The Uselessness of Paul Krugman
There’s nothing liberals love more than apologizing for the misdeeds of others. Recently in the New York Times Magazine, Paul Krugman took it to an extreme with his 6,670-word article titled "How Did Economists Get It So Wrong?".
Don’t bother reading it. It’s clear that he still doesn’t get it and definitely isn’t looking for any real answers.
Just the length of the piece is comical. We imagine poor Paul gazing out the window of his New York Times office searching for just one more quote, one more study, one more insight to help redeem his profession and his reputation in the wake of the greatest financial crisis since the Great Depression.
Because in Krugman’s ivory tower and on the Times editorial board, economics still matters and no debate about stimulus packages or health care plans or financial regulation would be complete without his unique and important insights. He’s too big to fail and worth every word. And who could edit him anyway? He won a Nobel Prize.
Over here in reality, most of us already know that he and those that follow in his footsteps have no reputation to salvage. As the chief hand waver for the liberal establishment, Krugman is ready at a moment’s notice to pen op-eds and cite studies that support any policy that his progressive paymasters dream up, even if it defies the most basic economic principles.
Economics is a subject that students love to hate, and I was no exception. Much of it is so theoretical that it is not just a waste of time, but in obvious conflict with the real world. For example, in Macro, I was taught that having both low inflation and low unemployment was impossible, even though thankfully America has accomplished this for most of my working life.
Still, two economic concepts did penetrate the fog: "supply and demand" and "incentives matter." They are intuitive, easy to understand and apply, and deadly weapons against progressive economic policies.
Take ObamaCare, an easy target. According to the Democrats' dubious accounting there are 30 to 45 million uninsured. But once the government starts to offer quality health insurance priced below-market, why wouldn’t every single American have an incentive to sign up? Especially when their employers decide that it is easier to pay the fine than to provide care? Incentives matter.
Then supply and demand enters the picture. More patients means more demand for doctors, which would normally be a good thing for the profession. Yet the government is capping and cutting reimbursements, which reduces the supply of medical care. It’s Jimmy Carter all over again, but with lines at the “free” clinic instead of the gas pump.
Does it end there? No, it never ends. Patients still want care, so they buy supplemental private insurance policies. The best doctors exit public care and patient wait times increase and quality deteriorates. And although the government should be happy to get a few patients off the rolls, just ask anyone in the UK or Australia what the general attitude is to private insurance and care.
Apply supply and demand and incentives, and its obvious that progressive policies disrupt markets, kill jobs, and destroy wealth. History is full of examples, and we don’t need to turn to the wreckage of the Soviet empire. Amity Shales wrote an excellent book, the Forgotten Man, that describes how President Roosevelt’s policies during and after the Great Depression harmed the very people they were supposed to help for at least a decade.
What’s maddening is that Krugman and his kind aren’t completely ignorant of supply and demand and incentives. They know that with the right economic policies in place, America -- in other words, you -- can be on the right side of the social justice fight. Your carbon and soda tax dollars can pay GE and the green jobs czar whatever is necessary to turn America -- yes, you again -- into a country of green global citizens supporting multiculturalism and diversity.
Progressives wielding junk science is nothing new, but economics is a particularly attractive target because it is a soft science masquerading as a hard one. It is a social science, like sociology or anthropology, and an economist is simply someone, anyone, who studies the economy in whatever way they choose to do so.
That’s why a list of economists can include Karl Marx, Milton Friedman, Adam Smith, John Keynes, Ludwig Von Mises, and J.K. Galbraith. They share no inviolate principles or even common subject boundaries, only a common interest in how societies produce and consume.
To call economics a social science is no insult, as human society is certainly worthy of study. The danger is that social sciences are especially vulnerable to subjectivity and political bias.
Still, before anyone makes the feeble relativist argument that there are no good and bad economists and each has their own valid view, let’s defer to Henry Hazlitt, an economist and writer for the Wall Street Journal who is credited with bringing Hayek ‘s Road to Serfdom to the American reader:
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
In just one line from his insightful, accessible, and freely available book, Economics in One Lesson, Hazlitt tells you where to find the Forgotten Man -- just keep looking around and ahead.
By this definition, and by any reasonable application of critical thinking, the Obama administration is getting their advice from bad economists.
For despite their Ph.Ds, they can’t or won’t think through the long-term consequences of a nanny-state blank check government that can take over car companies with no vote, reorganize the health care or energy industry in a few weeks of debate, and spend a trillion dollars it doesn’t have on stuff it doesn’t need.
If Krugman wants to write an article about how economists got it so wrong, that’s low hanging fruit. Just explain why people like him, who undoubtedly know better, feel compelled to carry the progressives' water and give their policies credence. Why does he follow the party line instead of doing genuine analysis and research?
For example, what is his opinion of Freddie Mac and Fannie Mae? Was it a good idea to funnel taxpayer dollars into the riskiest home mortgages? The past, present, and future of our multi-trillion dollar progressive loan-guarantee programs is one of the most important economic issues facing our nation and was at the core of the financial crisis, but predictably Krugman doesn’t spare a word in his lengthy article.
The irony is that your job, or at least your career, is probably more secure than Krugman’s. Not just because he works for the troubled New York Times, an economic satire of itself, but because the role of a progressive cheerleader with a graduate degree in economics seems like a much easier one to fill than that of a genuine scientist.
As a modern-day Lysenko, he contributes nothing to the field, but simply burns through whatever credibility he once had at a dizzying rate. He didn’t predict the financial crisis, and he was wrong about the stimulus. As the errors, justifications, and blusters mount, at a certain point even the progressives will tire of him and look for someone else that can sell the story without reminding us of their past failings.
Still, as long as there are progressive funds flowing to progressive publications and organizations, there will be progressive economists. It’s just their job to use their credentials to convince and confuse, promoting social justice and progressive causes in the guise of economic science.
And for those of us not on the Soros-ACORN payroll, it’s our job as intelligent American citizens to discredit them before they can do any further damage. As Hazlitt wrote in 1946:
We are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore.