Tuesday, November 27, 2018

22 Days in Paul Krugman's Masterclass (Day 9) (How to Justify Hating the Rich)

Lesson 9 in Paul Krugman's Masterclass is 11 minutes and 33 seconds long.

In this lesson, Krugman teaches how to justify hating the rich and those who are top achievers.

He first starts out by claiming that the baby boomers years were much better because of less inequality. But he never, despite spending the entire lesson talking about inequality, discusses in detail the nature of inequality and the types of inequality.

To start with inequality in and of itself is not a problem. SEE: This Is What Those Who Are Concerned About Inequality Fail to Grasp.

There are problems when government regulations keep some from advancing, when crony deals are made and supported by government to benefit some at the expense of others, and when Federal Reserve Board monetary operations benefit the crony elements of Wall Street. But Krugman never brings these operators up and how they differ from those who gain riches by fulfilling consumer desires. It is just pure hate of all rich.

To make his hate case, he resorts to citing the discredited Thomas Piketty, who uses aggregate data to launch his class war. That is, Piketty uses the shaky method of aggregate economic data analysis, which eliminates all differences except, in his use, between two grand classes, the wealthy and the non-wealthy, to launch into a faulty aggregate explanation of the growth of wealth. It is all nonsense, of course. For the many, many problems with Piketty analysis see here.

Krugman not only throws out Piketty as a source for his hate the rich propaganda but also hate of inherited wealth, which means he fails to understand F.A. Hayek's observation that some concentrated wealth is valuable to a society.

But let us forget Hayek just now and bring out the God of Krugman, John Maynard Keynes, to close out this post.  Here is Keynes with his fascinating, and correct, observations on the importance of inequality and wealth from his 1919 book, The Economic Consequences of the Peace (emphasis in original)
The new rich of the nineteenth century were not brought up to large expenditures, and preferred the power which investment gave them to pleasures of immediate consumption. In fact, it was precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others. Herein lay, in fact, the main justification for the Capitalist System. If the rich had spent their new wealth on their own enjoyments, the world long ago would have found such a regime intolerable, But like bees they saved and accumulated, not less to the advantage of the whole community because they themselves held narrower ends in prospect.

The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during that half century before the war, could never have come about in a Society where wealth was divided equitably.(p.10)

Links to discussions of all Krugman's Masterclass lessons are here.


  1. Did you really expect Krugman to expose the racket by which he has become one of the rich? That racket of course is being a very well paid intellectual coming up with reasons for the ruling class to do as they want. In his case the various crony economic interventions.

    1. This brings to mind Mises's explanation in his book, "The Anti-Capitalistic Mentality," about why intellectuals resent the free market, namely, because it wouldn't reward them to the same extent that they believe is their due, and instead it rewards the vulgar entrepreneurs who create actual value for customers.

      "Neither can it remove or alleviate the resentment with which the intellectuals react to the contempt in which they are held by the members of "society." American authors or scientists are prone to consider the wealthy businessman as a barbarian, as a man exclusively intent upon making money. The professor despises the alumni who are more interested
      in the university's football team than in its scholastic achievements. He feels insulted if he learns that the coach gets a higher salary than an eminent professor of philosophy. The men whose research has given rise to new methods of production hate the businessmen who are merely interested in the cash value of their research work."

    2. My favorite economist, Don Boudreaux, thinks very highly of Deirdre McCloskey, and writes the following about the theory she developed to explain the start of the Industrial Revolution:

      "What does best explain why the Industrial Revolution began in northwestern Europe in the eighteenth century is that for the first time in history people then and in that part of the world began to talk about the bourgeoisie with respect. This new “habit of the lip” (as McCloskey calls it) replaced the older habit of talking about entrepreneurs and merchants as being, at best, contemptible functionaries whose services society might need in some measure but whose importance to society fell far below the services supplied by warriors, royalty, noblemen, and priests.

      With merchants and entrepreneurs in eighteenth-century Holland and England finally accorded widespread dignity, society’s best and brightest no longer avoided the world of private business to pursue careers at court or on the battlefield. The power of the bourgeoisie in these countries with tolerably secure private property rights was thus finally unleashed to revolutionize the economy—first in northwestern Europe and, continuing to today, the rest of the world."

  2. Your arguments, RW, fall on deaf ears if the listeners are leftists.

    I once asked a friend of mine (we were in college then, 40 years ago, but still friends today) if she would prefer a society in which there was greater inequality because the rich were richer, or if she would prefer a society where there was greater equality with no increased wealth for anyone. She chose the latter scenario. Leftism is a childish, emotional philosophy.