Tuesday, February 21, 2012

Getting Into Paul Krugman's Head

Now that Paul Krugman has completely failed in spotting the turnaround in the economy, and he has to know that serious price inflation is breathing down his neck (when he has been warning about deflation), is Krugman secretly reading Austrian economic texts to understand the economy?

Check this out. Hardcore Keynesian Krugman just wrote this at his blog:
A while back I read Lionel Robbins’s 1934 book The Great Depression; as I pointed out, it was a Very Serious Person’s book for its era. Its solution was a return to the gold standard — which would have made things worse — and free trade, which was basically irrelevant to the problem of insufficient demand.
He, of course, has to diss it as a "Very Serious Person's" book and this type of Austrian thinking "hopeless". But why is he reading it?

Here's what Mises.org has to say about the book (my bold):

Lionel Robbins: The Great Depression 
The Great Depression is a full-scale Austrian explanation of the Depression. It came out in 1934.  [From the book]
The conditions of recovery which have been stated do indeed involve the restoration of what has been called capitalism. But the slump was not due to these conditions. On the contrary, it was due to their negation. It was due to monetary mismanagement and State intervention operating in a milieu in which the essential strength of capitalism had already been sapped by war and by policy. Ever since the outbreak of war in 1914, the whole tendency of policy has been away from that system, which in spite of the persistence of feudal obstacles and the unprecedented multiplication of the people, produced that enormous increase of wealth per head which was characteristic of the period in which it was dominant. Whether that increase will be resumed, or whether, after perhaps some recovery, we shall be plunged anew into depression and the chaos of planning and restrictionism—that is the issue which depends on our willingness to reverse this tendency….
All over the world, Governments to-day are actively engaged, on a scale unprecedented in history, in restricting trade and enterprise and undermining the basis of capitalism. Such a policy is not confined to the Socialists. Indeed the political power of the socialist parties in many parts of the world may be said to be waning. But their opponents, the dictators and the reactionaries, are inspired by the same ideas. I t is a complete misapprehension to suppose that the victory of the Nazis and the Fascists is a defeat for the forces making for the destruction of capitalism. They have the same fanatical hatred of economic liberalism, the same hopes of a planned society. The differences are hierarchical. In Germany it is a crime deserving of torture or exile to be a Jew; in Russia to possess two cows. In our own more tranquil community the differences are equally non-economic. No doubt to their respective friends and colleagues it seems to make a world of difference whether agriculture is planned by Major Elliot or Dr. Addison. From the economic point of view there is continuity of policy. Such policies, as we have seen, have a cumulative tendency. They lead to an order of society which is likely to be less stable, less free, less productive, than our own.


  1. Did he *really* read it?

    His superficial blurb could have come from merely trying to read the back cover.

    On the off-chance that he did actually read it, he obviously didn't grasp anything. He's still talking about "insufficient demand," as if such a thing is possible in a world with unlimited desires.

    He also talks about how 'micro' conditions can be irrelevant or harmful to 'macro' conditions?

    God help us.

  2. For your own safety I would strongly urge you to stay out of Mr. Krugman's head. if you have any fear of large empty spaces, the experience could prove fatal...

  3. maybe he's dropping a hint?

  4. You have to love Krugman for being rich. In the post before that, Krugman, Archon of Big Government, is quoting Yes, Minister. Specifically, quoting the politician's fallacy.

    Considering Yes, Minister (and Yes, Prime Minister) are the two best lessons in public choice and the follies of big government, it's pretty rich of Krugman to quote from it.

    1. Haha, I just started watching those shows a few months ago. Extremely hilarious, but very revealing.

  5. Naturally, the Keynesians and interventionists never want to begin their argument with proof that the market fails or had failed and they will never address the fundamental nature of catallactics. Without the alleged emergency of the failure of the market, what is the excuse for their interventionism in the first place? How can their policies fix something that is not broken?

    Robbins point is well taken here that the market should have been expected to fail having been subjected to ubiquitous interventionism in every country and with such intervention having been supported and imposed by all “sides” of the alleged political spectrum.