Paul Krugman

By now, most if not all have surely seen the “Paul vs. Paul” debate that took place on Bloomberg a few weeks ago, but if not I’ll post it here:

 

 

In a retrospective blog post on the debate, Krugman lamented the debate as “useless,” and explained that he participated solely in order to promote his new book, entitled End this Depression Now! I don’t necessarily feel that this is somehow underhanded or disingenuous or even incorrect. In fact, I think many, at times, agree with Krugman on the nature of debates.

What is surprising to me, however, is that Krugman would then appear on the BBC, in what was structured again very much as a debate, and feel slightly rosier about it on his blog. That, however, is beside the point, so I’ve posted the more recent debate below:

 

 

I find it slightly troubling that Krugman has been pitted here against a venture capitalist and a politician (who, incidentally, happens to be a former financier), because things deteriorate quickly into the “apples vs. oranges” style of debate: neither side adequately addresses the arguments of the other, because neither seems particularly familiar with the ideas of the other. They are, in a cursory sense of course: Krugman scoffs at the market and the financiers trot out typically neoconservative viewpoints, but neither one effectively addresses the argument of the other on its own terms.

It is strange to see Krugman–an economist–promoting his book–a work that likely deals with economics–by debating a series of opponents who are not, in fact, economists. To be certain, Dr. Paul comes close. He has written many books and even lectured in the Austrian tradition, but he is also a polarizing figure that viewers may be quick to write off due to his political views. The two in the latter interview, of course, seem handpicked for their typically conservative talking points. (This might not be Krugman’s fault, as the nature of what he has to say will likely draw criticism from neocon types, and he also may not have had any say in who he would be debating). But it is surprising to me that Krugman, who is very vocally self-assured in his philosophy, hasn’t put his views directly to the test against another economist.

Some of you may know what I’m getting at here, and for those of you who don’t, I’m talking about the Krugman Debate with Austrian economist Robert Murphy. Murphy has gotten into back-and-forths with Krugman in the past (see Krugman’s blog here) and has challenged him to a formal debate. Should Krugman accept, $100,000 will be automatically donated to the food banks of New York City. Murphy has raised $72,000 so far, and tracks progress at the debate website here.

I have to think that Krugman knows about this and, as an avowed liberal and progressive, I don’t believe he is ignoring it simply because he is disinterested. Perhaps he is waiting for the sum to reach $100,000 (but, if that is the case, then he could facilitate it by acknowledging the challenge and agreeing to the terms), but part of me thinks that Krugman might also hope not to debate Murphy. Murphy has written time and again about fallacies that Krugman commits in his analyses, while Krugman’s criticisms of the Austrian school (mainly snide asides about the “phlogiston theory of fire” and unsophisticated characterizations of “hangover theory”) have tended to be less than satisfying. On the other hand, not much will do more to promote a book on liberal economic theory than to give away $100,000 to New York’s poorest in its name.

To take on someone like Murphy, though, would be to change the nature of the debate. No longer would he be discarding with predictable and easily dismissed conservative talking points, but rather would be challenged to defend his arguments on the basis of their implied assumptions. It would no longer be enough to simply state that we have a problem with “demand,” or that “demand” is the cause of our woes, without then explaining why this theory of the depression is even valid in the first place. And no longer would the question stop with the problem of “demand,” as I’m sure Murphy’s first response would be to point out that Krugman rarely offers explanations as to where that problem–if it really is the problem–came from. In fact, this is often the reason that Krugman’s arguments sound so complete in his appearances: he begins with demand as a starting point, and then tells the opponent that if the problem is a lack of aggregate demand, we must step in to increase that demand. Rarely do his opponents point out that he is taking the lack of demand for granted, and that he should seek to explain the cause of that lack of demand (and justify his explanation with sound theory) before moving on. In fact, if a lack of demand, as he calls it, is actually some other problem that originated from a malinvestment due to the state’s interference with the allocation of capital, then Krugman’s solution actually gives rise to a cycle of increasingly devastating alternations between booming periods of similar malinvestment and increasingly aggressive busts. In fact, this is what Krugman himself advocated, when he argued in 2002 that the Fed should create a housing bubble to replace the Nasdaq bubble. And, in fact, those were his exact words.

Although I think Dr. Paul performed admirably in his debate with Krugman, an economist like Robert Murphy is not attempting to win voters or otherwise maintain a specific image, and thus could go after Krugman much more aggressively. This is important, since even many of Krugman’s basic ideas–his persistent broken window fallacies, for example, or his unsatisfying justification of them via the liquidity trap–regularly go unchallenged. Or, of course, an opponent fluent in all facets of economics could go the Detlev Schlicter route, identifying 7 of Krugman’s most persistent (and least safe) assumptions and with them questioning the very theory with which Krugman interprets history and economic phenomena:

 

When do we ever stop printing money and borrowing? I think that you are stuck in a failed paradigm, a failed economic theory and a failed policy program. This has happened to scientists and politicians before. You cannot admit that failure. When you are confronted with the failure of modern central banking, of Keynesian stimulus and of moderate inflationism, your only answer is that nothing is wrong with any of it, it is just not implemented forcefully enough. Dr. Krugman, you remind me of a doctor, who misdiagnosed the disease and prescribed the wrong medecine and who is now unwilling to look at the situation objectively. All you want to do is increase the dosage.

 

Schlicter’s response goes into extensive detail and runs as an eleven paragraph long direct response to Krugman’s performance in the Paul vs. Paul debate. I strongly encourage all who are interested to read it at Schlicter’s Paper Money Collapse blog, here.

In fact, I think it serves as a perfect example of why Krugman has yet to respond to Murphy’s challenges, and why he likely will continue to ignore them in the future.

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