Krugman Disagrees With Krugman

posted by Nima

March 6, 2010 · Posted in General Economics 

Paul Krugman on unemployment benefits:

Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

In Mr. Kyl’s view, then, what we really need to worry about right now — with more than five unemployed workers for every job opening, and long-term unemployment at its highest level since the Great Depression — is whether we’re reducing the incentive of the unemployed to find jobs. To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.

… and here, on the other hand, is Paul Krugman on unemployment benefits:

What does textbook economics have to say about this question? Here is a passage from a textbook called “Macroeconomics“:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

So it turns out that what Krugman calls Sen. Kyl’s “bizarre point of view” is, in fact, textbook economics. The authors of that textbook are Paul Krugman and Robin Wells. Miss Wells is also known as Mrs. Paul Krugman.

It’s not that this particular contradiction should surprise anybody in any way or that this is some great ‘gotcha’ moment. He’ll come up with some stupid explanation that his deluded readers will gobble up. Just look at the hilarious comments on the above article!

Paul Krugman is a bigoted, dishonest and despicable apologist for state expansion wherever possible. His writing style is for the most part condescending and arrogant, meanwhile spouting some of the most incoherent and laughable nonsense one can find on economics.

He conveniently chooses to avoid syllogistic proof of his positions and sways with whatever a Democrat in power happens to need to have justified at any particular moment. Don’t take it serious, just tune out.

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8 Responses to “Krugman Disagrees With Krugman”

  1. AHBritton on March 8th, 2010 8:39 pm

    I cannot believe that I have to point this out to people, as this seems to be a popular libertarian/conservative attack recently. For some reason I seem to be the only person who really looked into this and thought about it rationally.

    Now before you attack me let me point out that I am NOT arguing that Krugman’s view on unemployment benefits is correct, I am NOT doing that. What I AM going to argue is that Krugman is NOT being a hypocrite. People that think they have found a gotcha moment where Krugman is contradicting himself and lying are WRONG. You can disagree with him, but he IS being consistent.

    First, here is the problem with that claim. In the Macroeconomics textbook he co-wrote with his wife, it says: “Public policy designed to help workers who lose their jobs CAN [my emphasis] lead to structural unemployment as an unintended side effect.” It CAN lead to structural unemployment, not that it always must. So even at this point I think I have shown that he didn’t contradict himself, but I will continue.

    In this VERY SAME textbook it also says in regards to multipliers: “compare the effects of an increase in unemployment benefits with a cut in taxes on profits distributed to shareholders as dividends. Consumer surveys suggest that the average unemployed worker will spend a higher share of any increase in his or her disposable income than would the average recipient of dividend income… If that’s true, a dollar spent on unemployment benefits increases aggregate demand more than a dollar’s worth of dividend cuts…”

    Thus in his textbook he says that unemployment benefits can effectively stimulate a depressed economy.

    Is Krugman the only one who says this? No, the mainstream Congressional Budget Office, which, as it website states “employs about 250 people.
    CBO is composed primarily of economists and public policy analysts. About 70 percent of its professional staff hold advanced degrees in either economics or public policy.” As far as I can tell this is true, there are dozens of PHD economists on staff. They agree that the unemployment benefits stimulate the economy.
    Now let me say again, THIS DOES NOT MAKE THEM RIGHT! As I am sure you would agree. But let us look again at what Krugman claims in his editorial.
    “textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment.”
    Now this is slightly rigged since he wrote a textbook which did say that, but it is true. That IS what his textbook says, in a depressed economy benefits stimulate.
    “A bizarre point of view.” This is the one comment with which I would argue. I don’t think it is a “bizarre” idea as there are obviously economists that promote it.
    That being said, Krugman’s editorial was perfectly inline with his own record on these issues, and inline with many mainstream economists.
    Not that it is right.

  2. Nima on March 8th, 2010 10:03 pm

    Thanks for your comment.

    I would like to clarify:

    You argue: “That IS what his textbook says, in a depressed economy benefits STIMULATE.”

    But hat wasn’t the point of contention.

    He said in his article that “extending unemployment benefits not only helps those in need, it also REDUCES UNEMPLOYMENT.”

    Meanwhile he obviously sort of gets the point of how unemployment benefits can (yes CAN) create structural unemployment.

    So then to go out and call a suggestion along that concept a BIZARRE point of view?? I find this to be incredibly dishonest, sleazy, angry, passive-aggressive and frustrated partisan babbling.

    I find it simply disgusting and it tells us so much about his character. Not that this is in any way relevant to the concepts in question, it is just an emotional reaction on my part to a parasitical system and its ugly outgrowths in the realm of academia.

  3. AHBritton on March 9th, 2010 2:29 am

    “But hat wasn’t the point of contention.”

    Actually, yes it was. Unemployment benefits = stimulate the economy, stimulate the economy = less unemployment.

    It is arrogant maybe, but not sleazy. He believes, like many other economists, that unemployment benefits REDUCES UNEMPLOYMENT in an economy where there is a ration of 5:1 between available positions and active job seekers (I have not looked up that figure so it could be false). Like I said, you can disagree with his economics, you can even say he is severely downplaying the oppositions argument, beyond that you loose footing. You should agree with me. I am merely pointing out that he is over exaggerating his economic footing as much as you are over exaggerating his sleaziness in this instance.

    I don’t want to make this personal, but it is honestly this willingness to demonize opposition that has made me disenchanted with almost any political view and community with which I’ve been involved (and I’m running out of political parties:).

    I honestly am not out to make anyone look good, or to demonize anyone. I just am interested in finding the truth, and that includes giving people the benefit of the doubt. I give you the benefit of the doubt in assuming you probably have not read Krugman’s macroeconomics textbook, I have not as well, but I did look into it enough (thank god for google books) to find that Krugman was not contradicting the textbook view he wrote as far as I can tell.

    To call him a sleaze for disagreeing with you, or even doing the oh so common tactic of downplaying the opposition, is just to lower yourself to the same tactics you decry him for. I know politics and economics get passionate, but please, stick to the facts.

  4. Nima on March 9th, 2010 12:07 pm

    “I don’t want to make this personal, but it is honestly this willingness to demonize opposition that has made me disenchanted with almost any political view and community with which I’ve been involved (and I’m running out of political parties:).”

    I write things like what I wrote above in order to observe and elucidate typical, normal, and expectable phenomena of this ugly thing called “political process”.

    I certainly don’t want to create the perception of participating in that process and I certainly have no business with any “political parties”. You will never see me endorse this or the other party. I did not say “And now every one support the oh so virtuous Senator Kyl”, because he’s just another sleazebag politician whom I could care less for.

  5. AHBritton on March 9th, 2010 6:24 pm

    I don’t really want to get into a debate about anarcho-capitalist philosophy. I understand that you are against the entire political/governmental apparatus. I am not really interested in debating that right here and I think it is irrelevant in many ways to the point I was making.

    I just realized that Krugman actually explained himself much better in relation to his editorial here:

    http://krugman.blogs.nytimes.com/2010/03/07/supply-demand-and-unemployment/

    He responds very well to what the WSJ, you, and other people have been promoting as Krugman’s hypocrisy. Again, you can disagree with his economic analysis but you can hardly claim he is being dishonest in his assessment. Well I’m sure you CAN claim that, but I would be interested in where this supposed hypocrisy and dishonesty appears in his much more elucidated blog post.

  6. Nima on March 9th, 2010 7:55 pm

    Thanks.

    This article is actually a perfectly mind numbing example of his typical pompous and glaring nonsense. It’s hard to keep a straight face while reading through it! :)

    What is amazing to me is how people manage to put so many undefined terms and assumptions into one short article in order to really say nothing at all.

  7. AHBritton on March 10th, 2010 2:30 am

    Which undefined terms? If there is a specific undefined term you found to be disingenuous I am surprised you did not include it in your comment. Otherwise I am left to speculate as to what you are referring to, which isn’t helpful for honest debate. I hope I have been as clear and unambiguous as possible in my comments and would hope that if I did lack clarity you would help me rectify that situation.

    Not that this necessarily applies but just because you do not recognize or understand a term does not make it undefined. Usually if I find something I don’t understand, I do my best to understand it BEFORE making such accusations.

    I just want to point out that the title of your blog is “Krugman Disagrees With Krugman.”

    Although multiple people have made this claim, no one has been able to show me how it is in any way true. If at some point you could present to me any truth to this statement I would appreciate it.

    I know that there are deep and complicated epistemological and praxeological underpinnings to the Misian austrian perspective, and that I respect. As far as this particular instance and your claim of hypocrisy that Krugman can be shown to contradict his VERY OWN VIEWPOINT, is what is at contention. Where does Krugman state that in very high unemployment situations generous unemployments fail to stimulate the economy and produce jobs more than they increase incentives to stay unemployed. If you can’t demonstrate THAT, the title and proposition of your blog are false and misinformation.

    Now you might not care and think that misinformation is fine as long as it furthers your cause. I think, however, that fidelity to the truth is vastly more important than trying to win a point for the home team.

    So, just so we don’t get sidetracked, where does Krugman state that during periods of suppressed inflation (this is another debate so don’t get distracted) where there is high unemployment and a high ratio of job applicants to job prospects, does Krugman say that IN THIS SCENARIO that the stimulative effects of a short term increase in unemployment benefits DO NOT outweigh possible disincentives to work. This has NOTHING to do with your personal economic analysis but your claim that KRUGMAN contradicted HIMSELF.

    Thank you for your time. (I will say that I am enjoying reading through some of your primers and trying to become familiar with your world view. I hope we can have productive discussions in the future.)

  8. Nima on March 10th, 2010 11:43 am

    OK, so you would like me to spend time again taking apart one of his posts. Geeeeez, it is really not a fun thing to do, I have done it before and I will do it again, just for you :) But it will have to wait until tonight.

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