I am a long-time critic of NYT columnist and Nobel laureate Paul
Krugman. In addition to my podcast “Contra
Krugman” (co-hosted with Tom Woods), over the years I’ve also written
dozens of online articles pushing back against our era’s most influential
disciple of Keynes. Some of my favorite essays are now available in my new
book, Contra Krugman: Smashing
the Errors of America’s Most Famous Keynesian. The book is
600+ pages, grouped together by topic, including such issues as fiscal
stimulus, the Fed’s QE programs, climate change policy, the minimum wage, and
Krugman’s bogus history of the Great Depression.
Besides pointing out the economic fallacies in his arguments, I also
document the numerous examples of Krugman’s inconsistency. Indeed, on my blog
I’ve had to invent a new term for this practice: a Krugman Kontradiction.
It’s not a literal contradiction, but rather the type of assumptions and
points of emphasis that change from argument to argument, so that Krugman
always ends up promoting more government intervention (at least if it’s from
a Democrat).
In the present article, I’ll list some examples of Krugman Kontradictions.
For more details, and for other examples (which don’t lend themselves to a
pithy summary in the present list), I refer you to my new book.
On Bond Vigilantes:
Nov.
10, 2012:
“I argued yesterday that even if the heretofore invisible bond
vigilantes materialize one of these days, their attack won’t have the effects
the deficit hawks imagine. Because America has its own currency and a
floating exchange rate, a loss of confidence would lead not to a
contractionary rise in interest rates but to an expansionary fall
in the dollar.”
March
11, 2003:
“With war looming, it's time to be prepared. So last week I switched to a
fixed-rate mortgage. It means higher monthly payments, but I'm terrified about
what will happen to interest rates once financial markets wake up to the
implications of skyrocketing budget deficits.”
On World War II as Example of the Keynesian Multiplier:
Aug.
15, 2011:
“World War II is the great natural experiment in the effects of large
increases in government spending, and as such has always served as an
important positive example for those of us who favor an activist approach to
a depressed economy.”
Jan.
22, 2009:
“[T]he prospect of a Keynesian stimulus is having a weird effect on
conservative economists, as first-rate economists keep making truly
boneheaded arguments against the effort.
The latest entry: Robert Barro argues that the multiplier on
government spending is low because real GDP during World War II rose by less
than military spending.
Actually, I’ve already taken that one on. But just to say it again: there
was a war on. ... I can’t quite imagine the mindset that leads someone
to forget all this, and think that you can use World War II to estimate the
multiplier that might prevail in an underemployed, rationing-free economy.”
Is Social Security a Ponzi Scheme?:
Oct.
22, 2012:
“Take the common claim on the right that Social Security is a Ponzi scheme
because the system has few real assets. It’s true that Social Security is
mainly a system in which each generation pays for the previous generation’s
retirement, in the expectation that it will receive the same treatment from
the next generation. But like monetary circulation, this process can go on
forever; there’s nothing unsustainable about it (yes, demography, but that’s
about the levels of taxes and benefits, not the fundamental nature of the
scheme). So there’s nothing Ponziesque at all.”
1996/97 Issue
of Boston Review:
“I like Freeman's idea of providing each individual with a trust fund when
young rather than retirement benefits when old, but we had better realize
that this is a significant change in the character of the social insurance
system. Social Security is structured from the point of view of the
recipients as if it were an ordinary retirement plan: what you get out
depends on what you put in. So it does not look like a redistributionist
scheme. In practice it has turned out to be strongly redistributionist, but
only because of its Ponzi game aspect, in which each generation takes more
out than it put in. Well, the Ponzi game will soon be over, thanks to
changing demographics, so that the typical recipient henceforth will get only
about as much as he or she put in (and today's young may well get less than
they put in).”
On the Case for Fiscal Stimulus:
Feb.
20, 2014:
“The case for stimulus was that we were suffering from a huge shortfall in
overall spending, and that the hit to the economy from the financial crisis
and the bursting of the housing bubble was so severe that the Federal
Reserve, which normally fights recessions by cutting short-term interest
rates, couldn’t overcome this slump on its own. The idea, then, was to
provide a temporary boost both by having the government directly spend more
and by using tax cuts and public aid to boost family incomes, inducing more
private spending.”
1999:
“What continues to amaze me is this: Japan's current [1999] strategy of
massive, unsustainable deficit spending in the hopes that this will somehow
generate a self-sustained recovery is currently regarded as the orthodox,
sensible thing to do - even though it can be justified only by exotic stories
about multiple equilibria, the sort of thing you would imagine only a
professor could believe.”
On Whether 2013 Provided a Good Test of Market Monetarism vs.
Keynesianism:
April
28, 2013:
“But as Mike Konczal points out, we are in effect getting a test of
the market monetarist view right now [in April 2013], with the Fed having
adopted more expansionary policies even as fiscal policy tightens.
And the results aren’t looking good for the monetarists: despite the Fed’s
fairly dramatic changes in both policy and policy announcements, austerity
seems to be taking its toll.”
January
4, 2014:
“Incidentally, these other factors are why I don’t take seriously the
claims of market monetarists that the failure of growth to collapse in 2013
somehow showed that fiscal policy doesn’t matter. US austerity, although a
really bad thing, wasn’t nearly as intense as what happened in southern
Europe; it was small enough that it could be, and I’d argue was, more or less
offset by other stuff over the course of a single year.”
Does 1990s Canada Have Lessons for the US During the Great
Recession?
September
21, 2014:
“Oh, my. Josh Barro tells us that conservatives are once again
touting Canada as a role model, in particular using its experience in
the 90s to claim that austerity is expansionary after all.”
March
24, 2012:
“I’d argue that Canada in the 1990s is a good model for America now: a
severely depressed economy, suffering very much from lack of aggregate
demand, in which the effects of downward nominal rigidity can all too easily
be misinterpreted as signs that there isn’t actually a lot of slack.”
Did Krugman Think Alan Greenspan Should Inflate a Housing Bubble?
June
17, 2009:
“One of the funny aspects of being a somewhat, um, forceful writer is that
I’m regularly accused of all sorts of villainy…The latest seems to be that I
called for the creation of a housing bubble — in fact, the bubble is my
fault!...
Guys, read it again. It wasn’t a piece of policy advocacy, it was just
economic analysis. What I said was that the only way the Fed could get
traction would be if it could inflate a housing bubble. And that’s just what
happened.”
October
30, 2006:
“As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan
needed to create a housing bubble to replace the technology bubble. So within
limits he may have done the right thing. “
Do Unemployment Benefits Reduce Employment?
Jan.
12, 2014:
“There’s a sort of standard view on this issue, based on more or less
Keynesian models. According to this view, enhanced UI [Unemployment
Insurance] actually creates jobs when the economy is depressed. Why? Because
the economy suffers from an inadequate overall level of demand, and
unemployment benefits put money in the hands of people likely to spend it,
increasing demand.
You could, I suppose, muster various arguments against this proposition,
or at least the wisdom of increasing UI. You might, for example, be worried
about budget deficits. I’d argue against such concerns, but it would at least
be a more or less comprehensible conversation.
But if you follow right-wing talk — by which I mean not Rush Limbaugh but
the Wall Street Journal and famous economists
like Robert Barro — you see the notion that aid to the unemployed
can create jobs dismissed as self-evidently absurd. You think that you can
reduce unemployment by paying people not to work? Hahahaha!”
2010:
“People respond to incentives. If unemployment becomes more attractive
because of the unemployment benefit, some unemployed workers may no longer
try to find a job, or may not try to find one as quickly as they would
without the benefit. Ways to get around this problem are to provide
unemployment benefits only for a limited time or to require recipients to
prove they are actively looking for a new job.”
On Admitting Error:
October
23, 2017:
“Again, everyone makes forecast errors. If you’re consistently wrong, that
should certainly count against your credibility; track records matter. But
it’s much worse if you can never bring yourself to admit past errors and
learn from them.
That kind of behavior makes it all too likely that you’ll keep making the
same mistakes; but more than that, it shows something wrong with your
character.”
June
22, 2015:
“Those who can, cite evidence to support their position; those who cannot
play gotcha. Events have overwhelmingly supported a Keynesian view of the
effects of fiscal policy, but the anti-Keynesians have responded, not by
reconsidering their views, but by seeking to discredit the messengers.
In particular, there’s a lot of “Krugman said X would happen, and
it didn’t, so Keynesian economics is wrong.”
“I know what the response will be: “But you said blah blah blah!” So what?
Even if I did, and even if my remarks aren’t being taken out of context, I am
not the Oracle of Keynes, and my fallibility says nothing about how the
economy works. If gotcha is all you’ve got, then you’ve got nothing.”
Conclusion
Now to reiterate, my examples above are of Krugman Kontradictions — that’s
with a “K,” meaning they are not literal contradictions. Believe me, I am
well aware of “what Krugman was trying to say” in each of the above examples.
(That’s partly why I’ve provided links to everything — I encourage you to go
read the discussion in context.) Nonetheless, I think even the fairest of
readers will conclude that Krugman has a disturbing habit of mocking and/or
vilifying people who use arguments that he himself employed earlier in his
career, or under slightly different circumstances.
Besides the fun of catching Krugman in his flip-flops, my new book shows just how weak the empirical
case for Keynesian fiscal policy is. I imagine many Austrian readers
will be surprised to see how well the data support their position. Indeed, in
several of the chapters I take the very numbers Krugman digs up, and show
that they come down on the side of Mises and Hayek, not Keynes and Krugman.
