There is a raging debate among economic policy thinkers taking place online about now. Is it about the proper role and size of government in an economic system? No. Is it about whether Keynes’ prescriptions of domestic fiscal deficits and easy money are still effective for a 21st century highly integrated global economic system? No. Is it about whether uncoordinated economic initiatives among world governments might possibly do more collective harm than good? No.
The debate is over whether Paul Krugman is mean to people who disagree with him. Which is not just a little bit silly. Of course, he is. That’s his frigging job, as an economist turn political shill. He just does his partisan econo-politicizing a bit nastier than others.
Everyone who has read more than a column or two of his in the New York Times fully well knows he is acerbic, churlish, rude and ridiculing when it comes to those who disagree with him. Paul Krugman believes he has never been wrong about the proper economic policy that the whole of these United States (and for that matter, the rest of the world) should follow. Krugman’s legions of acolytes are as certain of Krugman’s inerrancy as is Krugman, and they love it when he belittles people who oppose his ideas, referring to them as fools, knaves and lunatics, or lately, sociopaths (all Krugman’s words). End the debate there. Paul Krugman is mean to people who disagree with him. Get over it.
Paul Krugman’s basic economic prescription for anything that ails an economic system is a) fiscal deficits, and b) easier money. To my knowledge, Paul Krugman has never counseled that US fiscal deficits should be reduced (except indirectly). To my knowledge, he has never counseled that the US should tighten up its monetary policy. Except, and this is an important exception that proves the bias in his analysis, he opposed letting the Bush tax cuts lapse so that the Republicans wouldn’t be awarded a political victory over the Democrats. Ending the tax cuts (a tax increase) would have lowered the fiscal deficits a bit, but he thought doing so was worth it in order to deliver a political victory to the enlightened progressives of his Democratic party. Most Republicans disagree with Krugman’s ideas, so they are the fools, knaves, lunatics and sociopaths he derides and demonizes. He claims he is not always right, but it is they who are so constantly intent on being wrong. And a political victory over those fools, knaves, lunatics and sociopaths would have more long-term economic value than opposing them on analytical economic grounds, or so he sold it. Paul Krugman never lets his economic analyses get in the way of his political impulses.
Clive Crook of Bloomberg is now openly debating Brad Delong, a Krugman acolyte who also happens to be an economics professor. The debate looks something like children in a playground arguing over whose dad is the best. It is a personal tit for tat that is simply a bit too much to stomach. Read the linked article, if you must, but before lunch. Meanwhile, Caroline Baum at Bloomberg debates Keynes’ ideas, but not his person. She offers a reductio ad absurdum argument that if spending were the problem, why not just print money and give it to everyone to spend (which is too close to the truth of what’s actually happening to be comfortable). John Maynard Keynes is the source of Krugman’s ideas, so debating Keynes is tantamount to debating Krugman, but without, one presumes, feeling so covered in partisan ickiness afterwards.
The role that government should play in an economic system is not, however, a question that can be answered by economics. It is a normative, not a positive, question. It concerns what should be, not what is. The role of government in an economic system depends on the purpose of the system. Even if the received purpose for the system is to enhance the welfare of the individuals within it, that begs the question of what, exactly, enhances individual welfare? Is it freedom, including the freedom to fail? Is it security, i.e, freedom from failure? Is it to have one’s needs met? Is it to serve the society in which the individual exists? Assuming that an economic system exists to enhance individual welfare, each of the myriad ways of defining individual welfare would yield a different answer for the proper level of government involvement. If freedom is the ultimate metric through which individual welfare is measured, the role of government would be quite small, limited perhaps to just providing law and order. If service to the state defines individual welfare, the government would be all-encompassing, running the economic system something like an antebellum plantation. Either of these models at the extremes of government involvement, and a litany of others in between, could make for a viable economic system. The question of which one is correct is more a matter of faith and belief than of economics.
Economists are often accused of suffering from physics envy, of trying to quantify relationships that aren’t really amenable to quantification. But economists should follow the physicist’s general explicatory strategy in defining the proper role of government in an economic system. Physics does not attempt to answer the question “why”, and economics shouldn’t either. Take the economic system as it is, ask what sort of system is desired, and figure out the best way to get there. This is where Krugman fails. He tries to explain how to achieve a certain type of economic system, falsely assuming (intentionally, no doubt) that the question of which sort of system is desired has been resolved. It hasn’t. The question of what most enhances individual welfare is one of political philosophy, not answerable by economics.
Krugman has used his quite robust understanding of positive economics as a megaphone to support his normative views, i.e., his political philosophies, in the process developing something of a cult following, so much so that prominent econo-journalists spend vast energies debating his character and not his economics. Krugman recently bemoaned the low inflation rate as holding back the potential for expanding the employment rolls. Which is to say, he almost slipped, and revealed the true strategy behind his call for fiscal and monetary stimulus–to engineer inflation sufficient to bring wages down to a market-clearing level. The Krugman cult didn’t take too kindly to his calls for more inflation, believing that there was enough already, not understanding that inflation is the implicit mechanism through which fiscal and monetary policy is expected to decrease unemployment. The Krugman cult fancies itself an intelligent opposition to big business conservatives; it doesn’t get that Keynes, and his most vocal proponent today, Krugman, sought to save capitalism and capitalists, not destroy it or them. In other words, the cult doesn’t get that for all his bluster in the service of advancing the anti-Republican cause, Krugman advocates pursuit of exactly the same strategy that the Republican and Ayn Rand proselyte Alan Greenspan, and his successor, Ben Bernanke, pursue. If the economic question is to get more people to work, they all believe that the economic answer is to lower the wage rate through inflating the price of everything else but labor. Krugman is thereby disingenuous, even fraudulent, in the sense that he has set things up as a liberal/conservative battle over this or that particular amount of stimulus. Stimulus may or may not help “jumpstart” the economy, depending on one’s view of the multiplier. But it is the lowering of wages through inflation that keeps it humming, as Krugman fully well knows.
Paul Krugman won the Nobel prize for economics. Too bad there isn’t one for Machiavellian politics. By trumpeting the economic need for more stimulus, i.e., for a more expansive and intrusive government, he has turned an economic non-debate into a political maelstrom in the service of advancing his party’s cause–the one to which all political parties ascribe–gaining more power. As an economist, he really should be ashamed. He is rapidly destroying what little reputation for objectivity the academy may ever have had.
As for everyone else, we should be ashamed for allowing someone who is trenchantly biased to frame the debate, even allowing him to be its subject. Argue all day long about how large a stimulus package should be. But ignore economic arguments and authority when doing so. The argument about the size of fiscal deficits is an argument over political philosophy, not resolvable through resorting to economic theory or analysis.