Krugman Can’t Understand How Someone Could Be So Stupid as to Believe What He Used to Believe

Over at CafeHayek, Russ Roberts is mystified at a recent Paul Krugman blog post. Concerning the debate over whether the US federal government should extend unemployment benefits, Krugman wrote on January 12:krugman090421

There’s a sort of standard view on this issue, based on more or less Keynesian models. According to this view, enhanced UI actually creates jobs when the economy is depressed. Why? Because the economy suffers from an inadequate overall level of demand, and unemployment benefits put money in the hands of people likely to spend it, increasing demand.

You could, I suppose, muster various arguments against this proposition, or at least the wisdom of increasing UI. You might, for example, be worried about budget deficits. I’d argue against such concerns, but it would at least be a more or less comprehensible conversation.

But if you follow right-wing talk — by which I mean not Rush Limbaugh but the Wall Street Journal and famous economists like Robert Barro — you see the notion that aid to the unemployed can create jobs dismissed as self-evidently absurd. You think that you can reduce unemployment by paying people not to work? Hahahaha!

Before continuing, let’s be clear at the rhetorical devices Krugman uses here. First, he sets it up as the “standard view” that extending unemployment benefits (in a depressed economy) will boost job growth, through Keynesian demand-side effects.

Then, Krugman racks his brains trying to figure out how somehow could possibly disagree with this “standard view.” He says “I suppose” you might worry about the larger budget deficit that this would cause. He doesn’t offer any other possible mechanism by which someone might oppose it.

Finally, Krugman says that that’s not the argument that opponents are using. Instead, they are relying on a supply-side argument, claiming that it would reduce the incentive to work if you paid people not to work. In the context, it is clear that Krugman thinks this is NOT a good objection to the “standard” Keynesian view.

Against this backdrop, then, Russ Roberts is simply astounded because we can turn to Paul Krugman’s own (recent) books to elucidate this very argument–the one that “right-wingers” such as Robert Barro are advancing, much to Krugman’s horror. For example, in the 2010 edition of Krugman’s Essentials of Economics he writes:

People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job.

And, in the 2009 edition of Krugman’s textbook Economics he writes: “Generous unemployment benefits can increase both structural and frictional unemployment. So government policies intended to help workers can have the undesirable side effect of raising the natural rate of unemployment.”

So we see here, that the type of supply-side argument that Barro et al. bring up is one that Krugman himself endorses. Indeed, this is literally the “standard view on the topic.”

To be sure, a Keynesian like Krugman could argue that in the middle of a big economic slump that such supply-side issues are of only minor importance, and get trumped by demand-side factors. But that’s not at all the argument Krugman is making in this latest blog post. Instead, he is making it sound like Barro et al. are grasping at straws, and not even relying on a coherent argument (such as fear of bigger deficits) when trying to oppose extension of unemployment benefits.

Krugman does this in other contexts, too. To take just one other example: He has coined the terms “confidence fairy” and “invisible bond vigilantes” to mock economists who believe that investors might worry about rising government debt levels, and consequently favor faster action on bringing down deficits even though market interest rates are quite low for US government debt. Yet back in 2003 Krugman wrote:

With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

My point in the present post isn’t to accuse Krugman of outright contradictions, or to say he’s forbidden from ever changing his mind.

Rather, my point is that Krugman frequently accuses his opponents of being stupid and/or evil, when they present a view that he himself advanced in other circumstances. His typical readers would have no idea that Krugman once worried about bond vigilantes, or that his books lay out the standard case for why generous government unemployment benefits might contribute to structural unemployment. No, Krugman has led such typical readers to believe that anyone espousing such views is either a complete idiot–immune to theory and evidence that we’ve had since the 1930s–or is a paid shill who hates poor people.

5 Responses to “Krugman Can’t Understand How Someone Could Be So Stupid as to Believe What He Used to Believe”

  1. So, Krugman changed his mind in light of new evidence, and as a result he's a hypocrite?

    Or "Krugman frequently accuses his opponents of being stupid and/or evil, when they present a view that he himself advanced in other circumstances." is laughable, as circumstances dictate methodology. It's like Krugman calling you stupid for wearing a raincoat on a sunny day, when he himself advocated raincoats when it is raining.

    • Barry says:

      I can't recall where I read this recently, but it's a nice summation:

      RBC assumes that the economy is running on the production frontier; Keynesian economics assumes that such is a special case – they usually assume that, but they are willing to recognize when it's not.

    • Pete Courcy says:

      Krugman didn't change his mind in light of new evidence. There's been no "new evidence".

      Krugman wrote his book in 2010, just four years ago. It was raining then, and its raining now.

      Krugman rarely ever changes his mind in light of any new evidence that is not political.

  2. "To be sure, a Keynesian like Krugman could argue that in the
    middle of a big economic slump that such supply-side issues are
    of only minor importance, and get trumped by demand-side
    factors. But that’s not at all the argument Krugman is making in
    this latest blog post."

    Actually, that's almost precisely what he says, in fact he says
    it (again) in the passage you just quoted. Here it is, one more
    time:

    "… enhanced UI actually creates jobs when the economy is
    depressed. Why? Because the economy suffers from an inadequate
    overall level of demand, and unemployment benefits put money in
    the hands of people likely to spend it, increasing demand."

    So, what are we supposed to make of this kind of self-evident
    contradiction within the space of this single post? Stupid/Evil?

    And if you're interested in why Krugman dares to regard the
    Keynesian view as the standard view:
    http://krugman.blogs.nytimes.com/2014/01/12/the-a

    If you're interested in his disagreements with Robert Barro:
    http://krugman.blogs.nytimes.com/2013/12/16/conse

    • Peter says:

      What Krugman forgets to mention is that the supposed increase in demand by the unemployed will be offset by the reduction in demand from taxpayers forced to pay for the benefits. No additional wealth is created by this type of transfer, hence economically it is a wash at best. Indeed, valuable resources are diverted from wealth creating activities, resulting in less wealth in the future.

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