For all of you who wondered why I had not written my usual Monday missive against Paul Krugman’s latest column, it was because the Krugperson seemed to be making sense. In his Monday, March 23, column, Krugman was critical of the government’s newest bank bailout plan, the “cash for trash” program in which the government co-signs for private investors who buy toxic assets with the understanding that if they go down in value, the government will pay for them.
Now, I was naive, I suppose. Perhaps Paul Krugman was recognizing that this created a huge moral hazard, or it would stand in the way of the necessary liquidation that must take place before we can have a recovery, yada, yada, yada.
Well, I found out today why Krugman was against this program. It is because it supposedly is “market-based,” and if there is anything Krugman hates, it is a “free market.” (Of course, the Treasury’s latest missive is not free market by any stretch of the imagination, but to Krugman, even crony capitalism is the exercise of a pure free market. Writes the Nobel Laureate:
It’s a bit disappointing to see the Obama administration engaging in this sort of market-worship — hailing markets as a Good Thing in themselves, rather than as an often but not always useful means to an end. But I have reason to think that unlike the Bushies, they don’t really believe it; it’s just politics. Which is actually better than having genuine market fanatics running things, I guess.
There you have it. Krugman is right to oppose the plan, but he is right in the way a broken clock tells time correctly twice daily.
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Only thing funnier to read from Krugman blog are comments on his blog
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Anyway, what fellow Austrians think about another Nobel Prize-winning Keynesian economist Joseph Stiglitz?
“The Geithner plan is very badly flawed,” Stiglitz told Reuters in an interview during a Credit Suisse Asian Investment Conference in Hong Kong.
…
“Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.”
http://www.reuters.com/article/reutersEdge/idUSTRE52N1IQ20090324
Is it just me or is Krugman beginning to sound more Marxist than Keynesian? As little respect as we all have for Keynesians, I still don’t think that they share his disdain for markets (at least not to the same degree). But, of course, I could be wrong.
The idea that the bank plan is bad because it is somehow “market-based”, rather because it’s an utter distortion of the market or a rigged market, is a criticism that I hadn’t expected, even from Prof. Krugman. What’s ironic is that the source of the problems is not the “market-based” bit but the “government-based” bits, i.e., the designing and sustaining of the unfair and uneconomic incentives built into the plan.
Regarding the question of what sort of timepiece Prof. Krugman reminds us of, I am not sure a stopped-clock (which, after all, is correct twice a day) is the best comparison. I think the better comparison is a 24-hour clock that is 12 hours slow. When he thinks it’s night, it’s actually day and vice-versa.
I agree with pussum207.
Krugman isn’t good enough to rate better than a broken clock.
Briggs,
I think you’re right. Most Keynesians are utilitarians in their anti-market policies, while Krugman does seem to be more of an outright hater.
“Cash for Trash” and a broken clock is right twice a day–brilliant!
Love the metaphors about the clocks and Krugman. They are both right in their own sense.
It seems that those who are “set for life” within the State apparatus (or for any other reason) often deepen their hatred for the free enterprise until the point comes that they acknowledge their full appreciation for full blown socialism. Krugman is well on his way. Marx condemned capitalism while living well in down-town rich London. Keynes never had to worry about money and basically summarized his work by saying something like: “In the end we are all dead”. Even Adam Smith condemned “consumption” while living on a fixed and “princely” salary, mostly State-provided, while working only because he wanted to.
“Job for life” apparently means, “if I don’t have to work, no-one has to”.
A chained dog tends to love the hand that fills the kibbles dish, and bite all the others.
Krugman is NOT a Nobel Laureate!
There exists no such thing as a “Nobel Prize in economics”!
The Nobel Prize was instituted by the Swedish chemist Alfred Nobel, the inventor of dynamite, who in 1895 testamented his vast private fortune to prizes in Physics, Chemistry, Medicine, Literature and Peace.
In 1968, over 70 years after his death, the Swedish CENTRAL BANK instituted another prize, the “economics prize of the Riksbank to the memory of Alfred Nobel”. For some reason, the Swedish king since 1969 ritually hands over this prize at the same event as the true Nobel Prizes are handed out.
So PLEASE stop mis-titling Paul Krugman! He’s a CENTRAL BANK prize winner, not a Nobel Laureate.
All marxists fancy themselves economists, don’t they?
Well THERE’S your problem!
So, ProudCapitalist, you are saying that F.A. Hayek got this same prize? I checked and the prize goes back only to 1969….
Yup, Wikipedia backs you up. Whoda Thunkit?
F.A. Hayek got this same prize?
-yes, but that’s only because the Swedish CB thought that it could undermine austrians by rewarding his compromises on social safety nets in “The Road to Serfdom”…and also making him share the prize with a Marxist.
Of course he countered this brilliantly with his award ceremony speech… criticising central planning….
There you have it.
A substantive (well beyond the “civil and intelligent” standard) rebuttal to …someone not worth anymore trouble than equating with a broken clock…which is right twice a day…something that the readership here needs minding, apparently.
Mr Krugman is most certainly not a broken clock. Unlike Krugman, even a broken clock is accurate twice a day.
Unless he’s stuck on the 25th hour.
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