Sunday, December 28, 2008
Krugman: You Can't Prove My Plan Is a Bad Idea
As always, I am stunned by Krugman's latest blog post (HT2MR). Check this out, and note that this is his entire post:
Do you understand how crazy this is? To give context, Tyler Cowen has been repeatedly arguing lately that proponents of stimulus have not made the case that it has ever actually, you know, WORKED. That's what Krugman means by "FDR didn't do so well, the statistical evidence ain't so great, etc."
Notice that the two biggest case histories to "prove" the need for a huge stimulus right now, ARE EXAMPLES WHEN HUGE GOVERNMENT STIMULUS EFFORTS WENT HAND-IN-HAND WITH ECONOMIC DISASTER. Everyone got that? Clearly FDR was more of a Krugmanite than, say, Warren Harding or Calvin Coolidge, and yet the depression under FDR was much much worse than any previous one.
By the same token, what the Japanese tried in the 1990s was far from libertarian liquidationism, and it went hand-in-hand with the "lost decade."
Now Krugman et al. have responses here. E.g. both Hoover and FDR idiotically raised taxes during the 1930s, so it wasn't textbook Keynesian fiscal stimulus. And Japan didn't credibly promise large price inflation (to get adequate negative real interest rates) as Krugman recommended, so his prescriptions weren't fully tried.
But Tyler's point (and I'm paraphrasing) is that Krugman et al. are just excusing apparent FAILURES of pump priming to kickstart the economy out of recession. OK fine, so give us one good example WHERE IT ACTUALLY WORKED.
And to this challenge, Krugman offers the above.
Readers have been correcting me for saying “niggling nabobs of negativism” in this post. Yes, I know the original (written by my former colleague William Safire.) But “niggling” is better for the current situation.
Here’s how I see it: the opponents of a strong stimulus plan don’t really have an alternative to offer. They don’t even have a really coherent critique; as Brad DeLong points out, if you believe that a surge in private spending would raise employment — and even the critics agree on that — it’s very hard to explain why a surge of public spending wouldn’t have the same effect.
The critics are instead mainly engaged in a series of minor complaints, aka niggles; FDR didn’t do so well, the statistical evidence ain’t so great, you can’t trust government, etc., etc..
So niggling nabobs it is.
Do you understand how crazy this is? To give context, Tyler Cowen has been repeatedly arguing lately that proponents of stimulus have not made the case that it has ever actually, you know, WORKED. That's what Krugman means by "FDR didn't do so well, the statistical evidence ain't so great, etc."
Notice that the two biggest case histories to "prove" the need for a huge stimulus right now, ARE EXAMPLES WHEN HUGE GOVERNMENT STIMULUS EFFORTS WENT HAND-IN-HAND WITH ECONOMIC DISASTER. Everyone got that? Clearly FDR was more of a Krugmanite than, say, Warren Harding or Calvin Coolidge, and yet the depression under FDR was much much worse than any previous one.
By the same token, what the Japanese tried in the 1990s was far from libertarian liquidationism, and it went hand-in-hand with the "lost decade."
Now Krugman et al. have responses here. E.g. both Hoover and FDR idiotically raised taxes during the 1930s, so it wasn't textbook Keynesian fiscal stimulus. And Japan didn't credibly promise large price inflation (to get adequate negative real interest rates) as Krugman recommended, so his prescriptions weren't fully tried.
But Tyler's point (and I'm paraphrasing) is that Krugman et al. are just excusing apparent FAILURES of pump priming to kickstart the economy out of recession. OK fine, so give us one good example WHERE IT ACTUALLY WORKED.
And to this challenge, Krugman offers the above.
Comments:
I think the problem is that you/we/free marketers are talking past the Krugman types. Their devotion to bigger government isn't based on some well-considered statistical and empirical analysis. It's based on a theological devotion to big government, central control as the final answer to the dirty problem of creative destruction in which you have to contribute to society to be rewarded.
We keep tell them "government doesn't work" like they actually care.
We keep tell them "government doesn't work" like they actually care.
I think we need to radically change the entire way we debate these things. When Obama gets up there and talks about repairing "infrastructure," we idiot free marketers accept the parameters of the debate as if:
He a) actually intends specifically that instead of using it as a cover for massive spending everywhere and b) That "infrastructure" is even the problem and that government can improve it to stimulate the economy. We need to speak beyond the mythology about their true motives.
We need to start talking about the real objective of all of these central planning big government Marxist programs: to simply re-organize society into the hands of our supposed "elite." There is no economic rational. There never was.
He a) actually intends specifically that instead of using it as a cover for massive spending everywhere and b) That "infrastructure" is even the problem and that government can improve it to stimulate the economy. We need to speak beyond the mythology about their true motives.
We need to start talking about the real objective of all of these central planning big government Marxist programs: to simply re-organize society into the hands of our supposed "elite." There is no economic rational. There never was.
Ok, one last comment and then I gotta get to bed. (Ok, actually, to my literary critique of Keynes recommended on the GMU group blog awhile back for an hour, then bed.)
The key word in Krugman's complaint, as someone pointed out in Cowen's blog, is plan. Krugman is upset that his opponents just aren't central planners like he is.
His critics don't have a plan? Well, champ, that's kind of generally the point.
The key word in Krugman's complaint, as someone pointed out in Cowen's blog, is plan. Krugman is upset that his opponents just aren't central planners like he is.
His critics don't have a plan? Well, champ, that's kind of generally the point.
Krugman is like a bitter wife who is convinced that she can force her husband to make more money. "Should I just nag him or belittle him until he does?" The friends responds, "You would probably be better off being supportive and if he's happy with what he's doing he will eventually make more money." The wife responds, "You call that plan? I don't have the patience for that."
Krugman is making a pretense there that a recovery can be forced.
Krugman is making a pretense there that a recovery can be forced.
Sup, nigglers?
Any of you guys seen the missing in action films where the vietnamese commander screams "BRADOCKKKK!" everytime he arrives at a place chuck norris just blew up? I swear I have taken to shouting "krugmannn!" everytime I read one of his lie riddled verbal excretions. It wasnt a decision I made, it is just a tick I developed after the rage became too great to hold in.
Any of you guys seen the missing in action films where the vietnamese commander screams "BRADOCKKKK!" everytime he arrives at a place chuck norris just blew up? I swear I have taken to shouting "krugmannn!" everytime I read one of his lie riddled verbal excretions. It wasnt a decision I made, it is just a tick I developed after the rage became too great to hold in.
Is Krugman really this dumb or is he part of an invasion advance team of Kanamits?
http://www.golobthehumanoid.com/kanamitpage.html
He certainly is an utterly dishonest coward. Not only is there no evidence of the "stimulus" actually ever stimulating anything, but Keynes himself said that the sole purpose of credit expansion was to lower the wages of British workers without them realizing it. The purpose of the credit expansion is to trick people into thinking they are richer than they are. It is a cruel and unscrupulous scam. THE END.
A priori, we also know that the creation of fiat money results solely in those receiving it first essentially stealing the purchasing power of those holding the old money. Again, all that is accomplished is that people are tricked temporarily into thinking that they are richer than they really are. Reality will soon rear its ugly head. Credit expansion is a stimulus merely for theft, dishonesty and economic uncertainty.
People like Krugman and DeLong have no interest whatsoever in a calm, detailed debate with their intellectual foes. They are so cowardly, they will not even allow intelligent comments to be made on their blogs. Their sole intent is to smear and defame us using their access to the media that we do not yet have. There is never a reason why we should expect anything else from such dishonest cowards. EVER.
http://www.golobthehumanoid.com/kanamitpage.html
He certainly is an utterly dishonest coward. Not only is there no evidence of the "stimulus" actually ever stimulating anything, but Keynes himself said that the sole purpose of credit expansion was to lower the wages of British workers without them realizing it. The purpose of the credit expansion is to trick people into thinking they are richer than they are. It is a cruel and unscrupulous scam. THE END.
A priori, we also know that the creation of fiat money results solely in those receiving it first essentially stealing the purchasing power of those holding the old money. Again, all that is accomplished is that people are tricked temporarily into thinking that they are richer than they really are. Reality will soon rear its ugly head. Credit expansion is a stimulus merely for theft, dishonesty and economic uncertainty.
People like Krugman and DeLong have no interest whatsoever in a calm, detailed debate with their intellectual foes. They are so cowardly, they will not even allow intelligent comments to be made on their blogs. Their sole intent is to smear and defame us using their access to the media that we do not yet have. There is never a reason why we should expect anything else from such dishonest cowards. EVER.
# posted by 
: December 29, 2008 at 7:28 PM
: December 29, 2008 at 7:28 PM
The last time a big stimulus package was attempted was more recent than 'Japan in the 1990s.' It was USA circa 2001-2004.
How did that work out again?
How did that work out again?
# posted by : December 30, 2008 at 12:11 AM
: December 30, 2008 at 12:11 AM
I'll give you an example of where it worked- World War II. Which was essentially the biggest public works project in US history up to that point.
Voters in the 1930s apparently were even bigger idiots than today's voters because they repeatedly re-elected FDR who was "making the Depression worse" with his Keynesian stimulus and government intervention.
Perhaps it would have been better to have completely deregulated the banks and let all of them fail as frightened depositors took every last dollar from bank reserves. Read about FDR's first days in office sometime; it was his bank holidays and subsequent plan to restore depositor confidence that saved the economic system from complete collapse. The people cheered him as well they should have.
Haven't we seen yet that completely unbridled capitalism is a runaway horse?
Perhaps it would have been better to have completely deregulated the banks and let all of them fail as frightened depositors took every last dollar from bank reserves. Read about FDR's first days in office sometime; it was his bank holidays and subsequent plan to restore depositor confidence that saved the economic system from complete collapse. The people cheered him as well they should have.
Haven't we seen yet that completely unbridled capitalism is a runaway horse?
# posted by : December 30, 2008 at 1:08 PM
: December 30, 2008 at 1:08 PM
For jeff and anon-
Please read Higgs where he debunks the myths you have just put forward.
Please read Higgs where he debunks the myths you have just put forward.
# posted by : December 30, 2008 at 1:57 PM
: December 30, 2008 at 1:57 PM
in ref: Higgs - the first review cited on Amazon is by Ann Coulter.
Thanks anyway, I think I'll pass.
Even a blind squirrel finds a nut once in a while, but still...
Thanks anyway, I think I'll pass.
Even a blind squirrel finds a nut once in a while, but still...
# posted by : December 30, 2008 at 2:08 PM
: December 30, 2008 at 2:08 PM
Is Anonymous Krugman’s little brother? Notice how he absolutely refuses to even read the definitive work of the great scholar Robert Higgs. Don’t confuse Mr. Anon with facts, logic or analysis. Just a quick 7th grade level ad hominem attack and Mr. Anon runs and hides under the bed.
We should all be encouraged by the likes of the cowardly Krugman, Brad DeLong and Mr. Anon in the coming debate. They are shooting with blanks and they know it. Shine a bright light on them. They will invariably slither away and find a new rock under which to hide.
We should all be encouraged by the likes of the cowardly Krugman, Brad DeLong and Mr. Anon in the coming debate. They are shooting with blanks and they know it. Shine a bright light on them. They will invariably slither away and find a new rock under which to hide.
# posted by : December 31, 2008 at 10:31 AM
: December 31, 2008 at 10:31 AM
Bob,
I don't think you've really addressed Krugmans point at all. He said-
>If you believe that a surge in private spending would raise employment — and even the critics agree on that — it’s very hard to explain why a surge of public spending wouldn’t have the same effect.
How do you answer that? Do you indeed deny private spending would raise employment? If not, why wouldn't public spending?
You seem to be saying, "well give us an example where it did". People do, and we go back and forth on why each case did or didn't represent true Keynsianism.
But putting that aside- why, in theory, wouldn't it work?
@Matt C- thanks for the recommendation, but I don't want to order a $60 book just to get an answer from you, particularly when the only review on it comes from Ann Coulter. Got a link?
I don't think you've really addressed Krugmans point at all. He said-
>If you believe that a surge in private spending would raise employment — and even the critics agree on that — it’s very hard to explain why a surge of public spending wouldn’t have the same effect.
How do you answer that? Do you indeed deny private spending would raise employment? If not, why wouldn't public spending?
You seem to be saying, "well give us an example where it did". People do, and we go back and forth on why each case did or didn't represent true Keynsianism.
But putting that aside- why, in theory, wouldn't it work?
@Matt C- thanks for the recommendation, but I don't want to order a $60 book just to get an answer from you, particularly when the only review on it comes from Ann Coulter. Got a link?
When an individual spends he spends on something he thinks will make HIS life better, and he spends out of his own production. He consumes wealth -he- created.
When the government spends, it spends money it didn't earn on things which people apparently don't value more than the cost, or the government previously destroyed the market for that good (aka roads). Government spending costs the spenders nothing -- especially under a fiat money system. They create the illusion of no opportunity costs, so they don't economize. They destroy wealth with each dollar they spend because each dollar they spend weakens the private property rights of the actual producers. Private property rights are among the most important social pre-conditions for the division of labor and cooperation.
Please note, I am "anonymous" but I sign my posts.
Jim O'Connor
The Colony, Texas
When the government spends, it spends money it didn't earn on things which people apparently don't value more than the cost, or the government previously destroyed the market for that good (aka roads). Government spending costs the spenders nothing -- especially under a fiat money system. They create the illusion of no opportunity costs, so they don't economize. They destroy wealth with each dollar they spend because each dollar they spend weakens the private property rights of the actual producers. Private property rights are among the most important social pre-conditions for the division of labor and cooperation.
Please note, I am "anonymous" but I sign my posts.
Jim O'Connor
The Colony, Texas
# posted by : January 1, 2009 at 1:15 PM
: January 1, 2009 at 1:15 PM
I struggle to understand how someone can make the claim that "it’s very hard to explain why a surge of public spending wouldn’t have the same effect" in good faith.
All consumption isn't equivalent, how can that not be obvious? If it were, all we'd have to do to fix the economy is burn a few cities to the ground and watch the wealth be created. The "unseen" in the Hazlitt sense is the wealth taken from the other cities which weren't burned to the ground, the capital improvements which didn't happen there as a result, etc.
Capital isn't an aggregate, it is specific factors of production in specific organizations. Spending isn't an aggregate. Krugman is a non-swimmer betting he can cross a river with an average depth of 24" (the aggregate depth).
Don't want to spend the money on Higgs? One Lesson by Hazlitt is free in PDF. The application to FDR should be obvious. Garett Garrett's works are free by PDF too. He said a lot of what Higgs said _as_it_was_happening, though not with the theoretical purity.
Jim O'Connor
The Colony, Texas
All consumption isn't equivalent, how can that not be obvious? If it were, all we'd have to do to fix the economy is burn a few cities to the ground and watch the wealth be created. The "unseen" in the Hazlitt sense is the wealth taken from the other cities which weren't burned to the ground, the capital improvements which didn't happen there as a result, etc.
Capital isn't an aggregate, it is specific factors of production in specific organizations. Spending isn't an aggregate. Krugman is a non-swimmer betting he can cross a river with an average depth of 24" (the aggregate depth).
Don't want to spend the money on Higgs? One Lesson by Hazlitt is free in PDF. The application to FDR should be obvious. Garett Garrett's works are free by PDF too. He said a lot of what Higgs said _as_it_was_happening, though not with the theoretical purity.
Jim O'Connor
The Colony, Texas
# posted by : January 1, 2009 at 1:29 PM
: January 1, 2009 at 1:29 PM
Krugman views employment as an end in itself. Destroy all of the farm equipment and you'll have full employment. Half the population will starve, but those who remain will all be employed, living short lives in mud huts. That is essentially what Krugman is recommending with public spending.
Private spending isn't happening because private people are in debt and have to pay for their prior consumption. The people that they have to pay are in China, Japan, etc. In order to pay them they have to produce goods at a price people in China and Japan want to pay. Americans think that being an American obligates the world to provide for them a certain standard of living independent of their production. This isn't so. Production must precede consumption (one would think that this is obvious). The rest of the world is starting to figure out this isn't such a good plan for them.
Public spending shouldn't happen either because the "public", ie the government, is already $100 trillion in debt prior to these insane bailouts (President of the Dallas Federal Reserve's number from 9 months ago). The government has ALREADY SPENT a decade of the country's production without paying for it. How much more should the government consume to "stimulate" the economy?
Jim O'Connor
The Colony, Texas
Private spending isn't happening because private people are in debt and have to pay for their prior consumption. The people that they have to pay are in China, Japan, etc. In order to pay them they have to produce goods at a price people in China and Japan want to pay. Americans think that being an American obligates the world to provide for them a certain standard of living independent of their production. This isn't so. Production must precede consumption (one would think that this is obvious). The rest of the world is starting to figure out this isn't such a good plan for them.
Public spending shouldn't happen either because the "public", ie the government, is already $100 trillion in debt prior to these insane bailouts (President of the Dallas Federal Reserve's number from 9 months ago). The government has ALREADY SPENT a decade of the country's production without paying for it. How much more should the government consume to "stimulate" the economy?
Jim O'Connor
The Colony, Texas
# posted by : January 1, 2009 at 1:43 PM
: January 1, 2009 at 1:43 PM
Jeff and Anon (Not Jim O'Connor)-
Just because the book is reviewed by someone who is full of worthless drivel does not mean that Mr. Higgs is as well. You can find many anti-Coulter ideas in his commentary for the Independent Institute.
You can also listen to him on a Podcast with Russ Roberts at EconTalk.
Not to rehash everything that Jim O'Connor stated, but public sector spending is not a wealth creater. More importantly it is a wealth destroyer. Building this to build things doesn't actually produce wealth, but providing goods and services that consumers actually value is what makes wealth. Building a road or bridge that people do not really need takes from those who could use it to create wealth to others. It's really just a transfer.
Just because the book is reviewed by someone who is full of worthless drivel does not mean that Mr. Higgs is as well. You can find many anti-Coulter ideas in his commentary for the Independent Institute.
You can also listen to him on a Podcast with Russ Roberts at EconTalk.
Not to rehash everything that Jim O'Connor stated, but public sector spending is not a wealth creater. More importantly it is a wealth destroyer. Building this to build things doesn't actually produce wealth, but providing goods and services that consumers actually value is what makes wealth. Building a road or bridge that people do not really need takes from those who could use it to create wealth to others. It's really just a transfer.
# posted by : January 2, 2009 at 10:08 AM
: January 2, 2009 at 10:08 AM
I'm not certain whether anyone has provided this link to Robert Higgs' 1997 paper "Regime Uncertainty - Why the Great Depression Lasted so Long and Why Prosperity Resumed After the War". It's a free PDF file.
http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf
My short interpretation of the article is that Higgs shows in microscopic detail how Roosevelt inhibited the resumption of prosperity during his term but that prosperity resumed almost immediately after FDR died and went straight to hell on April 12, 1945.
Post a Comment
http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf
My short interpretation of the article is that Higgs shows in microscopic detail how Roosevelt inhibited the resumption of prosperity during his term but that prosperity resumed almost immediately after FDR died and went straight to hell on April 12, 1945.
# posted by : January 2, 2009 at 11:17 AM
: January 2, 2009 at 11:17 AM Subscribe to Post Comments [Atom]
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