Monday, February 4, 2013

Krugman Tries Again to Answer Hoppe

Well, at least this time, as opposed to last time, Paul Krugman actually addresses Hoppe's question (to  a small degree)

Krugman writes:
Some further thoughts inspired by the welcome hatred of the usual suspects toward yours truly. One quite common statement among the Austrianish horde is something along the lines of “It’s ridiculous to imagine, as Krugman does, that you can create real wealth by printing more pieces of paper.” 
Well, it may be ridiculous, but it’s also true, under certain conditions — namely, when the economy is suffering from inadequate demand. And you don’t have to use highly abstruse reasoning to see this, either; all you need to do is think in terms of some kind of model, not necessarily of the mathematical kind. The whole point of the true story of the baby-sitting coop, which brings it down to a human scale, is that it’s quite possible for economies to get into a snarl that can be solved by printing more money, or having the government spend more.
The way to counter this is to continue as Hoppe suggests, keep asking the baby questions of Krugman. By him writing that an economy can suffer "from inadequate demand," he is suffering from the delusion that supply and demand doesn't work. We should ask him if he accepts the proposition, that in a free market economy, market clearing prices will result because of supply and demand. If so, then how can he say that there is such a thing as "inadequate demand?" Prices will simply clear and wages and capital goods will be priced based on the prices of consumer goods. Where's the problem?

A second point about his above statement is that he, again, references a baby-sitting coop story. It is amazingly at the core of his view of how economies work. Yet, as I have pointed out before, here and here, Krugman misunderstands the story and considers the baby-sitting coop coupons money, which they are not. We should ask him if he, indeed, views the baby-sitting coop coupons as being the same thing as money. If he says, "yes," it is easy to demonstrate why they are not. If he says, "no," the entire edifice of his view of economics collapses, since it is based on those coupons being money.


  1. We're getting to the bastard. That he's even aware of Hoppe's almost off-handed comment and moreso clearly aggravated by it says so much.

    But that's the genius of Hoppe, he can distill it all down to one or two phrases that can rattle you to your very intellectual foundations:

    "How can a piece of paper make society richer?"

    All of Herr Krugman's research assistants and ghost writers couldn't answer this if they were replaced by and infinite amount of monkeys and given eternity to ponder it.

    1. You sum it up nicely JFF :)

    2. "It was the best of times, it was the BLURST of times!?. Stupid monkey!" - Mr. Burns

  2. Krugman: "Well, it may be ridiculous, but it’s also true, under certain conditions — namely, when the economy is suffering from inadequate demand."

    Wow, I didn't imagine that even he was so ignorant of basic economic precepts.

  3. I can not take that guy even remotely seriously. I learned all of the same garbage he did, but I knew from just reading it that there was something wrong with it.

    Either her's a very clever rent-seeker, or just a plain child stuck in an overweight lazy grey bearded man's body.

  4. In defense of Krugman......

    I think I understand Krugman. He believes that any economic activty is beneficial for the economy and society as a whole.

    Hurricane Katrina sparked a rebuilding effort. It created jobs. The same thing with Hurricane Sandy. Perhaps the killer in CT just wanted to stimulate the economy in a positive way. Think all the money spent on caskets and funerals. That will surely stimulate the economy. Maybe Krugman feels that if we get enough disasters or enough serial killers then we can have a vibrant economy. More death more destruction....good for the GDP.

    Let me give an example: A man owns a house (no mortgage) and has 150K in the bank. A storm destroys the house and the man spends 150K to rebuild it.

    I'm sure Krugman would think that this has been great for the economy. But I look at it as the man had a house and 150K before the storm. Now he has a house (because it was rebuilt) and no money.

    That money could have been spent on other things. Perhaps the man could have built a 2nd house to rent out which would have provided more housing for someone. Perhaps he could have sought training in a new field that would have increased the man's income over time. Maybe that savings could have been used to start a new business, which would have provided employment for other people while adding to the variety and/or supply of goods and services for people in the community.

    He is right on certain things. Printing money does benefit people.....certain people.

  5. With the recent news of Argentina, and this article, maybe you should write something of note Robert.

    Here's Paul Krugman spouting his nonsense on Argentina:

    1. That was the first thing I thought of, too.

  6. Hoppe proved his point because asking Krugman just a simple BASIC question drew out from Krugman such a preposterous and pathetic response. These types of questions help easily demonstrate the mush-brained and dishonest "intellectual" foundations of "progressive" thought, such as it is.

    In my hammerings of the Magic Money Tree crowd, it dawned on me that the reason they cannot comprehend the concept of economic calculation is because they basically deny that any transaction can actually be voluntary. When starving people buy stuff, is that voluntary? Or something. Except that it's quite easy for average people using basic English Common Law concepts of property, contract and tort to determine in each case whether there has been an assault, fraud or tort. Asking basic questions quickly demonstrates that "progressives" must obfuscate about even the most self-evident and widely understood aspects of our civilization.

    The ridiculous details of the Keynesian Hoax are just the details of monstrous liars.

    Don't let yourself get bogged down in them.

  7. here, here

  8. Krugman wants you focused solely on the medicine, not the disease; the modus operandi of a snake oil salesman:

  9. "... all you need to do is think in terms of some kind of model, not necessarily of the mathematical kind."

    You see, if you could just imagine you live in a fantasy world where there is no time preference and marginal utility, then everything would be just fine.

    1. You mean like this?

  10. "Prices will simply clear and wages and capital goods will be priced based on the prices of consumer goods."

    I imagine Krugman would probably respond to this by saying that prices might be unable to adjust because they are sticky downwards or that the interest rate is unable to fall to the market clearing level because that level is negative.

  11. Guys guys guys, can nobody see that Krugman completely dropped ongoing monetary policy under the bus?

    Krugman is saying that printing money, i.e. inflation, is only able to boost growth **during certain times**. Now, if that is the case, then it doesn't even matter what those certain times happen to be. As long as it is not all the time, then Krugman should be relentlessly chastising the Fed for engaging in ONGOING monetary policy. After all, the Fed does engage in more or less continuous open market operations to target continuous price inflation, right? And doesn't Krugman support that too? His answer to Hoppe is either a blatant lie, or he is so confused he doesn't even know when monetary policy is justified in his own mind.

    The important point is that because Krugman believes that printing money is only justified during certain times, where there is "insufficient demand", then that would mean the Fed should only ever print money during certain periods, say during bank panics, or recessions, or whatever. Nothing that would approach continuous price inflation.

    If Krugman believes that continuous price inflation is necessary to ensure economic growth, then that necessarily implies that Krugman really does believe that printing money is necessary for society to grow richer.

    Why hasn't anyone addressed this point? I thought Wenzel would be all over this one.

  12. "We should ask him if he, indeed, views the baby-sitting coop coupons as being the same thing as money." -RW

    He most certainly does, in research for my latest blog post (click my name for direct link), I read Krugman's 1998 Slate article, he equates the coupons with money twice:

    1. "Since most of the co-op's members were lawyers, it was difficult to convince them the problem was monetary."

    2. " That is exactly what our head coupon issuer Alan Greenspan did in 1987—and what I believe he would do again."