SUPER HOT: Ron Paul versus Paul Krugman

Jeremy Hammond has written a book, Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis, that contrasts the economic views of Ron Paul with those of Paul Krugman. I just learned about the book this evening via a Lew Rockwell link, so I haven't read it yet, but the video promoting the book has the right spirit!



Here's a blurb about the book from Hammond's site:

Ron Paul vs. Paul Krugman is an examination of the root cause of the crisis as seen through the eyes of two prominent commentators on the subject, each representing a different school of economic thought. Congressman and presidential candidate Ron Paul is today perhaps the most visible proponent of the Austrian school, whose luminaries include Ludwig von Mises and Nobel Prize-winning economist Friedrich A. Hayek. Nobel Prize-winning economist and New York Times columnist Paul Krugman is today perhaps the most well-known voice for the Keynesian school, whose adherents espouse the theories of British economist John Maynard Keynes.

A comparative analysis of these two schools of economic thought as applied to the financial crisis and as promulgated through the views of Ron Paul and Paul Krugman is instructive. Whose school offered more explanatory and predictive power? Whose diagnosis and prescriptions have been better suited to deal with the problem? Who should we listen to now?

Here's a snippet from a Foreign Policy Journal review of the book:

The reader does not have to be highly knowledgeable about the world of economic theory to understand Ron Paul vs. Paul Krugman. Clearly written, and with an obvious and well supported perspective, the short work highlights some of the aspects of all the political discussions about free markets, government intervention, and how certain authorities—essentially Krugman in this study—are quite willing to change their words to suit their own purposes. Krugman’s main purpose appears to be to avoid accepting any blame for the financial mess that the U.S. and thus the world is currently immersed in.

I am not a fan of economics, as the people I normally associate with economics do not appear to be the brightest intellects in the land, and often seemingly lack common sense. This discussion, by leaving out much of the economic jargon, presents a clear case that Ron Paul has it right and has been consistent, and still is consistent, with his views and advocacy for true free market action... 

The central point under discussion here is the control by the government through its institutional affiliates of the interest rates. For Krugman, the simplified argument amounted to keeping the interest rates low in order to spur spending, and if that did not work, then lower the rates some more, and so on. Accompanying this intervention were and are the assurances given by the government—both rhetorically and in real financial support—that the financial institutions would be bailed out if the economy turned against them. For those with large amounts of unspent money, this would give license to deal with all kinds of risky financial behaviors.

For Ron Paul, his arguments were consistent and have been proven correct. Interest rates, subject to the market and its hopefully balanced demands for spending and saving, for building wealth and saving for the purchases of real goods that build the wealth, should not be held artificially low. Instead they should be allowed to rise and fall as the demands of saving and spending rise and fall.

Hammond quotes both figures extensively, comparing their words from one time to another time. In Paul Krugman’s case, it is a long series of changing his story, in one part to avoid responsibility for his part in the financial downturn, and for the other part—it is hard to ascertain—in order to sound like he still knows what is best, or what he is doing is correct. The differences between what he said at one time and says at a later date are numerous and obviously contradictory, and Hammond has no trouble juxtaposing Krugman’s waffling rhetoric.

Ron Paul on the other hand is consistent with his message: we do not have free markets and we need to get to them. By controlling the interest rate and controlling and assisting the institutions with rules and bailouts, the free market cannot operate as it should, and by holding the interest rate near zero, we are only setting the economy up for an even bigger downturn in the future.

At this point, I can see why Ron Paul will not be the Republican nominee for president—he makes too much sense and the big money boys do not want him taking away their taxpayer financed cash cow.