Comments (29)

• newson

  whilst krugman is wrong with his diagnosis and his cure, i think he's fairly accurate in describing the symptoms of the american malaise (and that of all western, social democracies).

  multiple bubbles in all asset classes have given rise to a class of weathy, the likes of which are new to modern times. the poor have had their lot improve, but it's hard to imagine that the rich would have done anywhere near as well without the vast boost that inflation has given to their assets.

  i don't think it's un-austrian to note the dangerous social tension that a wealth gap not strictly a product of merit can create.

  monetary reform could put all citizens on an equal footing. unfortunately, we'll get fiscal punishment instead.

  Published: February 20, 2008 9:13 AM

• Paul Marks

  The truth is, by definition, "civil".

  Paul Krugman is a liar - Ronald Reagan did not play on the racism of Southerners or anyowe else. Reagan did not have a racist bone in his body.

  As for the claim that Southerners voted against their economic interest - that is Professor Krugman's opinion. And, as Paul Krugman has never shown much sign of knowledge of economics, it is an opinion without weight.

  The claim that the United States was a Welfare State in the 1950's is an odd one. However, if Professor Krugman wishes to return government spending on health, education and welfare programs to the level it was in the 1950's (either in money terms or as a percentage of the economy) this would be a step in the right direction.

  The contrast between Senator Taft and Eisenhower is overblown. Senator Taft was in favour of many government programs (in housing and so on). Senator Bricker (spelling alert) was rather more hardline that either Senator Taft or Eisenhower on domestic spending.
  

  Published: February 20, 2008 9:16 AM

• I feel better about Regean.

  WOW, I feel a whole lot better about the presidency of Ronald Regean after reading this article about Krugmans feelings about this man with super-human abilities loaded with racial hatred. Of which he has neither!!!!

  And all along I thought it was that Carter and Mondale were just dorks.

  I was losing my opinion of RR as this web site has written several dozen articles none of which are even mostly positive.

  But if Krugman hates him then he can't be bad.

  Published: February 20, 2008 9:23 AM

• Fephisto

  It's the little argumentative gems I search for:

  "if one thinks that people are unlikely voluntarily to donate to charity to help the poor, why is it assumed that they will support compulsory taxation for the same purpose?"

  And gladly receive.

  Published: February 20, 2008 9:47 AM

• lester

  guys like krugman and JK Galbraith are the ones most readily foisted on the public as economists. it's similar to how the neo cons errant books, columns, and websites are the first ones oten recommended for those interested in foreign policy.

  Published: February 20, 2008 9:52 AM

• Ron Brown

  David,

  "Like him or not, Paul Krugman is an economic theorist of distinction".

  I'm completely miffed by this statement. Can you give some specific examples that support this belief?

  Currently, I'm not convinced the man would receive a passing grade on the oral exam at Mises University.

  Published: February 20, 2008 10:08 AM

• David Spellman

  Most of the people I have ever met prefer to believe lies if they think it will benefit themselves. People are easily seduced in to using the power of government to take from their neighbors because they like getting something they didn't earn. It's not that anyone is foolish or stupid; on the contrary, they are quite rational but very selfish.

  Published: February 20, 2008 10:10 AM

• Nat

  The consciense of a "liberal"?

  I take it that this book has no pages.

  Published: February 20, 2008 10:17 AM

• George Gaskell

  Most of the people I have ever met prefer to believe lies if they think it will benefit themselves. People are easily seduced in to using the power of government to take from their neighbors because they like getting something they didn't earn. It's not that anyone is foolish or stupid; on the contrary, they are quite rational but very selfish.

  I agree fully, and believe this is the reason that voters in the US are well past the point of electing politicians that will reduce the size and scope of the Homeland government. (The very fact that the term "Homeland" has any meaning or use today is just about reason enough to start looking for a house in Canada or Mexico.)

  Reagan was the last president elected on the rhetoric of smaller government, and is touted today as though he actually accomplished anything in that regard, when in fact the government grew tremendously during the 1980s.

  When propaganda is that successful, it is essentially impossible that limited government will be achieved by electoral means.

  I never thought I would say this, but I long for the days of Clinton -- when nothing of note was accomplished. Given this trend, I predict that President McCain will prove to have an itchier trigger-finger than Bush II, and given McCain's eagerness to stifle citizens' disagreements with him, will be even more likely than Bush to direct his ire toward those of us within the Homeland.

  Published: February 20, 2008 11:46 AM

• fundamentalist

  Essentially, Krugman argues that we follow the Europeans. We all know what an economic powerhouse Europe is, with its double digit unemployment and exploding government debt. The poor in France are so elated that they regularly celebrate with bon fires made from cars.

  Published: February 20, 2008 12:32 PM

• Useless Spectator

  if one thinks that people are unlikely voluntarily to donate to charity to help the poor, why is it assumed that they will support compulsory taxation for the same purpose?

  It's quite simple: if I support voluntary charity, that means I have to pitch in (which I do). With compulsory taxation, I can make "the rich" (somebody else) pay.

  That is what liberal politics is all about: do whatever I think you ought to do to save the world, and make somebody else foot the bill.

  Essentially, Krugman argues that we follow the Europeans. We all know what an economic powerhouse Europe is, with its double digit unemployment and exploding government debt. The poor in France are so elated that they regularly celebrate with bon fires made from cars. ~fundamentalist

  LOL!!! Funny,and very true. You should post that comment on a liberal blog, preferably one with a good number of viewers. It will make the leftists rethink their views, or at least humble their pretenses of being motivated by conscience.

  On a more positive note, have you ever heard of Pacific Garden Mission? It is a rescue mission that spreads Christianity and rehabilitates the homeless and criminals--the least of these, as Jesus put it. They have a radio show that dramatizes their life stories and conversions. All considered, PGM is far more effective than any of the government's poor relief, criminal rehabilitation, or public awareness campaigns. Check them out! http://pgm.org

  Published: February 20, 2008 1:57 PM

• Working Guy

  The problem with universal health care (i.e. gov't sponsored) is the tendency of people to "milk" the system. Take a look:

  Two million 'wrongly get benefit'
  http://news.bbc.co.uk/2/hi/uk_news/politics/7223687.stm

  Bid to tackle 'sick-note culture'
  http://news.bbc.co.uk/2/hi/health/7253577.stm

  Published: February 20, 2008 2:08 PM

• Niccolo Adami

  Ron Brown, Krugman is actually a fair economist in certain issues. See his Pop Internationalism and The Self-Organizing Economy.

  
  Fundamentalist, you could not have said it better. Americans, and even the many wealthy Europeans that believe their system is so fantastic, often turn a blind eye to the giant shit hole that is the mainstream European economy.

  
  David, I don't think Mises ever rejected empirical examination in his economics. He did not find most mathematics to be sufficient, however, I believe he found great importance in empiricism, as Menger did.

  Published: February 20, 2008 2:47 PM

• George Gaskell

  The problem with universal health care (i.e. gov't sponsored) is the tendency of people to "milk" the system.

  Not exactly. The problem with stat-run health care is the fact that providers have no means of making decisions about what kind of care to give, how much different kinds of care are worth, etc.

  In a private system, the market prices for goods and services will tell providers how many employees to hire, what level of training is needed for those employees, how much they can afford to pay them, how many buildings to build, how much equipment to buy, etc.

  In a state-run system, there is NO WAY for providers of health care to make these calculations. Even if they wanted to, they have no information on which to base these economic decisions.

  So, instead, they make these decisions based on other criteria. Most often those alternate criteria end up being a combination of (a) their own administrative convenience and (b) political pressure.

  Published: February 20, 2008 3:06 PM

• Grant

  Fephisto,

  Taxation allows groups to force other groups to pay for things they would like to have. For example, many economists would likely say charity is a public good, so one group can force another to pay for charity and enjoy the benefits (which in our case seems to be smugness) of it. For this reason, I don't think its necessarily true that in the absence of government we'd have as much 'charitable' spending, simply because people are less likely to be generous with their own money as they are other people's (i.e., they 'free-ride' off of an out-voted minority).

  Published: February 20, 2008 3:42 PM

• Inquisitor

  Niccolo, what Gordon is referring to is the fact that Mises held that empirical facts (e.g. a rise in consumption followed by a rise in a good's price) cannot disprove, on its own, an economic theorem (in this case the law of demand.) I don't think Mises' Kantian framework can do the notion justice though.

  Published: February 20, 2008 6:10 PM

• Michael A. Clem

  For this reason, I don't think its necessarily true that in the absence of government we'd have as much 'charitable' spending, simply because people are less likely to be generous with their own money as they are other people's
  

  That may be true, Grant, but as a private endeavor, charity shouldn't need as much money as government, because it can spend it more effectively.
  
  And if other restrictions and regulations on competitiveness are also minimized, more people would be better able to take care of themselves, so that fewer people would need charity in the first place, or would need it for a lesser amount of time.

  Published: February 20, 2008 8:08 PM

• Paul Z Hartyanszky

  An excellent article. Summarily debunks the arguments so typical of economists like Krugman. I'm interested in the health care part of piece. Especially -
  "The United States spends almost twice as much on health care per person as Canada, France, and Germany, almost two and a half times as much as Britain — yet our life expectancy is at the bottom of the pack"

  Are there any explanations to this? It's quite striking. Krugman's attempt to suggest that this proves the efficacy of socialised medicine is rightly pointed out as a non-sequitur. However I think a more ample discussion is required.

  I would like see where the statistics came from. Also, cost comparison data for Australia would be brilliant.
  A common left-wing retort in my country is that "we don't want to move in the direction of an 'American-style' health care system". This can be translated as: "Don't question my spending/regulating scheme" or "My experts know better than your experts" It's odd considering the realities of intervention in the USA.

  Sometimes I feel that health economics doesn't get hardly enough treatment on mises.org which is a pity because the issue fills the political news. I don't know of a powerful politician in the world that doesn't claim that he is for "better" government-provided health care.

  Does anybody suggest particular Austrian reading material on the subject.

  Published: February 20, 2008 11:57 PM

• KY Leong

  Reading Krugman is a lot like trying to read Keynes -such a pain; both are incapable of anchoring their arguments on consistent theory. The two also have something else in common - both are what I'd call statist Intellectual Opportunists. So, Krugman's position on Iraq is just, well, "krugman".

  Published: February 21, 2008 2:13 AM

• Fephisto

  @Grant:

  Sans the argument that could occur over 'crowding out' charity, I'm looking at this from the view of rights violations. So, from that standpoint, what you're saying only appears to be helping my side of the argument.

  Published: February 21, 2008 9:11 AM

• fundamentalist

  useless: "On a more positive note, have you ever heard of Pacific Garden Mission?"

  Yes, I've listened to their radio drama for years. Great program!

  Published: February 21, 2008 10:31 AM

• fundamentalist

  Niccolo: "Europeans that believe their system is so fantastic, often turn a blind eye to the giant shit hole that is the mainstream European economy..."

  That's very true! But I also think they do one more thing: they consider their culture to be morally superior and think that trumps wealth. For example, look at Sarkozy deciding to dump GDP as an economic measure and fishing around for measures that match French values.

  Published: February 21, 2008 10:36 AM

• fundamentalist

  Paul Z: "The United States spends almost twice as much on health care per person as Canada, France, and Germany, almost two and a half times as much as Britain — yet our life expectancy is at the bottom of the pack" Are there any explanations to this?"

  I've looke into it a little, and it's difficult to analyze because our record keeping and recording methods are so different. Comparing life expectancies across countries is like comparing apples and oranges.

  As for health care spending, the differences in costs are easy to explain. In the US, the AMA holds a monopoly on the supply of healthcare, and therefore the pricing. The feds provide almost unlimited demand, so naturally the cost is going to rocket. In Europe, the state controls the supply and the price. Excess demand is controlled by longer wait times.

  As for reading material, Arnold Kling over at the Econ Library has a book on healthcare econ. He's not an Austrian, but close.
  

  Published: February 21, 2008 10:45 AM

• Brian Gladish

  Paul Z Hartyanszky,

  My understanding is that life expectancy statistics are greatly affected by factors oher than the health care system. This article - http://www.city-journal.org/html/17_3_canadian_healthcare.html - outlines some reasons, such as homicide and auto accident (maybe a more effective approach would be to ban cars - JUST KIDDING!).

  Published: February 21, 2008 4:12 PM

• Tired of Krugman

  Krugman is called an economist, but most of his writings and talks are from a modern liberal with very little credibility in the eyes of this economist. It galls me when a person like Krugman hides behind his credentials as an economist to expouse his socialist crap.

  Published: February 22, 2008 1:44 PM

• The Conscience of Kneejerk "Conservatives"

  It's pretty funny reading a bunch of wannabe Ayn Rand's ragging on Paul Krugman.

  So I checked around your "think tank' mission statement.

  I particularly like this bit of grossly simplistic dogma about how Ludwig von Mises "proved" (proved, mind you) that

  "...government intervention is always destructive, whether through welfare, inflation, taxation, regulation, or war."

  So much for your credibility.

  
  

  Published: February 26, 2008 9:20 PM

• jeffrey

  Which of these--welfare, inflation, taxation, regulation, or war--do you find most productive?

  Published: February 26, 2008 9:50 PM

• Inquisitor

  So saith the obvious troll.

  Whenever something isn't disguised and mired in bullshit, it's 'simplistic'.

  Read Mises, then come back and comment. Until then, you better put your flameproof suit on, troll.

  Published: February 26, 2008 9:52 PM

• Joe The Plumber

  An Open Letter to Paul Krugman

  Dear Paul:

  Forgive my rudeness in calling you by your first name. I have been reading your writings in New York Times, Slate and other fine publications for years. I even read your book "The Conscience of a Liberal." I have gotten to know you so well that, I feel, we could be on a first name basis. Besides, if we are to create a class-less, hierarchy-free society, calling you Professor Krugman would instantly create a deplorable hierarchy — perhaps falsely indicating that you might know more about economics than I do. We simply cannot encourage such elitist hubris.

  Now that we have established that in our class-less Utopian society everybody's opinion is equally valid, I am compelled to offer you mine about what you should do about that Nobel Prize thingie. Hopefully, you will take my advise a bit more seriously than that damnable Bush-Cheney administration has taken yours.

  Paul, as a matter of principle, you should reject that Nobel Prize.

  That's right. You should just flat-out tell those Swedes that you don't want that prize. It just wouldn't be the right thing to do, considering your progressive ideals.

  First of all, it's just not fair that only you should get this prize this year when there are hundreds of thousands of other economists in this world. Honoring only one person in this way is a totally non-egalitarian thing to do. Either we should honor them all or none at all. We are fighting for equality and justice in this society; not giving Nobel Prize to everyone creates Haves and Have-nots, and we just can't tolerate that.

  Second of all, a white man like you getting the prize — again! — is racist and sexist to the max. I just checked out the list of laureates in economics since 1969 and almost all of them are white men!! (There were two names — Amartya Sen and Arthur Lewis — who appeared to be non-white, but that just proves tokenism, you know! It has never been awarded to a woman.) Why do we see heterosexual, white men chosen so often? Why don't we ever see any black lesbians getting this prize? Paul, I want you to make a statement against this institutional racism and sexism; and reject this symbol of discrimination and marginalization.

  Third of all, the amount of money — $1.4 million — that Riksbank is offering is obscene. Who deserves that kind of money anyway, when coal miners in third world countries — many of them barely 14 years old — don't make even $30 per month — and they are the ones risking their lives every day! As you have pointed out in your writings, the gap between the rich and the poor is rapidly widening. You getting that $1.4 million will only make the situation worse. I know you are a man of principles. If you wanted to make millions you could have easily chosen a crass and tasteless career, something like a Wall Street CDO structurer. I mean, you certainly had the brains. And the right pigmentation. And the right pair of chromosomes. But, no. You instead chose the noble profession of teaching. You have worked long and hard to build your moral authority; don't destroy it in a nano-second by succumbing to the temptation of money. Love of money is the root of all evil. If you accept this monstrously large sum of money, you will forever lose all moral authority to talk about the unfairness and inequality in the society. If you lose that moral authority, who will rail against all the greed and injustice in this increasingly oligarchic society? Who will stand up to corporate plutocrats? Those damnable conservatives tried to drag your name through mud when the news came out that your worked as a consultant for an advisory board for Enron. I am pretty sure that you handled the conflicts of interest in the Enron affair adequately, but why hand your critics further fuel now to blow-torch your reputation? Should your reputation get tarnished, who, pray tell, will be our champion? Who will battle evil media-types like Bill O'Reilly and Rush Limbaugh?

  Fourth of all, the selection process employed by Riksbank was neither transparent nor democratic. I mean, I never got to vote on that decision! What right does Riksbank have to hand out this prize without getting the people involved? It might be Riksbank's money, but we the people should have the final say in how it gets doled out. But no. Riksbank doesn't want to do the morally correct thing. They want to exclude everybody but their pals from the decision-making process. This is just like Dick Cheney and his buddies cutting back-room deals to divvy-up Iraq spoils. It smells of favoritism; it smells of cronyism; it just stinks. Paul, would you ever go hunting with Cheney and his buddies? If the answer is no, then please don't accept the prize that was bestowed by this elitist and exclusionary committee.

  Fifth of all, the prize sends a wrong message to the society. We agree that you worked hard all your life. You went to MIT, you got your Ph.D. You didn't drop acid like some bozos in the 70s. (At least, a quick googling on your name didn't turn up any such dirt.) You were studying your ass off while others were partying like crazy. Now you got the Nobel Prize and they don't. That's just not fair. Do you know what message it sends? That if you work hard in life, you can achieve things that others can't! That's a nasty and brutish message to send. Conservatives say things like that, not liberals like you! Radicals of the right believe in this "every man to himself" bullshit (and they don't even apologize for the non-PC nature of the phrase), not enlightened progressives like you!! Defenders of inequality believe in this myth about individualistic bootstrapping, not a seasoned class warrior like you!!!

  Sixth of all, the prize perpetuates the shameful legacy of colonization and imperialism. Almost all of the laureates have been from the first-world countries. Don't you know that the vast majority of humanity lives in third-world countries. To systematically exclude people from poor countries from participating in the intellectual dialogue means further polarization. If people from third-world countries don't win such prizes often enough, what kind of role models will kids there have growing up? Won't they fall prey to false prophets? No wonder religious radicalization is rampant in countries from Somalia to Afghanistan. Paul, by the mere act of accepting this prize you will be promoting global terrorism. And many of these terrorists also subjugate women. So you will be participating in women's subjugation too.

  Seventh of all, you accepting this prize will lead to global warming. You and your loved ones will be traveling to Stockholm in an airplane that will be consuming hydrocarbons — yes the same hydrocarbons that pollute the environment and prop up the dictatorial regimes. Now, you could ask Al Gore about how many carbon offsets that you will need to buy for your flight to Stockholm — and he should know for sure — but that still won't make it morally acceptable in the current economic environment. Just when millions of people worldwide are losing their jobs due to the worsening credit crunch, Nobel prize-winners feasting on a sumptuous dinner makes for a sad spectacle. Why don't we just take the money that will be spent on your travel and spend it on installing solar panels in Sub-Saharan Africa instead? That will allow the disadvantaged African children to power up their One-Laptop-Per-Child laptops and that should go a long way towards bridging the digital divide. Isn't that what we liberals should want, after all?

  To summarize, by accepting this Nobel Prize you will promote racism, sexism and inequality; suppress democracy; encourage terrorism; subjugate women; and cause global warming. Paul, I want you to stand up for your liberal values and reject this prize. If you do that, you will be a bigger hero for your liberal fans who read your newspaper columns so lovingly. With one act of sacrifice, you will enhance the moral authority of the liberal philosophy that puts people first and money last. Liberals will rejoice and celebrate. Given your passion for reducing inequality, you will be a shoo-in for the newly created post of the Wealth Redistribution Czar under the Obama administration.

  Paul, after all my exhortations against doing so, it's still your decision to make. If you decide to go ahead and accept the prize, I will understand. I mean, $1.4 million is a lot of dough to walk away from. Besides, aren't moral principles all relative to begin with? And since when has hypocrisy become such a big crime?

  If you accept the prize, you will be richer by several hundred thousand dollars even after paying taxes at the top marginal rate. I know you have often said that the rich don't pay enough in taxes. Paul, this will be your shining moment to do things differently. Unlike other rich people, I am sure, you will write an extra check to the US Treasury because you believe, in the heart of your hearts, that the marginal tax rate on the rich should be higher. You will show your critics that you are a man of principles who puts his money where is mouth is — even though you came up somewhat short of your ideals in accepting the prize in the first place. A couple of hundred thousand dollars that you would voluntarily contribute to the US Treasury, in addition to your obligatory taxes, would go a long way towards paying for the universal health-care program. We are the only rich country in the world that doesn't have that health-care safety net. While we are on the topic of single payer universal health-care system, let me tell you how eagerly I am awaiting the arrival of such a system. It wouldn't come a day sooner for me. Recently, my immoral and greedy insurance company refused to pay for my bariatric surgery — they want me to exercise instead. Imagine their gall in holding me responsible for my own health! I don't like to exercise and, frankly, I shouldn't have to. I would rather watch Oprah in my free time — which I have a lot of since I don't like to work much either. Paul, don't you agree that it's my fundamental right to get a free bariatric surgery? And all those rich people should be taxed more to pay for it. Furthermore, the cost of my bariatric surgery is such an infinitesimally small fraction of the funds that go to the military-industrial complex. Rather than wasting money on propping up dictators and tyrants around the world, it's time we started investing in America and my bariatric surgery is a fine place to start as any other.

  Now we come to the topic that is near and dear to your heart. You have talked passionately about a need to promote a broadly shared prosperity. You will be happy to know that there are others who agree with you whole-heartedly and would love to share in your new-found prosperity. Even after paying for all the taxes and whatnot, you will still be left with a lot of money. Please take a look around — there are others in the society who will have much less. They certainly deserve your help. The case in point - your's truly. I bought a house in New Jersey — not that far from yours — at the height of the housing bubble. My real estate agent told me that housing prices always go up and I believed him. Then the evil bank people lent me the money when they knew I will never be able to make the mortgage payments once the teaser rate expires. That's what I call predatory lending and the regulators did nothing to protect me from these greedy and evil bankers. I am truly a victim of this lending fraud. Unlike Senator Chris Dodd I was never invited to be part of "Friends of Angelo" VIP clientele program and therefore never got a sweetheart deal on my mortgage. Paul, I am asking you — no I am begging you — to help out your fellow being who is down on his luck. I will drive my hybrid car to your house to collect the cash. Even a little bit would help. I am upside down on my home for $100,000. If you could just take care of that little deficit, I can start building equity in my home. After all, I too deserve to live the American Dream.

  Love and peace!

  Sincerely,

  Joe "The New Jersey Plumber"
  joe-the-plumber [at] gmx.com

  Published: October 26, 2008 9:56 PM