The frustrations of Paul Krugman

Mr Grey Ghost, formerly a (very) occasional writer on the old site, and the proprietor of Politik Ditto, pointed out this article to your Editor:


Krug attacks!


The nation’s most dangerous economist, Paul Krugman, releases another book with his only idea for Dems — spend more money
Last Updated: 8:53 AM, May 27, 2012 | By Kyle Smith

When Paul Krugman dies, he’ll be primarily remembered for three things: He won the 2008 Nobel Prize in economics; he has been one of the world’s most-read and most-influential political pundits; and he said with total seriousness (watch the video) that a way to fix America’s economy would be for the government to spend a ton of money preparing for a nonexistent alien invasion because at least that would get people working.

I’ll save you the trouble of writing in with the riposte, “Where’s your Nobel Prize?” The Nobel committee is not infallible (the guy who invented the lobotomy and declared it “always safe” got a Nobel), but even if it was, Krugman’s award was not for political philosophy but for an arcane point of technical analysis, and even if it were for political philosophy, many economists with the opposite philosophy (Milton Friedman, Gary Becker, Friedrich Hayek) have also won the Nobel.

Other august winners include Le Duc Tho and Yassir Arafat.

As for the esteemed Dr Krugman’s suggestion that a way to fix our economy would be to prepare for an invasion by aliens from outer space, your Editor tried, but failed, to find an article with Dr Krugman’s position on President Reagan’s Strategic Defense Initiative.

Mr Smith’s article continues to note Dr Krugman’s combative and less-than-professionally-courteous style:

Krugman “writes with more vitriol than I find attractive,” writes Harvard economist and fellow Times columnist Greg Mankiw. He treats anyone who disagrees as “a mendacious idiot,” writes George Mason University economist Alex Tabarrok. “Krugman should stop bullying people,” wrote columnist Michael Kinsley.

Perhaps one can understand Dr Krugman’s vitriol: he believes that he knows the way out of our economic problems, but nobody in a position of authority is listening to him. The New York Times provides him with the greatest of public platforms, but responsible policy-makers are not putting his theories into practice. President Obama sort of tried to, with the ineffective 2009 stimulus plan, and the reaction of the public to the soaring debt was to kick out Democratic officeholders in the 2010 elections. But, given Dr Krugman’s very personal criticism of Ben Bernanke, Chairman of the Federal Reserve Boad of Governors and the man who hired Dr Krugman at Princeton, comparing him to the Borg, it seems rather improbable that the Chairman will be particularly disposed to giving the columnist’s positions much respect; Dale Carnegie’s book, How to Win Friends and Influence People is obviously not among the many books Dr Krugman has read.

In a way, Dr Krugman is calling for a return to World War II. After a decade of President Franklin Roosevelt trying to end the Depression, the two men who really helped us get out of it were Adolf Hitler and Hideki Tojo. Other countries were at war, while we had an untouched and virtually untouchable industrial plant, capable of turning out war materiél at a prodigious rate. We were only half-started when the Japanese decided to up the ante and attacked Pearl Harbor.

However, there are several rather significant differences between now and the 1940s:

  • During the 1940s, the United States was an oil exporter, producing much more than we needed for ourselves; today, we must import petroleum;
  • During the 1940s, the United States was the world’s largest steel producer, and exporter; today, we are a net importer of steel;
  • The war materiél produced for World War II was rapidly expended, and had to be constantly replaced; production to ward off an invasion from outer space would quickly come to a halt unless the aliens really did attack;
  • By the end of the war, the United States had 45% of the world’s industrial capacity, because our European competitors so obligingly blown up each other’s; today, industrial capacity is spread across the world; and
  • Our huge deficits in the 1940s were produced by borrowing from ourselves, and in 1946, only 1% of our national debt was owed to foreigners; in January of 2011, 47% of the debt held by the public was held by foreigners, and we cannot borrow the kind of additional money Dr Krugman would like to see us borrow solely from within.

We remained the world’s premier exporter for several years after the war, and that balance of trade surplus enabled us to get our debt down to more manageable levels. But in 1975 we ceased being a net exporter, and have been a net importer ever since. Whatever stimulus Dr Krugman sees as occurring from preparing to fight the little green men would quickly be eaten up by the staggering debt repayments which would leave this country to repay foreign debt holders, as well as the dollars that would leave to continue to buy foreign goods.

Now, to be fair, Dr Krugman’s suggestion was that “we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail,” rather than build war materiél, but that only clarifies the silliness of his proposals. The space aliens part was just a gimmick to make it a national security issue, but the fact is that there is just no real market for high speed rail service, other than in the densely populated northeast corridor, where it already exists! Passenger rail service disappeared from the private market decades ago, because the traveling public chose other methods: automobiles and airplanes. The Congress created Amtrak to take over that market, but despite seemingly annual projections that eventually Amtrak would make a profit, it does not, save on a few heavily-used routes in the northeast corridor.

In a way, it seems that Dr Krugman has bitten hard on the in-fashion liberal idea of high-speed rail — for which there is no real market beyond the imaginations of the urban hipsters like Amanda Marcotte — without considering its other implications. One reason that passenger rail faded is that the American people, with ever-better highways available, chose to travel by automobile rather than rail. It took about the same amount of time, and it was door-to-door travel, without the necessity of separate travel to the train station and renting a car at the destination train station. If high-speed rail really was to make a serious impact on long-distance travel, then government expenditures on highways would decrease, meaning that the stimulus effect Dr Krugman sees in building the high-speed rail system would be countered by the loss of jobs in highway construction and maintenance. One would also assume a decrease in airline traffic, meaning that some of the airlines would go out of business, costing multiple thousands of jobs. Any way you look at it, Dr Krugman’s proposal doesn’t make much sense.

Economically, Dr Krugman’s proposal would be a better one if those space aliens actually did attack! :)

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