they’re not worth anything. He says that no one wants to buy them, but neglects to say why. He seemed to skip over the recognition that prices actually mean something, and that they’re not selling because they’re worthless.
Everything for sale, has a price.
cs,
You did hear him correctly regarding not wanting to get into it because it’s not “major school”. I think that’s just arrogance on his part. He probably knew he would dig himself into a hole if he did go there.
I want to see Krugman and someone from mises.org on TV debating each other for an hour or two. I think the public could really do with this…
sorry – I watched the video and I think Krugman did well. You guys are out to lunch
MarkB,
I believe (government) accounting rules stipulate these assets are to be marked to market, and hence have zero book value because there are no buyers in the market.
I did like how he saw parallels to the 1929 crash and Japan’s 90′s depression, and even though both followed keynesianism to the “K”, though caused depressions that lasted for a decade or more.
“Uhh.. well.. what can I say? This looks like a classic crisis. Like the beginning of the 30s, like Japan. And we tried our medicine then… uhh, and it didn’t work. So we’re gonna try it one more time… cause, uhhh, I mean, it’s main school and we’re batshit insane. Does that answer your question?”
As an educated person in the Darwin year I’m much more offended in what he says between minute 15 and 16. We this… we tought that… et cetera. He’s just the court jester posing as a scientist.
I mean, all he really says is something looks like this or like that and that there are parallells. He never uses terms like cause and effect, not even on a hypothesis basis. But an universal truth is that govt. messes everything up, so the slection process of scientists adhering to this institution can only be really evil people who put fame and intellectual power before honesty and truth, or they’re just village people upgraded to nationwide (and beyond) talking and writing heads. Krugman is a mix of both, and thereby proving the title of his columns @ NYT totally inapplicable.
michael, being a Krugman apologist (see also here: https://www.blogger.com/comment.g?blogID=14390234&postID=1671467468565534511 ) without any arguments makes you a troll; your ‘thinking’ is worthless because no one is buying its produce here.
@ me: Published: February 16, 2009 4:21 AM: I meant to say ‘village idiots’ instead of ‘village people’. Excuse.
You guys are out to lunch
Our free lunch, I presume.
Wait, did he just say that the Austrians were the Bush administration’s “favoured economists”?
@michael
Here is a nice write-up by a friend – it links to other articles, but it’s very comprehensive and thorough:
http://recom.org/forum/showpost.php?p=211944&postcount=10
The problem with Krugman’s reasoning is that he’s addressing the symptoms (i.e. fall in consumer spending) but not the fundamental cause of the crisis (i.e. due to central bank mismanagement); and proposing short-term fixes while ignoring their long term consequences. That’s what differentiates between good and poor economic reasoning.
But definitely be free to make up your mind. Examine both perspectives and see which one makes sense to you.
I laughed when he said that “bubbles happen”. Wow man, that’s deep! Such penetrating analysis!
not a major economic school?
hayek got the nobel price for a central austrian theory. krugman got it for some international trade stuff, which isn’t really related to his keynesian views.
Marco’s post sums it up well – Krugman really is saying “”Uhh.. well.. what can I say? This looks like a classic crisis. Like the beginning of the 30s, like Japan. And we tried our medicine then… uhh, and it didn’t work. So we’re gonna try it one more time… cause, uhhh, I mean, it’s main school and we’re batshit insane. Does that answer your question?”"
Exactly–
They are holding onto the dumb belief that “this time its different” (different than the great depression) and if they make all the same mistakes somehow the result will be positive…. why? because they hold onto bad ideas. why do they hold onto and defend bad ideas? probably because their careers depend on it. Can they reinflate into another boom-bust-bailout sequence? Possible but I have my doubts, they really did it this time…
-John Bardacino
Is his mouth hanging open any time he’s not talking?
Let me get this straight, he’s an actual “Mouth Breather”?
Curt Howland: Is his mouth hanging open any time he’s not talking?
In pretty much every TV appearance I’ve seen him in, yes. If he’s talking with somebody that disagrees with him, his mouth opens wider, as if in shock.
Krugman is a professor at the Woodrow Wilson School of Economics at Princeton.
The same Woodrow Wilson whose major accomplishments were (1) launching an elective, unnecessary, foreign war against people who posed no security threat to the United States, and (2) creation of a central bank, which one might say was created to finance the aforementioned unnecessary war.
He has announced who he is, even before he opens his slack-jawed mouth and spews his whiny, shallow, nonsensical garbage. Knowing nothing more than the job title he voluntarily assumed, I already know what I think of him.
Magnus,
you missed the IRS among major achievements of wilson presidency.
The similarities between Krugman and Bernanke are astonishing especially the astonished, glazed-over look they share and the gulps that they take every time they find themselves in the real world instead of their fantasy modeled world.
Our job is to make sure that these charlatans are called to account every time they dare to ‘take questions.’
Krugman used a tried and true technique of many a politician. Ignore the question and change the subject.
Those wishing to enlighten others on the Austrian view need to take note of Ron Paul’s technique used to question Fed chairmen. Explain the applicable Austrian theory, thereby educating the listener, then pose the question.
As I was leaving college twenty odd years ago, I was having a final discussion with an accounting professor of mine. He was aware of the (minor, perhaps one day major) connections I had in the political world. particularly at the State level, and I had expressed some desire of pursuing political office above beyond the plying of my trade. He said the government needs more accountants and less lawyers (to paraphrase) and the assumption is less economists too.
Only lawyers and economists (of the classical schools anyway) can, with a straight face, say that more of what is killing us is a cure. Accountants don’t operate under any such nonsense (except for those who have sold their souls to the Feds). Perhaps it has something to do with understanding what real equity is, how it is calculated, when, and the concept of going concern. Understanding a simple paradigm – private entities books have to balance at some point (or in other words cash flow positively) or the enterprise goes out of business. The public sector has wiped away this boundary – they have FORCE. They can attack whomever they please when cash begins to run short. I guess the lawyers understand this but don’t care, and economists such as Krugman buries his head in the sand at such a reality.
The ONLY outcome from our course is violence.
It is interesting to note his reaction to the mentioning of the Austrian School. If you watch Krugman, he doesn’t blink much when he speaks and rarely modulates his voice. However, after the caller’s statement/question, he kept shifting his eyes, blinking and his tone changed several times. Also note the hard swallow. Hard swallows are generally an indicator of intense discomfort. I think his physical reaction was more telling than his actual answer.
Typical hubris from Krugman. Yeah, well, the Austrians aren’t a major school so I don’t have to address the fact that they’re right. Oh, and I knew the housing bubble would be bad, too. Just don’t ask me why I didn’t mention it until after it burst.
What would we have to do to get a guy like Krugman, DeLong or Galbraith to agree to a debate with Garrison, Horwitz or any of the fine Austrian scholars in the world today? It seems to me, an entertainer like Glenn Beck would relish the opportunity to host a Keynesian v. Austrian showdown. One half-hour of Garrison schooling a slack-jawed Krugman would be priceless and could certainly change a lot of minds.
Caveman, “What would we have to do to get a guy like Krugman … to agree to a debate with Garrison?”
You’d have to get Nobel-laureate Krugman to agree to a televised debate. With a representative of a school of school of thought that isn’t “major.”
private entities books have to balance at some point (or in other words cash flow positively) or the enterprise goes out of business. The public sector has wiped away this boundary – they have FORCE.
It was always thus. The “public sector” exists for the sole and express purpose of wiping away that boundary. That’s why it was invented. That’s the only thing it is good for. That’s how it operates.
Government spending exists in order to waste money, to pay for things that people do NOT want to pay for. If people wanted the things government did, they’d already exist, without governmental involvement. Government force only exists because people do not want to do those things.
The government’s activities are therefore a perfect map of what people do not want.
And the degree of force the government uses to get people to pay for these things is a perfect measurement of how much people do not want to do them.
Since I can remember (late 1980s), there has never been more than a month gone by without someone comparing the (then) current situation to 1929. 1929 is an obvious date to compare to, so everyone does it.
I believe he admitted that this type of spending will send us into the 3rd world (about 13m in)…
“It’s not that next year’s deficit is gonna make the United States into a banana republic. It would take 5, 6 years of deficits like that to turn us into a banana republic.”
But he’s not worried about deficits.
Krugman had probably 10 columns warning about the housing bubble. Additionally, he wrote a book in 1998 (!) about the possibility of the exact crisis we are now facing happening in the U.S. Which at the time, was dismissed by the Austrians.
His book, “The return of depression economics” was first published in 1998.
It is not even wrong to say that he did not call this crisis. It shows stunning a lack of curiosity about the facts of his statements, and the world of economics in general.
Hayek himself said his theory of unemployment was unprovable:
“Briefly, we find the curious situation where the Keynesian theory, which is comparatively best confirmed by the statistics because it is the only one which can be tested quantitatively, is nevertheless false. Yet, it is widely accepted only because the explanation earlier regarded as true, and which is still regard as true, cannot by its very nature be tested by statistics.”
Untestable theories are non-scientific.
Additionally, he wrote a book in 1998 (!) about the possibility of the exact crisis we are now facing happening in the U.S. Which at the time, was dismissed by the Austrians.
For starters, writing a book in which you describe a hypothetical economic crisis is hardly the same as predicting an economic crisis. In his book, Krugman misidentifies the causes of his hypothetical crisis (not to mention misidentifying the causes of Japan’s lost decade and the Great Depression). So, it’s hardly surprising that in 1998, as they are today, Austrians dismissed Krugman.
No less a Keynesian apologist (and Krugman admirer) than Brad DeLong had this to say about Krugman’s book: “No one should read The Return of Depression Economics thinking that they will learn answers. Krugman does not have any answers.” Put that in the press release! I couldn’t have said it any better myself.
Krugman’s position today is the same as it’s ever been. He maintains that FDR didn’t spend enough to end the Great Depression. He contends the Japanese didn’t spend enough to break out of the recession of the 90s (I guess that $5 trillion in infrastructure spending just wasn’t enough) and he keeps telling anyone who will listen that the US government needs to spend, spend, spend until our problems go away.
If you’re impressed with Krugman for writing about the possibility of a crisis similar to our current crisis in 1998, you should be infinitely more impressed that the Austrian Theory of the Business Cycle has been accurately predicting boom-bust cycles since at least 1929 (!!).
Haha that was sweet. I’m really liking the fact that the Austrian School is gaining more and more supporters. I admit, I only recently became interested in studying economics on my own. Actually it was the debate about the TARP bailout that piqued my interest. I quickly happened upon the Austrian School and couldn’t be happier. Talking about political economy in college was always so confusing. It seemed like the material was full of absurdities and contradictions. Because it was/is! I feel more intellectually fulfilled than ever thanks to the books I’ve now read and sites like mises.org. Anyway, sorry for the rant.
@ Magnus – I thought the name of the school was rather ironic. Wilson is quoted as having said he destroyed America with the creation of the Fed. When I saw the name of the school above Krugman I felt like I was watching some strange nightmare film about the end of the world. Spooky!
Woodrow Wilson:
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” -Woodrow Wilson, after signing the Federal Reserve into existence”
http://en.wikiquote.org/wiki/Talk:Woodrow_Wilson
“Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed.” — John Maynard Keynes, “Consequences of Peace.”
Interesting quote. Keynes himself is saying here that taxation is a sort of “Dog and Pony Show” to make the money look real. I wonder what Krugman would have to say about the importance of the “tax breaks” in the stimulus package in light of this statement by Keynes?
“Yes, I am a Keynesian. But more precisely, I’m a Keynesian wearing Minsky clothing, and doffing Austrian shoes. In the fullness of time, I expect Chairman Bernanke, a brilliant Keynesian, to rediscover that the Austrians were not all wet in their diagnosis of the potential for maldistribution of investment, even though they were soaking wet about what to do about it. The Austrians said let the asset price and credit excesses purge themselves. A much better way, I believe, is to lean against the excesses preemptively, using all available tools, including regulatory tools.”
Yes, inflation targeting is fine. Myopic inflation targeting is not. Asset prices matter, and not just in the context of their influence on aggregate demand relative to aggregate supply and, thus, inflation. Asset prices matter in their own right, because wild swings in asset prices, even in the context of “stable†goods and services inflation, are a source of both volatility and maldistribution in investment.
http://www.dailyreckoning.com/a-kind-word-for-the-austrian-school/
Paul McCully, “A Kind Word for the Austrian School”
It would make a Good “Twilight Zone”. I liked the comment “bring in the austrians”. WELL hell, lets get them beer barrels a rollin!
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