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Krugman the Keynesian / Artikel mises.org

verfasst von - Elli -, 11.09.2003, 15:41

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Krugman the Keynesian
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by
William L. Anderson

 

[Posted
September 11, 2003]

 

<img alt src="http://www.mises.org/images3/krugman.gif" align="right" border="0" width="187" height="222">Ever
since he started writing his semi-weekly column for the New York Times,
Paul Krugman has been a lightning rod of sorts. The Princeton University
faculty member has become the Times' resident"expert" on
economic issues, and he usually fails to disappoint, at least if creating
controversy constitutes success.

 

I
admit to being a regular reader of Krugman's columns, and I suspect that many
of my fellow economists on all sides of the ideological divide read him as
well, which is one reason the Times has made him a featured star. Of
course, being of the Austrian School of Economics, I find very little in
Krugman's statements on economics with which I can agree. (I think that some
of his criticisms of the Bush Administration's policies are correct—and
especially the war in Iraq—although the policy alternatives that he presents
usually are as bad or even worse.) 
In fact, whenever I email Krugman's columns to my friends—which I do often—I
also send the accompanying message,"Krugman is evil."

 

Yet,
it does no good simply to accuse one of the nation's most"elite"
economists—most likely a future Nobel Prize winner—of being"evil." 
He may be a right decent fellow, for all I know. What I consider to be evil is
not his personality nor his Massachusetts Institute of Technology pedigree nor
his wealth and fame. Rather, I consider that the policies he recommends are
evil because, in the end, they constitute fraud. That's right, fraud.

 

Before
deconstructing Krugman's economic views, let me also say that at least when it
comes to his columns, he is more of a political operative than he is an
economist. (That being said, many"public intellectuals" also are
little more than shills for political parties, both left and right.) 
If all we read on economics were Krugman's columns, we would learn that Bill
Clinton gave us prosperity because his administration pushed a tax increase
through Congress in 1993. That tax increase, says Krugman, enabled us to
"balance" the federal budget, which magically created a good economy.
(That the federal budget actually was never"balanced" in
conventional accounting terms, and that the alleged balanced budgets occurred
late in Clinton's term during the Fed-created unsustainable boom, and not when
taxes were increased seems to be off Krugman's radar screen.)

 

Furthermore,
his columns claim that Clinton's government was the model of"fiscal
responsibility," and is always full of praise for the former president's
policies. My guess is that if the Clinton Administration were in power now and
following basically the same budgetary and legal priorities as the Bush
Administration is currently doing, he would be writing excuses for Clinton.

 

However,
let me say that since my own writings have been extremely critical of the Bush
Administration and both political parties, it does not bother me to read
Krugman's anti-Republican rants. What does bother me is that the man pretends
to be something he clearly is not: an economist.

 

That
is correct. Let me say it again. Paul Krugman is not an economist. His
colleagues in the economics profession and the editorial board of the Times
may call him an economist, but that does not make him one.

 

This
is harsh criticism, I realize, so I must explain my views in full. Yes,
Krugman has a Ph.D. from MIT in economics, but his writings, both popular and
academic, demonstrate that he does not believe in laws of economics. Instead,
like most folks with socialist leanings, he believes that the state is both
omniscient and omnipotent and simply by fiat can eliminate those pesky little
problems caused by scarcity.

 

If
one can surmise anything from Krugman's columns, it is that he is an unabashed
Keynesian. While others in the economics profession have forsaken the
Keynesian faith for things like"Rational Expectations" or
"Real Business Cycles," Krugman remains true to the Church of John
Maynard Keynes.

 

For
example, he freely uses the term"liquidity trap," a Keynesian
invention, to describe the current situation in Japan. The real problems
holding back Japan—the failure of the Japanese state to permit the
liquidation of long-malinvested capital—is totally off Krugman's radar
screen. (Of course, Japan also tried for a decade to engage in Keynesian
"fiscal stimulus" by engaging in huge and expensive public works
projects. Today, the nation is left with massive public debt, white elephant
projects, and rising unemployment and economic uncertainty.)

 

Other
Keynesian ideals flow into Krugman's work as well. Tax cuts must always be
undertaken in order to"stimulate aggregate demand," which means
they must always be targeted toward those groups who pay the least in taxes.
Since the Church of Keynes preaches that saving by people who are wealthy is
an important reason that aggregate demand dries up, upper-income individuals
must always be heavily taxed so their money will be"spent," not
saved or invested in projects that fail to meet Krugman's approval.

 

In
nearly every column, Krugman attacks the moderate tax cuts pushed by the Bush
Administration, blaming them for every evil from the current"jobless
recovery" to bad food for U.S. troops in Iraq. The reason for his harsh
criticism is not just his political partisanship (although that is obvious in
nearly everything he writes). Krugman is one who believes that"aggregate
demand" fueled by consumer spending is economic salvation, so anything
that actually cuts the tax rates for highest income earners is heresy to him.

 

The
reason that I classify Krugman as a noneconomist, however, is not simply his
faith in Keynesian orthodoxy. It is because Krugman demonstrates time and
again that in his view, economics is nothing more than a chessboard game of
aggregates and statistics. For example, Krugman is a strong supporter of fiat
money. Furthermore, his theoretical views of money fall into the category of
money being nothing more than a quantity variable.

 

While
presenting money as simply a mass of quantities permits one to engage in all
sorts of seemingly impressive mathematics, it says absolutely nothing about
money itself. Without an understanding of money as a productive asset, and
without understanding that money cannot be separated from the actions of
individuals, one literally cannot talk about money at all and make economic
sense. Yet, there is nothing in any of Krugman's works that suggests a
marginal utility approach to monetary theory. Money simply is"M" in
the equation of exchange MV = PY, and that is as far as it goes.

 

Of
course, Krugman's alleged specialty is international trade, where he
supposedly has made a case for moderate protectionism as a way to prosper a
nation. Unfortunately, like his other works, Krugman's work in international
trade is basically an extension of macroeconomics, at least if my copy of his International
Economics text is typical of his viewpoint.

 

Trade,
according to Krugman, does not involve exchanges between individuals; no,
trade occurs between nations, and, more importantly, nation states.
It is almost as though the government of the United States trades with the
government of Japan. While there is the requisite lesson on comparative
advantage, it is presented entirely as an exchange between the fiction called
"countries," and not as a basis for all exchange between individuals.

 

Even
when Krugman delves into"microeconomics," he commits the same
blunders as the rest of the mainstream. Economists have known since the first
days of the marginalist revolution that interpersonal utility comparison are
impossible to make. While ideas like"consumer surplus" and"welfare
losses" can be presented in graphical form as teaching tools, they
actually are works of fiction, since their use requires that one measure
utility in cardinal, not ordinal, terms. Of course, the use of cardinal
utility permits economists to present economic theory in mathematical terms
through multivariable calculus, which is one reason that it remains in use as
an explanatory tool even though it is thoroughly bogus.

 

Lastly,
Krugman's columns demonstrate that he is unable to engage in logical arguments.
Take his criticism of tax cuts, for example. His main objection is that those
who"benefit" the most are"the rich." 
That is the extent of his argument; wealthy individuals will receive larger
reductions in taxes than less-wealthy individuals, so tax cuts that slice off
marginal rates are bad. Nowhere does he point out that even a tiny reduction
in the top income tax rates will yield fairly large decreases in taxes wealthy
individuals pay because those people pay the lion's share of taxes in the
first place. In other words, the vaunted economist does not argue in
economic terms; he simply appeals to envy and calls it economic thinking.

 

Even
when Krugman"gets it right," he actually is wrong. In recent
columns, he has admitted that there were speculative excesses in the stock
market and elsewhere. However, in Krugman's world, that just happens because
such unwise speculation, in his opinion, is simply nothing more than a trait
of capitalism. Like most noneconomists posing as economists, Krugman does not
acknowledge what Carl Menger wrote in the first lines of the first chapter of
his path-breaking Principles of Economics:"All things are subject
to the law of cause and effect."

 

Yes,
Krugman admits there was unwise mass speculation during the latter years of
the"fiscally responsible" Clinton Administration, yet he has no
idea from whence it came, other than to place his faith in Keynes' dictum that
these things were the results of the"animal spirits" that are
released by capitalism. While Austrians can clearly point to the reckless
credit expansion by the Federal Reserve during the late 1990s as the cause of
the speculative bubbles, Krugman has nowhere to turn other than to say that
capitalists are stupid people who need the guidance of the state.

 

No
doubt, Krugman is an"authoritative" voice to those who advocate
statism. He is a product of an elite university and has taught at the"highest
levels" of academe since first earning his doctorate. Thus, those who
cite Krugman as an authority in economics commit the informal fallacy of argumentum
ad verecundiam (appeal to authority). However, if one wishes to appeal to
logic, clear thinking, and the realization that economic analysis begins with
the individual, then Krugman is not the person to whom one goes to find
answers. One might as well call on a politician for intellectual sustenance as
to call on Paul Krugman. In the final analysis, both will provide the same
answer: expand the state, and when that creates problems, expand the state
some more.

 


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William
Anderson, an adjunct scholar of the Mises Institute, teaches economics at
Frostburg State University. Send him MAIL.
See his Mises.org Articles
Archive.

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Krugman the Keynesian / Artikel mises.org - - Elli -, 11.09.2003, 15:41