Wednesday, August 24, 2011

Was the Fake-Krugman Accurate in His Representation?

Paul Krugman is still blogging on over the prankster that faked a Google + account using his name, but he has still not come straight out to deny that he would not be in favor of an earthquake that would have caused more damage than what was experienced yesterday in the Northeast. This is likely because Krugman's true position is as the fake-Krugman represented it.

Consider that Krugman wrote this three days after  the 9-11 attacks:
If people rush out to buy bottled water and canned goods, that will actually boost the economy.
And this:
Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good.
What Krugman is missing here is that it is savings-investment that increases productivity--not consumption. For a growing economy, you need savings-investment producing more product. And in a profit and loss economy, entrepreneurs will see to it that savings-investment is directed to producing products consumers want.

Further, as Henry Hazlitt pointed out in his parable, The Broken Window Fallacy, replacing a broken window does not increase the wealth of an economy. An economy would have been much better off if the window wasn't broken in the first place and the money was spent on other consumption.

Krugman's view is that all you need to boost an economy is to increase consumption. That's why he will always be in favor of physical damage that increases consumption. He has a blind eye to what other consumption could have occurred and most important what other production could have occurred.

Thus, while Krugman points to a Dave Weigel commentary on the fake-Krugman, Weigel's commentary is incomplete. Weigel spoke to Krugman, yet Weigel never asked Krugman the BIG question: "If the Northeast earthquake had done more damage, which forced homeowners to spend billions of dollars on repairs, would this be a boost for the economy." Krugman, if he is going to be consistent and argue that consumption is the only thing that is important to boosting an economy, then he is going to have to answer, "Yes".

More than likely Krugman is embarrassed to answer the question, since it will be in concurrence with what fake-Krugman posted, that damage which causes increased repair spending is a boost to the economy.

All fake-Krugman did is to apply Krugman's economic model to the earthquake and reach the type of conclusion that Krugman has reached in the past. That such a model exists and is promoted by a high profile NYT economist should shake us all up.

4 comments:

  1. Paul Krugman is still blogging on over the prankster that faked a Google + account using his name, but he has still not come straight out to deny that he would not be in favor of an earthquake that would have caused more damage than what was experienced yesterday in the Northeast.

    Let's be accurate here.

    Krugman is not in favor of disasters. He is just saying that the disasters would allegedly have economic benefits.

    It's not up to Krugman to come out and deny he is in favor of Earthquakes. It's up to him to come out and say whether he would agree with the prankster's non-advocacy comment.

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  2. Yes, people are getting caught up in the non-issue of whether Krugman is in favor of disasters or was in favor of WW2 in order to end the depression. I think he has made it clear by his space alien example it is massive government spending that is the key. I would think he would have favored that FDR had increased spending massively without the negative consequences of the war. But I also think if the earth quake had caused more property damage, without lives being lost, and the government stepped in with a massive rebuilding effort, and he was consistent, he would prefer the more damaging quake since it would "force" the government's hand or at least provide justification for increased spending. And that would be the broken window fallacy writ large

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  3. That's like saying I'm not "in favor of" rain. It makes me stay inside, gets everything wet, throws off my schedule, and makes me have to drive slow.

    I'm in favor of the results of rain, though. Grass growing, water in the lake where I fish, cooler tempt, etc.

    Sorry, but it's the same thing. Wishing for the results of an occurance is the same as wishing for the occurance.

    Krugman craves war.

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  4. Since more spending is what is needed according to Krugman's, can someone put in a good word to him that my family could use one or preferably $2 billion in tax-free money? I keep asking my congressmen but for some reason they are ignoring me. Sigh.

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