Thursday, April 8, 2010

Krugman Charges Neanderthals with Being Self-Hating Jews

Well, not quite, but almost the same.

He is suggesting that Austrian economists are self-hating  Keynesians:
What happens, instead — or at least that’s how I read it — is that Austrians slip Keynesianism in through the back door. Implicitly, they associate booms and slumps with rising or falling aggregate demand — utterly unaware that their own theory doesn’t actually make room for such a thing as aggregate demand to exist, or at least to affect overall employment. So Austrians are basically Keynesians in denial — self-hating Keynesians? — pretending to themselves that they’re not using ideas that are in fact essential to their story.
You can't call Neanderthals self hating-Jews because they roamed the land long before Jews even existed.

And you can't call Austrians self-hating Keynesians because most of the work in Austrian business cycle theory was done pre-Keynes.

Ludwing von Mises wrote the Theory of Money and Credit in 1912.

Friedrich Hayek published the German version of Monetary Theory and the Trade Cycle and The Paradox of Saving  in 1929.

Keynes' two-volume Treatise on Money wasn't published until 1930. And the Keynesian bible, The General Theory of Employment and Interest, wasn't published until 1935, by this time even Hayek's Prices and Production had been in print for four years.

Further, even the Nobel Committee, Krugman might recognize them as an authoritative body, pointed out that Hayek had developed enough of his business cycle theory before the 1929 crash to be one of the few to warn of that crash:
Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.
Some, self-hating Keynesian. The time-line doesn't fit.

Bottom line. Krugman continues to fail to look at the important role money plays in directing economic activity, when a central bank manipulates the money supply. It's almost as if he hates to think about the influence of money.


  1. We don't attribute the slump to a lack of aggregate demand, but a misaligned demand. Not all forms of "demand" are the same.

  2. It's NOBEL, as in "No-Bell" not "Noble".