Mark Thoma directs me to Eric Schoeneberg, who argues that the right is winning economic debates because people believe, wrongly, that there’s something inherently moral about free-market outcomes. My guess is that this is only part of the story; there’s more than a bit of Ayn Randism on the right, but there’s also the appeal of simplicity: goldbuggism is intellectually easy, Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it.First off, there is something inherently moral about free markets. They are based on the belief in private property and the belief that individuals have the right to freely exchange goods and services with each other. It doesn't get more moral than that.
Secondly, one has to ask, if "goldbuggism" is so easy compared to Keynesian economics, than why can't Krugman understand parts of goldbuggism? I am specifically thinking about parts of Austrian school economics. I'm sure Krugman would include Austrian economics under goldbuggism, since Austrian's have developed the most sophisticated theories as to why gold makes an ideal money. So let's take a look at Krugman's understanding of this intellectually "easy" economics.
During an attack on Austrian economics, Krugman wrote:
Most modern hangover theorists probably don't even realize this is a problem for their story. Nor did those supposedly deep Austrian theorists answer the riddle. The best that von Hayek or Schumpeter could come up with was the vague suggestion that unemployment was a frictional problem created as the economy transferred workers from a bloated investment goods sector back to the production of consumer goods. (Hence their opposition to any attempt to increase demand: This would leave "part of the work of depression undone," since mass unemployment was part of the process of "adapting the structure of production.") But in that case, why doesn't the investment boom—which presumably requires a transfer of workers in the opposite direction—also generate mass unemployment? And anyway, this story bears little resemblance to what actually happens in a recession, when every industry—not just the investment sector—normally contracts.This question by Krugman is a clear example that Krugman doesn't understand "easy" Austrian economics. I answered Krugman's question, this way:
Notice the viciousness, “supposedly deep Austrian theorists “.So if Austrian economics is so easy, but Krugman admittedly doesn't understand it, what conclusion is there other than that he really is not that bright?
As for as Krugman’s question as to why there isn’t a rise in unemployment during the boom part of the cycle , this clearly demonstrates his lack of a deep understanding of ABCT. Before a boom starts, the economy can be said to be in equilibrium between the consumer goods production and capital goods production. When a central bank then pumps in new money, new demand is created for labor in the capital goods sector causing bidding for labor away from the consumer goods sector. Thus, there is no point where rising unemployment would be a factor in this part of the cycle. However, during the downturn part of the cycle, it is not a case that the central bank is pumping money into the consumer sector. What is occurring, instead, is that a transfer of money is taking place from the capital goods sector to the consumer goods sector. It is this money drain from the capital goods sector that causes the unemployment. During the central bank induced boom, money isn’t being drained from anywhere.
As for every industry being impacted by a recession, Krugman just doesn’t get what a capital good is.
Krugman's comment about "easy" economics reminds me of a discussion I had sometime ago with a top neurosurgeon in NYC. After explaining Austrian business cycle theory to him, he snidely remarked, "Well that sounds like a simple theory." To which I replied, "I can make it sound complicated if you like. In fact there's this guy named Hayek who has developed part of the theory and with his writing style, his version of 'See spot run' would come out sounding complicated, but more to the point, isn't truth the real measure rather than simple or complex?"
Hayek, a Nobel laureate as is Krugman, nailed Krugman-like thinkers long ago. In his important work, The Counter-Revoloution of Science, Hayek laid out the case that economists like Krugman have physics envy. For some reason they have an inability to project out in deductive fashion. Because of this impotence, they try to force all science into the one tool they have left, mathematics. The problem is that mathematics does not provide for satisfactory answers in the sciences of human action. Thus, Krugman stuck with his inferior tool, lashes out at those who can perform.
Right now, Krugman has no clue about the price inflation that is coming, the Fed manipulated "boom" and the turnaround in unemployment that is coming. With his tool, he's totally impotent in solving these problems. He is trapped in some of the silliest forecasts an economist could make right now.
Come to think of it, he is probably justified in having an inferiority complex.