The PJ Tatler

Paul Krugman Embraces Fantasy

At City Journal, Guy Sorman reviews Krugman’s new book, End This Depression Now! (If that’s a personal cry for help, I hear they’re doing wonderful things these days with Prozac and polo mallets, as another denizen of Manhattan would say) and concludes “The Nobel-winning economist embraces fantasy:”

To be fair, Krugman acknowledges that he has become a “pundit,” an implicit admission that his book is informed by his liberal views as much as by his economic knowledge. End This Depression Now! is essentially a pamphlet pretending to offer scientific answers to the U.S. economic slump. Its argument is easy to summarize: we have the knowledge and tools to revive the economy and provide jobs to millions of unemployed Americans. Consequently, those in positions of power who refuse to put Krugman’s advice into practice, themselves motivated by ideology, are the enemies of the unemployed. They want Americans to suffer for their past sins of excessive borrowing and spending. As if to emphasize that he sees the economic debate as a morality play, Krugman dedicates his book to the unemployed.

“Ending the depression should be incredibly easy,” Krugman asserts. The government must simply spend more, because the American consumer is spending less. Borrowing from Keynes, Krugman argues that the crisis, having been provoked by a decline in private demand, can only be solved by an increase in public demand. This is “a moral imperative” (the book constantly zigzags between ethics and economics). Public spending would be not only efficient, Krugman contends, but ethical.

This inflationary solution, which Krugman calls “a feel-good experience,” has been tried before. It worked, he claims, during World War II, when arms-building programs lifted the U.S. economy out of the Great Depression. Half-jokingly, Krugman says that the threat of an alien invasion should suffice to motivate more government spending. But he knows well—or should—that President Obama has already tried to rekindle growth this way. He admits that the results were not impressive, but only because public spending didn’t go far enough and wasn’t sustained.

Krugman embracing fantasy? I just can’t see it myself: