"Krugman’s depiction is not the way real economists would describe any of this."

– John Goodman in today’s FREE Insight

Individuals working in the world of ideas lack sanctified immunity to the consequences of inconsistency.  Others monitor what they write and expose errors, especially those linked to ideology.   Here libertarians, aka classical liberals, have a large advantage; they have long been a minority in the intellectual arena.  Hence, their ideas and policy recommendations are constantly challenged. 

In contrast, especially in some university departments, progressive culture holds hegemony.  There is no one there to challenge even silly, illogical pronouncements consistent with the modern liberal creed.  Hence these propositions live on.  Some humanities departments are pure strains of political correctness.  So of course their enrollments have hemorrhaged, and for two reasons. 

First, employers majors ignore these majors when hiring, surely an important consideration.  Further, many intelligent undergraduates intuitively understand something important; America is the world's most successful large-scale social experiment.  And the market process is mainly responsible.  Why pay tuition to hear someone you don't like or respect trash your country and its philosophical foundations. 

Engineering, business, and economics departs are usually better.  They have closer links to cause and consequence, to reality checks.  Still, economists, even those with the best credentials, sometimes make fundamental errors.  When they do, others may pounce.  Here is an example.

Paul Krugman is an economist teaching at Princeton.  He is a graduate of Yale College and earned his Ph. D. at MIT.  He won a Nobel Prize.  He has a regular column in the New York Times, not a good place to hide.

In a recent NYT column Krugman labeled our economy “the fear economy” (www.nytimes.com/2013/12/27/.../krugman-the-fear-economy.html).  This suggests the workplace resembles a police state.   Economist John Goodman, president of NCPA in Dallas, responded with an analysis.  His key comment is: "Krugman’s depiction is not the way real economists would describe any of this."

As I began, whatever their accomplishments and awards, when they venture forth those working in the world of ideas are not immune to criticism.  Krugman's argument is appealing to the sympathies of many and Goodman's piece is below.   In the war of ideas there is no safe bunker.  How fortunate!

-John

PS I dedicate this week's column to Craig Bryant, for standing up.

2013 Was a Bad Year for Paul Krugman

By John Goodman 

Loyal readers of this blog know how often he has been wrong on health care. But have you been following his truly embarrassing posts on macroeconomics? As a true blue Keynesian, Krugman predicted disaster for 2013. We entered the year with higher income taxes on the rich and higher payroll taxes on everyone else plus lower government spending because of the sequester agreement — all bad for the hoped for recovery  from a Keynesian point of view. Krugman announced at the beginning that 2013 would be a test of “austerity” versus Keynesian view of the world. Here is Scott Summers response to him.

Where do I begin? Yes, growth did not “collapse” as the Keynesian model predicted. It increased. So say so! There was a dramatic reduction in the cyclically adjusted budget deficit, by any measure. I’m tempted to point out that a reduction in the cyclically-adjusted budget deficit (including the exact same 2% boost in the payroll tax) is what the Keynesians claim caused the severe 1937-38 depression. And yet growth accelerated in 2013. Or I could point out that the fiscal austerity in the U.S. was just as intense as in the eurozone, whereas the unemployment rate in the U.S. has fallen sharply since 2010, while the rate in the eurozone has risen sharply. The key difference was monetary policy, which was much tighter in the eurozone.

But none of this really matters, does it? Paul Krugman was the one that said 2013 was a test of market monetarism. He’s the one who said it was a test of whether monetary policy could offset the drag of fiscal stimulus. And now the results are in. And what is Krugman’s response? I can’t quite tell, but it almost seems to me that he’s denying that any test took place. Suppose real GDP had fallen at 1% instead of rising at 2.5%? Would he still be saying that no test took place in 2013? Would he say market monetarism didn’t fail the test because “other things weren’t equal?” Or would he say that a test did occur and market monetarism failed? I’ll leave that question to my readers. But if you are interested, I have another post that cites Krugman criticizing other economists who failed to admit they were wrong.

Scott also directs us to a Krugman post titled “The Year of the Weasal” to show how he treats other economists who disagree with him:

This is, I’d argue, a significant development, because it gives us a new window into the nature of the disagreement. As late as last year you could view this as a legitimate contest between rival models. But we’ve now seen that one side of the debate not only refuses to take evidence into account, but tries to dodge personal responsibility for getting it wrong. This has gone from a test of ideas to a test of character, and a lot of people failed.