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.