Thursday, March 12, 2009
Follow-Up On Krugman the Anti-Economist
In the previous post I was rendered without speech by Krugman's analysis. However, I tried to deal with several problems that I perceived, and thus may have given readers the wrong impression. His last confusion of the post had nothing to do with politics. In this post, I want to isolate that particular absurdity to make sure everyone here sees just how bad it was.
Recall that Krugman said:
His mistake here is so bad and so basic that we shouldn't even worry about the political naivete. Suppose someone had said that there were too many houses built during the boom years, and so that sector needs to shrink. Now Krugman might say, "I disagree with that analysis"--and in fact he has. But suppose the way he disagreed was to write:
Do you folks see it now? Back when I was teaching, if a business major had put this down on a short-answer for an Intro to Macro exam I would have read it to my wife so she could chuckle. ("Laugh" is a strong word; my wife is not the geek I am.)
And this guy won the Nobel (Memorial) Prize in economics. Oh my gosh.
Recall that Krugman said:
Plus, who is “the government”? It’s basically us, you know — the government spends money providing services to the public. Demanding that the government tighten its belt means demanding that we, the taxpayers, get less of those services. Why is this a good thing, even aside from the state of the economy?
His mistake here is so bad and so basic that we shouldn't even worry about the political naivete. Suppose someone had said that there were too many houses built during the boom years, and so that sector needs to shrink. Now Krugman might say, "I disagree with that analysis"--and in fact he has. But suppose the way he disagreed was to write:
[Satirical Krugman quote:] Plus, who are these "homebuilders”? It’s basically us, you know — the homebuilders spend money on lumber, nails, and workers providing houses to the public. Demanding that the homebuilders scale back their operations means demanding that we, the consumers, get fewer houses. Why is this a good thing, even aside from the state of the economy?
Do you folks see it now? Back when I was teaching, if a business major had put this down on a short-answer for an Intro to Macro exam I would have read it to my wife so she could chuckle. ("Laugh" is a strong word; my wife is not the geek I am.)
And this guy won the Nobel (Memorial) Prize in economics. Oh my gosh.
Comments:
The Blackadder Says:
The case of Krugman is rather puzzling. If you go back and read his older stuff in Slate, it is quite good, and shows no inclination towards an anti-economic way of thinking. Yet as time goes on, he seems to be reverting to a pre-economic mindset, such that he can say things like 'the debt doesn't matter, cause we owe it to ourselves,' etc. It's kind of like watching an economics version of Flowers for Algernon unfolding on the pages of the New York Times.
The case of Krugman is rather puzzling. If you go back and read his older stuff in Slate, it is quite good, and shows no inclination towards an anti-economic way of thinking. Yet as time goes on, he seems to be reverting to a pre-economic mindset, such that he can say things like 'the debt doesn't matter, cause we owe it to ourselves,' etc. It's kind of like watching an economics version of Flowers for Algernon unfolding on the pages of the New York Times.
# posted by 
: March 12, 2009 at 10:32 AM
: March 12, 2009 at 10:32 AM
hi mr murphy,
can you recommend a modern, readable text on austrian economics?
can you recommend a modern, readable text on austrian economics?
# posted by : March 12, 2009 at 1:59 PM
: March 12, 2009 at 1:59 PM
Ken, Richard Maybury has written a children's book on Austrian economics called Whatever Happened to Penny Candy. It's fantastic. Check it out.
# posted by : March 12, 2009 at 3:17 PM
: March 12, 2009 at 3:17 PM
Ken:
Dr Murphy is far, far too shy, retiring, and discreet to mention it, ever, but his own "Politically Incorrect Guide to Capitalism" is wonderful. It's not "about" Austrian economics (though very much informed by it), but it invaluable for refutation of the non-Austrian fallacies we all grew up with, and an introduction to the Austrian understanding. It's very readable.
Beyond that, Hazlitt's "Economics in one lesson" is a good basis, as is Callahan's "Economics for Real People" There are several titles from Rothbard and even Ron Paul that would be informative and readable, check mises.org
Of course, there's also a wealth of (often free) resources at mises.org, the center of the hardcore Austrians on the Internet. This is also where you get into a lot more detail, including things such as the refutation of arguments made by other branches of economics, and much more detailed study, if you're interested in that level of detail. Some of their material leans more toward the "textbook" side of the equation rather than the "readable". Of course, the ultimate example of "textbook" is probably Mises' "Human Action", along with the accompanying study guide written by.... Dr. Robert Murphy (imagine that). I haven't read Human Action or the study gude (I swear, it's on the list, Dr. Murphy!), but can't imagine either Mises or Murphy can cover the ground there without getting very technical and detailed indeed.
As far as the application of Austrian theory to the current mess (I believe "current mess" is the official designation now), I've ordered and am looking forward to Thomas Woods' "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse" (which we are assured has a lot of important things to say AFTER the title, and which just came out), as well as the forthcoming "
The Politically Incorrect Guide to the Great Depression and the New Deal" written by, you guessed it, Dr. Robert Murphy! I'm trying to remember on whose blog I learned about Dr. Murphy's new book.... You might also look for "Crashproof" by Peter Schiff, which is Austrian, but not "about" austrian economics, it's about taking investment action in the real world with an understanding based in Austrian Economics.
I'm speaking solely for myself, which is to say a non-economist dilettante dabbler who's interested in Austrian Economics, rather than a professional. In fact, I feel fortunate that I never took Macroeconomics in college. If Dr. Murphy or any of the other pros who hang out here have different recommendations, take theirs!
(waggishness aside, I have no relationship with Dr. Murphy, or any of the authors mentioned except as very satisfied customers of their books, writings, blog articles, and etc).
Dr Murphy is far, far too shy, retiring, and discreet to mention it, ever, but his own "Politically Incorrect Guide to Capitalism" is wonderful. It's not "about" Austrian economics (though very much informed by it), but it invaluable for refutation of the non-Austrian fallacies we all grew up with, and an introduction to the Austrian understanding. It's very readable.
Beyond that, Hazlitt's "Economics in one lesson" is a good basis, as is Callahan's "Economics for Real People" There are several titles from Rothbard and even Ron Paul that would be informative and readable, check mises.org
Of course, there's also a wealth of (often free) resources at mises.org, the center of the hardcore Austrians on the Internet. This is also where you get into a lot more detail, including things such as the refutation of arguments made by other branches of economics, and much more detailed study, if you're interested in that level of detail. Some of their material leans more toward the "textbook" side of the equation rather than the "readable". Of course, the ultimate example of "textbook" is probably Mises' "Human Action", along with the accompanying study guide written by.... Dr. Robert Murphy (imagine that). I haven't read Human Action or the study gude (I swear, it's on the list, Dr. Murphy!), but can't imagine either Mises or Murphy can cover the ground there without getting very technical and detailed indeed.
As far as the application of Austrian theory to the current mess (I believe "current mess" is the official designation now), I've ordered and am looking forward to Thomas Woods' "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse" (which we are assured has a lot of important things to say AFTER the title, and which just came out), as well as the forthcoming "
The Politically Incorrect Guide to the Great Depression and the New Deal" written by, you guessed it, Dr. Robert Murphy! I'm trying to remember on whose blog I learned about Dr. Murphy's new book.... You might also look for "Crashproof" by Peter Schiff, which is Austrian, but not "about" austrian economics, it's about taking investment action in the real world with an understanding based in Austrian Economics.
I'm speaking solely for myself, which is to say a non-economist dilettante dabbler who's interested in Austrian Economics, rather than a professional. In fact, I feel fortunate that I never took Macroeconomics in college. If Dr. Murphy or any of the other pros who hang out here have different recommendations, take theirs!
(waggishness aside, I have no relationship with Dr. Murphy, or any of the authors mentioned except as very satisfied customers of their books, writings, blog articles, and etc).
Ken:
I can't believe I failed to mention (I know, I know, given the length of my comment no one believes I possibly could have failed to mention ANYTHING, but never mind about that right now) Roger W. Garrison's excellent powerpoint demonstration of the Austrian Theory of the Business Cycle at http://www.auburn.edu/~garriro/ppsus.htm (the 2006 edition is the one I saw, and it'll run in Open Office if you don't have PowerPoint). It covers (what seems to me to be) some technical stuff, but in a very understandable way. It'll also scare the ($&(_# out of you when you think of the kinds of "fixes" advocated by Krugman and the Government.
I now return the blog to its' rightful owner (temporarily at least)
I can't believe I failed to mention (I know, I know, given the length of my comment no one believes I possibly could have failed to mention ANYTHING, but never mind about that right now) Roger W. Garrison's excellent powerpoint demonstration of the Austrian Theory of the Business Cycle at http://www.auburn.edu/~garriro/ppsus.htm (the 2006 edition is the one I saw, and it'll run in Open Office if you don't have PowerPoint). It covers (what seems to me to be) some technical stuff, but in a very understandable way. It'll also scare the ($&(_# out of you when you think of the kinds of "fixes" advocated by Krugman and the Government.
I now return the blog to its' rightful owner (temporarily at least)
I hate to admit it here, but I haven't read Bob's book yet. Someday ...
But I can highly recommend "Economics for Real People", and it is a free download at Mises.org
But I can highly recommend "Economics for Real People", and it is a free download at Mises.org
Is it that Krugman conflates 'the government' with 'the public' or is there something else I have missed?
# posted by : March 13, 2009 at 5:57 AM
: March 13, 2009 at 5:57 AM
Krugman has no experience with ANY of the basic precepts of libertarianism or Austrian economics, much less any experience with debating them. I'm certain he's never thought through the fact that monetary creation by a central bank is, in fact, unethical theft of purchasing power from holders of old money to the borrowers and holders of new money. I'm certain he's never thought through the fact that his spending/borrowing/taxation schemes rely upon a vast empire of SWAT Teams and prisons to force their will upon the populace. These Keynesians are like charlatans pretending to be biologists who have never even heard of cell theory, much less have any working understanding of it. Let's draw them out and let them babble. They will show us what they are made of.
# posted by : March 13, 2009 at 9:36 AM
: March 13, 2009 at 9:36 AM
"unethical theft of purchasing power from holders of old money to the borrowers and holders of new money."
Why is producing anything unethical?
Why is producing anything unethical?
# posted by : March 13, 2009 at 1:16 PM
: March 13, 2009 at 1:16 PM
Re: book recommendations, I can't improve on what has already been said.
Re: anonymous's question:
Is it that Krugman conflates 'the government' with 'the public' or is there something else I have missed?
You're right, that's one of the mistakes. But in this post, I was focusing on a different Krugman mistake, namely that he seemed to say it was impossible for a particular sector to produce too many units. I.e. let's concede for the sake of argument that the government is a great enterprise churning out all kinds of valuable goods and services for the public, it still could be possible that it is overproducing, because maybe the resources it uses could be better deployed to other businesses.
But Krugman's incredulous, "Why would we ever want the government to give us fewer services?!" overlooked that basic point about tradeoffs. That is literally stuff you go over on the first day of Intro to Micro.
Re: anonymous's question:
Is it that Krugman conflates 'the government' with 'the public' or is there something else I have missed?
You're right, that's one of the mistakes. But in this post, I was focusing on a different Krugman mistake, namely that he seemed to say it was impossible for a particular sector to produce too many units. I.e. let's concede for the sake of argument that the government is a great enterprise churning out all kinds of valuable goods and services for the public, it still could be possible that it is overproducing, because maybe the resources it uses could be better deployed to other businesses.
But Krugman's incredulous, "Why would we ever want the government to give us fewer services?!" overlooked that basic point about tradeoffs. That is literally stuff you go over on the first day of Intro to Micro.
scineram
If Ford produces titles to cars which don't actually exist is that a problem?
The Fed creates "titles to production" which was never produced, much less produced by the Fed.
If Ford produces titles to cars which don't actually exist is that a problem?
The Fed creates "titles to production" which was never produced, much less produced by the Fed.
# posted by : March 16, 2009 at 10:27 AM
: March 16, 2009 at 10:27 AM
ken,
Let me second the previous recommendations.
1. Economics in One Lesson isn't a systematic theory of economics, but it does a great job of making the news unwatchable in a concise way. The language assumes some previous economic knowledge in a few places.
2. Economics for Real People is very good exactly where Economics in One Lesson stops.
3. PIG Capitalism is very good, hits a lot of current hot topics.
4. Thomas Sowell's Basic Economics and Applied Economics are also very good, and once you've read these other books you can spot his problems because he is Chicago, not Austrian.
That would be the order I'd read them, too. My son's home school economics class was centered around these books. You could skip Sowell if you had to pick due to price or time.
The Rothbard mp3 "class" on economics is pretty listenable, too. My first real Austrian investigation. Available at Mises.org in the media section.
Post a Comment
Let me second the previous recommendations.
1. Economics in One Lesson isn't a systematic theory of economics, but it does a great job of making the news unwatchable in a concise way. The language assumes some previous economic knowledge in a few places.
2. Economics for Real People is very good exactly where Economics in One Lesson stops.
3. PIG Capitalism is very good, hits a lot of current hot topics.
4. Thomas Sowell's Basic Economics and Applied Economics are also very good, and once you've read these other books you can spot his problems because he is Chicago, not Austrian.
That would be the order I'd read them, too. My son's home school economics class was centered around these books. You could skip Sowell if you had to pick due to price or time.
The Rothbard mp3 "class" on economics is pretty listenable, too. My first real Austrian investigation. Available at Mises.org in the media section.
# posted by : March 16, 2009 at 10:35 AM
: March 16, 2009 at 10:35 AM Subscribe to Post Comments [Atom]
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