Paul Krugman

"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging."

"What saved the economy, and the New Deal was the enormous public-works project known as World War II, which finally provided a fiscal stimulus adequate to the economy's needs."

"When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right."

"I do not think that word “compromise” means what Mr. Ryan thinks it means. Above all, he failed to offer the one thing the White House won’t, can’t bend on: an end to extortion over the debt ceiling. Yet even this ludicrously unbalanced offer was too much for conservative activists, who lambasted Mr. Ryan for basically leaving health reform intact.Does this mean that we’re going to hit the debt ceiling? Quite possibly; nobody really knows, but careful observers are giving no better than even odds that any kind of deal will be reached before the money runs out. Beyond that, however, our current state of dysfunction looks like a chronic condition, not a one-time event. Even if the debt ceiling is raised enough to avoid immediate default, even if the government shutdown is somehow brought to an end, it will only be a temporary reprieve. Conservative activists are simply not willing to give up on the idea of ruling through extortion, and the Obama administration has decided, wisely, that it will not give in to extortion.So how does this end? How does America become governable again?"

"Things could have been even worse. This week, we managed to avoid driving off a cliff. But we’re still on the road to nowhere."

"Many liberals have changed their views in response to new evidence. It’s an interesting experience; conservatives should try it some time."

"Holding people accountable for their past is O.K., but imposing a standard of purity, in which any compromise or misstep makes you the moral equivalent of the bad guys, isn’t. Abraham Lincoln didn’t meet that standard; neither did F.D.R. Nor, for that matter, has Bernie Sanders (think guns)."

"The Sanders campaign has brought out a lot of idealism and energy that the progressive movement needs. It has also, however, brought out a streak of petulant self-righteousness among some supporters. Has it brought out that streak in the candidate, too?"

"If the question is when markets will recover, a first-pass answer is never."

"The fact is that Democrats have already been pursuing policies that are much better for the white working class than anything the other party has to offer. Yet this has brought no political reward."

"Nobody can credibly promise to bring the old jobs back; what you can promise — and Mrs. Clinton did — are things like guaranteed health care and higher minimum wages. But working-class whites overwhelmingly voted for politicians who promise to destroy those gains."

"You can’t explain the votes of places like Clay County as a response to disagreements about trade policy. The only way to make sense of what happened is to see the vote as an expression of, well, identity politics — some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn’t) and anger on the part of the less educated at liberal elites whom they imagine look down on them."

"Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem."

"With great wealth comes great pettiness."

"Nonetheless, William Barr — again, the nation’s chief law enforcement officer, responsible for defending the Constitution — is sounding remarkably like America’s most unhinged religious zealots, the kind of people who insist that we keep experiencing mass murder because schools teach the theory of evolution. Guns don’t kill people — Darwin kills people!"

"The [Trump impeachment] inquiry hasn’t found a smoking gun; it has found what amounts to a smoking battery of artillery."

"The way to deal with China would have been a broad coalition of countries that play by the rules. Instead, we've conveyed the message that big countries don't need no rules. And China is a very big country."

"Republicans Add Insult to Illness"

"Because the Trump team insisted that a roaring recovery was coming, and refused to notice that it wasn’t happening, we’ve now stumbled into a completely gratuitous economic crisis."

"If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman’s followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian heresy. By the century’s end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit."

"Keynesian theory initially prevailed because it did a far better job than classical orthodoxy of making sense of the world around us, and Friedman’s critique of Keynes became so influential largely because he correctly identified Keynesianism’s weak points. And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes seemed less than honest with his readers, I regard him as a great economist and a great man."

"Keynes didn’t make an all-out assault on Economic Man, but he often resorted to plausible psychological theorizing rather than careful analysis of what a rational decision-maker would do. Business decisions were driven by “animal spirits,” consumer decisions by a psychological tendency to spend some but not all of any increase in income, wage settlements by a sense of fairness, and so on. But was it really a good idea to diminish the role of Economic Man that much? No, said Friedman, who argued in his 1953 essay “The Methodology of Positive Economics” that economic theories should be judged not by their psychological realism but by their ability to predict behavior. And Friedman’s two greatest triumphs as an economic theorist came from applying the hypothesis of rational behavior to questions other economists had thought beyond its reach."

"One interesting footnote: although Friedman made great strides in macroeconomics by applying the concept of individual rationality, he also knew where to stop. In the 1970s, some economists pushed Friedman’s analysis of inflation even further, arguing that there is no usable trade-off between inflation and unemployment even in the short run, because people will anticipate government actions and build that anticipation, as well as past experience, into their price-setting and wage-bargaining. This doctrine, known as “rational expectations,” swept through much of academic economics. But Friedman never went there."

"In effect, Japan in the Nineties offered a fresh opportunity to test the views of Friedman and Keynes regarding the effectiveness of monetary policy in depression conditions. And the results clearly supported Keynes’s pessimism rather than Friedman’s optimism."

"What’s odd about Friedman’s absolutism on the virtues of markets and the vices of government is that in his work as an economist’s economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn’t he exhibit the same restraint in his role as a public intellectual? The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy. In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there’s a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I’d argue, is a counter-counterreformation."

"Equally important, the financial industry’s political power has not gone away. Banks have waged a fierce campaign against what many expected to be an easily passed reform proposal, the creation of a new agency to protect financial consumers. Despite the steady drumbeat of scandalous revelations—most recently, the discovery that Goldman Sachs helped Greece cook its books, while Lehman cooked its own books—top financial executives continue to have ready access to the corridors of power. And as many have noted, President Obama’s chief economic and financial officials are men closely associated with Clinton-era deregulation and financial triumphalism; they may have revised their views but the continuity remains striking. In that sense, this time really is different: while the first great global financial crisis was followed by major reforms, it’s not clear that anything comparable will happen after the second. And history tells us what will happen if those reforms don’t take place. There will be a resurgence of financial folly, which always flourishes given a chance. And the consequence of that folly will be more and quite possibly worse crises in the years to come."

"Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to."

"We’re living in a Dark Age of macroeconomics. Remember, what defined the Dark Ages wasn’t the fact that they were primitive — the Bronze Age was primitive, too. What made the Dark Ages dark was the fact that so much knowledge had been lost, that so much known to the Greeks and Romans had been forgotten by the barbarian kingdoms that followed."

"The best you can say about economic policy in this slump is that we have for the most part avoided a full repeat of the Great Depression. I say “for the most part” because we actually are seeing a Depression-level slump in Greece, and very bad slumps elsewhere in the European periphery. Still, the overall downturn hasn’t been a full 1930s replay. But all of that, I think, can be attributed to the financial rescue of 2008-2009 and automatic stabilizers. Deliberate policy to offset the crash in private spending has been largely absent."

"Sometimes economists in official positions give bad advice; sometimes they give very, very bad advice; and sometimes they work at the OECD."

"We’re now in the seventh year of a slump brought on by Wall Street excess; the wizardly job of “allocating the economy’s investment resources” consisted, we now know, largely of funneling money into a real estate bubble."

"I would summarize the Keynesian view in terms of four points:1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond. 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain. 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down. 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses."

"It has been obvious for quite a while that Sanders — not just his supporters, not even just his surrogates, but the candidate himself — has a problem both in facing reality and in admitting mistakes."

"As Branko says, there was a time when Serbs and Croats seemed to get along fairly well, indeed intermarrying at a high rate. But could anyone now put Yugoslavia back together? At this rate, we’ll soon be asking the same question about America."

"What does Alexandria Ocasio-Cortez know about tax policy? A lot."

"Paul Krugman's attack on Brian Arthur ("The Legend of Arthur") requires a correction of its misrepresentations of fact. Arthur is a reputable and significant scholar whose work is indeed having influence in the field of industrial organization and in particular public policy toward antitrust policy in hightech industries. Krugman admits that he wrote the article because he was "just pissed off," not a very good state for a judicious statement of facts, as his column shows."

"Critics of Paul Krugman call him acerbic and boastful, unfair on the attack and unwilling to make concessions on the defense, certain that he is correct, and always sure that those who disagree are mendacious or foolish (or both). And I cannot deny that these criticisms are accurate. But all these are outweighed by one fact: he is almost always--not always, but almost always--right. He is the closest thing to an heir to John Maynard Keynes we have today."

"Krugman is right about democracy in a sense: Democracy is essentially one big organized act of bullying whereby a larger group bullies a smaller group in order to plunder it with taxes. The “Civil War” proved that whenever a smaller group has finally had enough, and attempts to leave the game, the larger group will resort to anything—even the mass murder of hundreds of thousands and the bombing and burning of entire cities—to get its way. After all, in his first inaugural address Lincoln literally threatened “force,” “invasion,” and “bloodshed” (his exact words) in any state that refused to pay the federal tariff , which had just been more than doubled two days earlier. He followed through with his threat. This is “the kind of nation I believe in,” says Paul Krugman on his blog."

"I was just reading an excellent and appropriately approving account of your work. It tells of those who vigorously oppose. My admiration and my personal reward from what you do has no qualification, so it is with all those I wittingly know. Do realize that this is your worthwhile majority and that dissenters are an essential proof of your merit. I should be clear: your column is the best regular reading on economics and politics that I’ve encountered over the last seventy-five years and even a few more."

"I cannot forbear to lengthen an already long paper by adding some remarks about what Paul Krugman calls the "new international economics" (Strategic Trade Policy and the New International Economics, MIT paperback, 1986) and "new trade theory" (in "New Trade Theory and the Less Developed Countries," a paper submitted to the Carlos F. Diaz-Alejandro memorial conference held in Helsinki, August 23-5, 1986). The "new" theory rests on economies of scale. As I told Krugman at Helsinki, I find it a bizarre notion that increasing returns in international trade are new. I developed it at length in my 1953 textbook, based on the 1929 article of John Williams, reprinted in the AEA, "Readings in the Theory of International Trade." Jan Tinbergen developed it in his textbook, International Economic Integration (1954). I recall the joy in Cambridge, Massachusetts, when Kenneth Arrow made increasing returns respectable by formalizing Alfred Marshall's description of long-run decreasing costs historically with his paper on "Learning by Doing," a paper rapidly incorporated into international-trade theory by those who need formal models to understand the intuitively obvious. I confess to some irritation over Krugman's defense of his international-trade theory as new because it offers a well-worn truth in equation form."

"Like clockwork every election cycle: Krugman forgets everything he wrote about inequality and legalized corruption in Washington, sides w/ the candidate most likely to give him a power job, and screams at the left for doing what primaries are supposed to do: vet the candidates."

"Krugman [...] was not cheerfully advocating a housing bubble, but instead he was glumly saying that the only way he could see to get out of the recession would be for such a bubble to occur."

"As was the case with Smith's original observations on specialization and market size, we shall need a tractable analytical framework to make progress on this issue. The two Helpman and Krugman monographs have amply shown that when Smith's ideas are developed within a clear theoretical framework, they contain some surprising implications. They are, I think, outstanding illustrations of why we work to construct useful, explicit theories rather than being content with good rules of thumb."

"Paul Krugman has been doing a lot of very effective writing attacking non-economists writing about economic matters. Paul is speaking for the whole profession in a very effective way and addressing the most important questions in social science."

"Despite its flaws, Peddling Prosperity has much to recommend it. There is no book written for a lay audience that explains the economics profession with more perception or clarity than this one."

"I grew to understand how the Chicago School argued, and I can do it myself, but they were lying about how they arrived at their conclusions. I could see that they were obviously lying, but I was just annoyed and shocked that they continued to lie about how they got to the questions that they got to. And then it gradually occurred to me that if this is true, then maybe the whole profession is lying, and that belief has gotten stronger as I have gotten older. People say, "We do econometrics, and that tests our hypotheses." Baloney. We do theory. I was just rereading last night Paul Krugman's famous article where he tries to introduce geographical considerations into economics, and it is a very skillfully done article. It's rhetorically very skillful. I can show you how it works rhetorically, but it is complete nonsense scientifically, not because it is wrong but because it is arbitrary. There are a zillion other ways of formalizing geography in economics that would come to opposite conclusions to those he comes to, and yet he's kind of airily saying that this is a contribution. Then there are a thousand other articles modifying that. It doesn't get anywhere: they modify it and get completely different conclusions. If you change your assumptions, you get different theorems. So the whole exercise, it gradually dawned on me, was complete nonsense, so that's what turned me. But it is unfair and kind of stupid to say that I stopped doing economics."

"Paul Krugman is a respected trade theorist. But he does not speak authoritatively on subjects on which he has no expertise. Monetary economics is not his field of expertise. Krugman’s research background does not qualify him as an authority on Milton Friedman’s work. … Friedman’s reputation is intact despite Krugman’s deplorable efforts to denigrate him and his contributions."

"(Which writers — novelists, playwrights, critics, journalists, poets — working today do you admire most?) ...Because of “The Daily Show,” most of my reading time these days is consumed by journalists. Paul Krugman is always great. ..."

"I am proud of my generation of policy economists. You know their names: Walter Heller, Milton Friedman, John Kenneth Galbraith, Arthur Okun, Herbert Stein, Peter Drucker, and many more. But, as some sage has said, science progresses funeral by funeral. Paul Krugman is the rising star of this century and the next, and the world beats a path to his door. International finance is his thing, but that is only one of the many strings to his fiddle. The World Bank, the IMF, the Bank of Japan, and the Boston Fed all seek to tap his fountain of wisdom and new ideas."

"If you grew up in the 80s you probably remember Voltron. Although the show often had convoluted plotlines, it would somehow always end with Voltron (a super-powerful robot formed from five mechanical lions) facing off against a monster called a "Robeast". Voltron had plenty of weapons, but he would invariably strike the killing blow with his "Blazing Sword". Eventually the show became kind of routine, but to a four-year-old, it was pure gold. In the econ blogosphere, a similar dynamic has played out over the last few years. Each week a Robeast will show up, bellowing predictions of inflation and/or soaring interest rates. And each week, Paul Krugman...I mean, KrugTron, Defender of the Blogoverse, will strike down the monster with a successful prediction of...low inflation and continued low interest rates. Goldbugs, "Austrians", New Classical economists, and harrumphing conservatives of all stripes have eagerly gone head-to-head with KrugTron in the prediction wars, and have been summarily cloven in twain."