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View Full Version : Economics Economic Point/Counterpoint - Krugman vs. Moore


Taco John
08-20-2011, 01:10 PM
I found this to be very entertaining for anyone who is interested in economics. Two articles from two competing view points. Which person wins the debate and why?


Stephen Moore:

Why Americans Hate Economists (http://online.wsj.com/article/SB10001424053111903596904576514552877388610.html?mod=WSJ_Opinion_BelowLEFTSecond)


Paul Krugman:
Fancy Theorists of the World Unite! (http://krugman.blogs.nytimes.com/2011/08/20/fancy-theorists-of-the-world-unite/)

Taco John
08-20-2011, 01:15 PM
Frankly, I think Krugman is embarrassing himself. He's basically making the argument that the stimulus should have been $18 trillion that we borrowed and spent not $8 trillion, and saying that anyone who disagrees is "anti-intellectual."

He's clinging to shreds, because he's built his career on this sort of hocus pocus economics, and all he can do is point his fingers and blame other people for the fact that it didn't work.

BucEyedPea
08-20-2011, 01:21 PM
Moore's article is spot-on. Of course you knew that, right?

I am surprised it's even in the WSJ—many there and who read it subscribe unconsciously and consciously to Keynesian or "intellectual" economics which is nothing but a bill of goods sold by academics from their Ivory Towers.

It is shocking that Krugman, still teaches at Princeton in this day and age. He is devoid of reality and the real world where millions of individuals exchange voluntarily based on their needs and wants. Instead he clings to this pseudo-science that thinks math explains the whole of what's happening which gets used to manipulate data for the political classes. But then, Krugman serves the political classes.

KC native
08-20-2011, 01:39 PM
Frankly, I think Krugman is embarrassing himself. He's basically making the argument that the stimulus should have been $18 trillion that we borrowed and spent not $8 trillion, and saying that anyone who disagrees is "anti-intellectual."

He's clinging to shreds, because he's built his career on this sort of hocus pocus economics, and all he can do is point his fingers and blame other people for the fact that it didn't work.

ROFL Color me not surprised you find empty rhetoric as a better argument than the actual data that Krugman presents.

Taco John
08-20-2011, 03:55 PM
ROFL Color me not surprised you find empty rhetoric as a better argument than the actual data that Krugman presents.

Krugman's data: if instead of $8 trillion, we had borrowed and spent $18 trillion, everything would be fixed.

Taco John
08-20-2011, 03:59 PM
Economics is not a science. I hate to break it to you. It's not a science. You can dress it up as one, but at the end of the day, the only calculation that matters is the confidence in spending of the person with the dollars. There's no science you can apply to that. Borrowing $18 trillion dollars (which is about the size of stimulus Krugman is suggesting) in order to increase the stream and *HOPE* that the person with the actual capital will be encouraged to spend is nothing more than fishing.

FD
08-20-2011, 05:34 PM
Where has Krugman called for an $18 trillion stimulus?

gonefishin53
08-20-2011, 05:59 PM
Former Enron economics adviser Paul Krugman knows a lot more about Ponzi schemes than economics. I doubt if he knows enough about business economics to successfully manage a hot dog stand. He has a severe shortage of common sense.

RedNeckRaider
08-20-2011, 06:05 PM
Economics is not a science. I hate to break it to you. It's not a science. You can dress it up as one, but at the end of the day, the only calculation that matters is the confidence in spending of the person with the dollars. There's no science you can apply to that. Borrowing $18 trillion dollars (which is about the size of stimulus Krugman is suggesting) in order to increase the stream and *HOPE* that the person with the actual capital will be encouraged to spend is nothing more than fishing.

Fishing without a hook or bait, with the hope a fish will get tangled up in the line~

banyon
08-20-2011, 06:08 PM
TJ Decision tree:

Does it offer actual answers on what to do?- Can't have that.

Does it rely on empirical data, or comparisons with other historical periods or comparative country comparisons? --Get that outta here

Does it require any type of nuanced thinking or answers? -- Get it out

Does it reject standard theories and explanations without really understanding or explaining them? -- Starting to sound good

Is it pithy? Can it fit on a bumper sticker? Is it a misleading tautology like "What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work"? -- Check! This is my theory!

Taco John
08-20-2011, 06:18 PM
Where has Krugman called for an $18 trillion stimulus?

Actually, he hasn't been brave enough to give us his "scientific" viewpoint on which number is the magic number of trillions that we need to borrow from China in order to get our economy back on track. He's just argued that $8 trillion was far too little.

Taco John
08-20-2011, 06:23 PM
TJ Decision tree:

Does it offer actual answers on what to do?- Can't have that.

Does it rely on empirical data, or comparisons with other historical periods or comparative country comparisons? --Get that outta here

Does it require any type of nuanced thinking or answers? -- Get it out

Does it reject standard theories and explanations without really understanding or explaining them? -- Starting to sound good

Is it pithy? Can it fit on a bumper sticker? Is it a misleading tautology like "What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work"? -- Check! This is my theory!

What's the scientific analysis on how China would react if we defaulted on an $18 trillion dollar loan?

I absolutely believe that borrowing $18 trillion dollars would make it seem like all of our problems are solved - at least for a generation. My concern is how the next generation in both China and America receive the news that they're on the hook for the economic malfeasance of the generations before them.

You can erase all the ethics in the world with empirical data, but what you can't do if guess how the people and governments will react to that absence of ethics when it comes time to pay the piper.

FD
08-20-2011, 06:27 PM
Actually, he hasn't been brave enough to give us his "scientific" viewpoint on which number is the magic number of trillions that we need to borrow from China in order to get our economy back on track. He's just argued that $8 trillion was far too little.

$8 trillion? The stimulus was $787 billion. Where are you getting these numbers?

Taco John
08-20-2011, 06:31 PM
$8 trillion? The stimulus was $787 billion. Where are you getting these numbers?

I guess that depends on whether you count the bailouts as part of the stimulus, or if you attempt to seperate them out as operations that exist outside of the goals of stimulating the economy.

FD
08-20-2011, 06:34 PM
I guess that depends on whether you count the bailouts as part of the stimulus, or if you attempt to seperate them out as operations that exist outside of the goals of stimulating the economy.

Do you really think the "bailouts" cost $8 trillion?

JohnnyV13
08-20-2011, 06:42 PM
Krugman has been dead right about the behavior of bond prices and inflation in a liquidity trap.

Now, where I disagree is his dismissal of the Austrian business cycle theory with respect to Fed behavior pumping up the housing bubble and finance bubble.

Fed policy made those problems worse, and made the financial collapse bigger than it need to have been. Yet, I disagree with the Austrians when they say that the fault lies ENTIRELY with government and central planning.

While it is hard to know what WOULD have happened, I tend to think that the housing market and the new finance products had such high margins, that the market, all by itself, would have ran into large problems without goverment distortion of markets.

The the biggest fundamental problem I have with Austrian business cycle theory is its a priori presumption that economic downturns and generalized demand crashes MUST be caused by government, because entrepenuers will not make these mistakes as a class (there will always be enough contrary thinking entrepenuers to prevent a generalized slump).

I think this is a mis-evaluation of human behavior.

Take, for example, the current financial securities collapse driven by what we now know to be a flawed correlation model. The model SEEMED to work for many years, leading to very high profits for the first houses to issue such securities.

With the internet, mass communications and the reporting rules for publically traded companies, information with respect to these profits travels worldwide, almost instantaneously. With the relatively long timeframe before the collapse occurred, you could expect almost everyone in the industry to jump on the bandwagon (which is exactly what happened). If the industry did not act like this, investors would quickly shift resources to these more profitable ventures. None of this requires government distortion of the market.

Austrian economists like to say that their business cycle theory is proved by the fact that generalized slumps only seemed to start after the beginning of central banking (before, lean or plenty years were driven by harvest yields). I would like to note that mass communication technology, such as the telegraph, originated just about the same time. Rapid communication with respect to unusually high margins, will cause rapid emulation throughout the industry. If the market strategy creates long-term problems, but large short-term margins, you have a bubble created purely without government influence.

Note: the original mass communication technology is the newspaper, which allowed rapid dissemination of information on a scale unheard of before its debut. A printing press that issues books just isn't the same. The newspaper depended on the invention of cheap, disposable paper. In fact, I doubt central banking could function without the same invention.

Taco John
08-20-2011, 06:45 PM
Do you really think the "bailouts" cost $8 trillion?


Here's the Federal Reserve's ledger via Bloomberg:

http://imgs.sfgate.com/c/pictures/2008/11/25/ba-pender1126_gr_SFCG1227665160.jpg

FD
08-20-2011, 06:53 PM
Here's the Federal Reserve's ledger via Bloomberg:

http://imgs.sfgate.com/c/pictures/2008/11/25/ba-pender1126_gr_SFCG1227665160.jpg

So in other words you don't understand the difference between bank lending, loan guarantees and government spending.

Lending out $8 trillion dollars doesn't cost $8 trillion dollars unless you get paid back $0. Now, how much do you think the "bailouts" have actually cost?

orange
08-20-2011, 08:32 PM
Here's the Federal Reserve's ledger via Bloomberg:

You should probably read charts before you post them. The $8.5 trillion you're in love with is the MAXIMUM authorized; the actual used is less than half that, $3.2 trillion.

As for TARP specifically (which is only one line on that chart), it has pulled in $10 billion in PROFIT so far; they expect ultimately $20 billion.

http://thehill.com/blogs/on-the-money/banking-financial-institutions/169693-treasury-announces-10-billion-in-tarp-profit-from-banks

orange
08-20-2011, 08:42 PM
Former Enron economics adviser Paul Krugman ...

Back again, eh? Good luck staying this time; you know what they say - thirteenth time's the charm.

ClevelandBronco
08-20-2011, 09:32 PM
Krugman really has little choice but to say that the stimulus was underfunded despite the inconvenient fact that it was probably the most complete Keynesian experiment any country will ever be foolish enough to attempt. He's hearing the jeers and derision that will follow him to his grave and he's trying to mitigate the personal pain and the damage to his reputation.

KILLER_CLOWN
08-20-2011, 10:15 PM
VIDEO - Krugman Wants To Create A Keynesian-Infused Space Alien Economic Bubble To Revive U.S. Economy

<object style="height: 390px; width: 640px"><param name="movie" value="http://www.youtube.com/v/NtdnZnizh6U?version=3"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://www.youtube.com/v/NtdnZnizh6U?version=3" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="390"></object>

KILLER_CLOWN
08-20-2011, 10:21 PM
True Cost Of The Wall Street Bailout - PBS VIDEO

<object style="height: 390px; width: 640px"><param name="movie" value="http://www.youtube.com/v/CPgwNdzvhG4?version=3"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://www.youtube.com/v/CPgwNdzvhG4?version=3" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="390"></object>

JohnnyV13
08-20-2011, 10:28 PM
Krugman really has little choice but to say that the stimulus was underfunded despite the inconvenient fact that it was probably the most complete Keynesian experiment any country will ever be foolish enough to attempt. He's hearing the jeers and derision that will follow him to his grave and he's trying to mitigate the personal pain and the damage to his reputation.

Ummm Cleveland, Krugman has been saying that the stimulus was too small from the day it passed. He says that overall spending has actually gone down due to cut backs by state governments (most of whom cannot run deficits).

While you might disagree with his economic theories, at least you can be factually accurate with respect to his predictions. I don't agree with everything Krugman says, especially with his love for entitlements; but he's not as idiotic as you like to make him out to be.

One thing that Krugman has nailed has been bond prices and inflation predictions. His liquidity trap analysis seems to hold up very well to actual market behavior.

His predictions with respect to commodities have not been so good. But, their rise has not been as sharp as Austrians have predicted, outside of a few key commodities.

JohnnyV13
08-20-2011, 10:40 PM
True Cost Of The Wall Street Bailout - PBS VIDEO



Must admit, its hard to believe that 12.8 trillion in loan guarentees went out, without some political favortism at play.

petegz28
08-21-2011, 12:00 AM
Krugman is an idiot. Period. If the model that he claims works so well we would not be seeing increasing inflation and increasing unemployment.

Here is what the Krugmanites have gotten us....

Worthless $
Higher food, energy and commodity costs
Higher unemployment
Higher levels of debt

Sure interest rates are low but at the moment the only one benefiting from such is the Fed Gov who is printing money to borrow at said low rates.

As far as the unemployment issue goes, if unemployment created jobs then why are jobless claims going up and not down since we benefits for 99 weeks? Sure, these people spend their unemployment checks, like a person on a fixed income. And what do they spend it on? Food, utilities and gas for the car. Everything the Fed has managed to drive up in costs.

petegz28
08-21-2011, 12:11 AM
True Cost Of The Wall Street Bailout - PBS VIDEO

<object style="height: 390px; width: 640px"><param name="movie" value="http://www.youtube.com/v/CPgwNdzvhG4?version=3"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://www.youtube.com/v/CPgwNdzvhG4?version=3" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="390"></object>

nice find

banyon
08-21-2011, 09:03 AM
Krugman really has little choice but to say that the stimulus was underfunded despite the inconvenient fact that it was probably the most complete Keynesian experiment any country will ever be foolish enough to attempt. He's hearing the jeers and derision that will follow him to his grave and he's trying to mitigate the personal pain and the damage to his reputation.

The stimulus wasn't designed in a very specific Keynesian manner at all and that's why i was against it. Basically, it was just handed to Pelosi and some house committees to carve out some pork for them and their friends and the rest was state block grants for whatever.

There was no WPA, no CCC, no direct job creation. It was BS. It was mostly UI benefits and tax cuts for the wealthy. It was not a real Keynesian stimulus.

gonefishin53
08-21-2011, 03:37 PM
I'm not a Keynesian or a Marxist. I feel no shame in saying that. I love a Constitutional Republic form of government and hope someday our country returns to the fundamental soundness and sustainability of Constitutionally limited government.

KILLER_CLOWN
08-21-2011, 04:09 PM
I'm not a Keynesian or a Marxist. I feel no shame in saying that. I love a Constitutional Republic form of government and hope someday our country returns to the fundamental soundness and sustainability of Constitutionally limited government.

Amen to this.

JohnnyV13
08-21-2011, 04:28 PM
Krugman is an idiot. Period. If the model that he claims works so well we would not be seeing increasing inflation and increasing unemployment.

Here is what the Krugmanites have gotten us....

Worthless $
Higher food, energy and commodity costs
Higher unemployment
Higher levels of debt

Sure interest rates are low but at the moment the only one benefiting from such is the Fed Gov who is printing money to borrow at said low rates.

As far as the unemployment issue goes, if unemployment created jobs then why are jobless claims going up and not down since we benefits for 99 weeks? Sure, these people spend their unemployment checks, like a person on a fixed income. And what do they spend it on? Food, utilities and gas for the car. Everything the Fed has managed to drive up in costs.

Hello, general inflation (even if you include commodities) is still running well below any Austrian prediction, and is certainly nowhere close to hyperinflation rates. Hell, core inflation is BELOW fed targets.

Trying to claim that Fed policy has CAUSED high commodity prices is completely silly. Commodity prices were very high before the crash, not just gold and oil, but also things like copper. Austrians seem to think the Fed has this power to drive every economic action in the freak'n world. Gosh, could the massive expansion in third world economies caused by globalization have an impact? With about 3 billion Chinese, Indians, South Korea and other Asians (like the Philippines, who are now the no. 1 call center home in the world). maybe we have a lot of people demanding goods that they had no ability to demand even a decade ago.

Ever hear of supply and demand? Given that future demand, are speculative commodity bubbles really surprising; or do they foreshadow a world very likey to come?

America wanted the rest of the world to become like America. In the aftermath of the cold war, we got what we wanted. Russia and China became much more free market. India effectively sidestepped their crippling internal regulations with globalization. Even arab poluations are now demanding more freedoms.

Well, guess what, that's going to create more demand for consumer goods and the stuff you need to BUILD THEM.

Pete, have you EVEN SET FOOT OUTSIDE THE US IN THE LAST 15 years?

If you had, maybe you realize that access to retail goods has exploded in formerly primitive asian countries. My father came from a rural barrio in the Philppines. 30 years ago, driving there from Manila was an adventure, even though the distance was less than 150 miles. You had barely paved roads, winding routes and numerous potholes to demolish your car.

My father's town still only had electricity during certain parts of the day.

Today, there's a dual lane highway, much like you'd see here, for most of the distance, AND MOST ROADS in even a rural town are paved (the entire barrio has about 30k people). The biggest difficulty is escaping Manila traffic (which is terrible. 30 years ago Metro Manila was 5 million, now its population is 20 million, and Manila traffic is WORSE THAN NYC). They have cell phone towers, internet connections, and a massive Shu-mart store that looks like a US shopping mall.

As a child, most houses in my father's town didn't even have screened windows. Today, large numbers of houses have air conditioning. However, in the philippines, even the well-off will only air condition limited numbers of rooms in their houses.

Gee, ya think those things might have a long-term trendline impact on commodities? Guess not. Otherwise, we can't blame everything on the Fed.

Are you claiming the stimulus caused higher unemployment?

Again, to make that claim, you have to completely buy into Austrian theory. However, its hard to establish it on a factual basis because we can't create an alternative reality where we cut off unemployment benefis and see if it would cause people to get jobs. However, I'd like Austrians to explain what jobs these people are going to get since no one is hiring (other than answer with a theoretical, the market will clear and jobs will magically appear). Of course, you also have to believe that long-term demand slumps can only be caused by government and completely reject the notion of a liquidity trap (whose math has seemed to hold up very closely to actual economic performance. Even Robert Murphy on mises.org conceded this fact).

As for "worthless $", isn't that more of a long-term complaint than short term, since inflation and interests rates have remained low?

In fact, people around the world have been demanding dollars, simply because they see them as more relatively secure than any of the other currencies from 1st world governments (given the euro's even worse problems and japan never recovering from their Lost Decade).

Now, with the entire world using fiat currency, the "worthless dollar" complaint is a bit of drama queen hysteria, since what really matters is the RELATIVE STRENGTH of the dollar vs. other major currencies. Certainly inflation is a hidden tax, but you only suffer the punishment if you're unaware of it. (Though I will concede that constant inflation creates more outcome volatility with respect to the act of saving). That's why more than half of the population own stocks and there are even more in things like money market funds and brokered CD instruments.

In any case Pete, one could turn your point on its head and use it to claim austrian theory is worthless. "If Peter Schiff's model had any value, then where is the hyperinflation and bond rate increases that he's been predicting for more than 2 years?"

The point is, none of the major economic models have emerged from this recession unscathed, no matter what their supporters tell you. Only the Keynesians and Austrians can remotely claim victory for parts of their models, while the Chicago school monetarists have been pretty much busted.

mlyonsd
08-21-2011, 04:57 PM
The stimulus wasn't designed in a very specific Keynesian manner at all and that's why i was against it. Basically, it was just handed to Pelosi and some house committees to carve out some pork for them and their friends and the rest was state block grants for whatever.

There was no WPA, no CCC, no direct job creation. It was BS. It was mostly UI benefits and tax cuts for the wealthy. It was not a real Keynesian stimulus.Has Krugman been critical of how the 2009 stimulus was spent? That's an honest question, I really don't know.

banyon
08-21-2011, 05:09 PM
Has Krugman been critical of how the 2009 stimulus was spent? That's an honest question, I really don't know.

Not that I know of, but in looking for that, it is pretty interesting on recovery.gov you can see where everything is going:

Wichita got the least funding even though it had the highest unemployment rate.

mlyonsd
08-21-2011, 05:46 PM
Not that I know of, but in looking for that, it is pretty interesting on recovery.gov you can see where everything is going:

Wichita got the least funding even though it had the highest unemployment rate.

What did Wichita do to deserve that? Does politics come into play?

I've listened to Krugman on the ABC Sunday morning show several times and not once have I heard him rail on how the stimulus was spent. He might be taken more seriously by people like me if he would at least be as honest as you about how the money was spent.

JohnnyV13
08-21-2011, 08:58 PM
Has Krugman been critical of how the 2009 stimulus was spent? That's an honest question, I really don't know.

Yes, but mostly he complained that it contained too many tax cuts, and tax cuts aren't that stimulative (under a Keynesian analysis) due to a lower "multiplier effect".

Krugman thinks that paying people to bury money, then dig it up is better than no spending in order to put idle resources to work. This is where I think he's completely radical.

Baby Lee
08-21-2011, 09:05 PM
Yes, but mostly he complained that it contained too many tax cuts, and tax cuts aren't that stimulative (under a Keynesian analysis) due to a lower "multiplier effect".

Krugman thinks that paying people to bury money, then dig it up is better than no spending in order to put idle resources to work. This is where I think he's completely radical.

IIRC he advocates paying people to dig holes, then paying them to fill them in.

banyon
08-21-2011, 09:07 PM
IIRC he advocates paying people to dig holes, then paying them to fill them in.

Is that (Cool Hand) Lukeonomics?