Tuesday, July 15, 2014

Is Paul Volcker Responsible for Paul Krugman Leaving Princeton?

Ralph Benko has a theory.He writes that it might have been Krugman's inflationists views that resulted in his departure from Princeton:
Professor Paul Krugman is leaving Princeton.  Is he leaving in disgrace?
Not long, as these things go, before his departure was announced Krugman thoroughly was indicted and publicly eviscerated for intellectual dishonesty by Harvard’s Niall Ferguson in a hard-hitting three-part series in the Huffington Post, beginning here, and with a coda in Project Syndicateall summarized at Forbes.com.  Ferguson, on Krugman:
Where I come from … we do not fear bullies. We despise them. And we do so because we understand that what motivates their bullying is a deep sense of insecurity. Unfortunately for Krugtron the Invincible, his ultimate nightmare has just become a reality. By applying the methods of the historian – by quoting and contextualizing his own published words – I believe I have now made him what he richly deserves to be: a figure of fun, whose predictions (and proscriptions) no one should ever again take seriously.
Princeton, according to Bloomberg News,acknowledged Krugman’s departure with an extraordinarily tepid comment by a spokesperson. “He’s been a valued member of our faculty and we appreciate his 14 years at Princeton.”
Shortly after Krugman’s departure was announced no less than the revered Paul Volcker, himself a Princeton alum, made a comment — subject unnamed — sounding as if directed at Prof. Krugman.   It sounded like “Don’t let the saloon doors hit you on the way out.  Bub.”
To the Daily Princetonian (later reprised by the Wall Street Journal) Volcker stated with refreshing bluntness:
The responsibility of any central bank is price stability. … They ought to make sure that they are making policies that are convincing to the public and to the markets that they’re not going to tolerate inflation.
This was followed by a show-stopping statement:  “This kind of stuff that you’re being taught at Princeton disturbs me.”
Taught at Princeton by … whom?
Paul Krugman, perhaps?  Krugman, last year, wrote an op-ed for the New York Times entitled  Not Enough Inflation


  1. "Volcker Ascendant!!"
    Subtitle: Short those Bonds!!!!

  2. If you read the piece from The Daily Princetonian, you probably won't get the impression that Volcker was talking about Krugman or anyone specific.

    The interviewer [apparently Jacob Donnelly, who gets the byline] asked PV a question about whether central bankers worry too much about inflation. That question may already suggest concerns about the type of education the interviewer is getting. Anyway, Volcker gives an emphatic "no," because the responsibility of any central bank is price stability, etc.

    Then the interviewer presses the matter, suggesting that if a high level of inflation is "expected" then it likely won't do a lot of harm

    Volcker replies, “This kind of stuff that you’re being taught at Princeton disturbs me. Your teachers must be telling you that if you’ve got expected inflation, then everybody adjusts and then it’s OK. Is that what they’re telling you? Where did the question come from?”

    Rather than answer any of that, the interviewer switches subject and they talk about the 'Volcker rule,' i.e. the badness of prop desks at investment banks.

    My point is this ... Volcker wasn't speaking generically, in that much-quoted sentence, about "the kind of stuff you're being taught." The word "you" was singular, not plural. "You, the guy asking me these questions, have obviously heard some rotten stuff. where did YOU get it?"

    Has that interviewer taken a course by Krugman? My impression is Krugman is too much the jet setter to teach a lot of undergrads. At any rate, you could contact Mr Donnelly and ask.

    The notion that this exchange has anything to do with Krugman's departure from Princeton seems waaay too speculative a leap under the circumstances. but, hey, if it makes you happy....