Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Sunday, October 10, 2010

Krugman Derangement Syndrome

I've exposed Krugman's would-be critics before:

-   Sloppy methodology and lazy thinking by an economist who wants to be taken seriously, though I've concluded he's insane.
-  Cherry picked, out of context quotes by some college kid.
-  Making shit up, by a deranged politician.

Well, here is more making up of shit by Steven Horowitz, another college professor of economics.

The title, The Newspeak of Paul Krugman, sets just the right Orwellian tone, I'd say - and with the typical right wing blow-hard's tone deafness to irony.  Here is the beginning of the text.

In his September 28 New York Times blog post, Paul Krugman announced that “economics is not a morality play.” That turn of phrase is his way of defending the idea that in unusual times, such as the sort of deep recession we are in, we can get strange relationships between economic cause and effect. The result is that actions which we might find highly distasteful can have positive effects. Thus we cannot afford to be overly concerned with morality if the goal is to get out of the recession.
Specifically, Krugman defends the claim that World War II got us out of the Great Depression, because “this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn’t particularly wise.” Even spending on something destructive like war, he argues, is what is needed to solve the problem, especially when the “political consensus for [domestic] spending on a sufficient scale” is not available. In Krugman’s version of Orwell’s Newspeak, destruction creates wealth, and war, though not ideal, is morally acceptable because it produces economic growth.

There is so much wrong here, in concept, attitude, and fact, that it's hard to know where to start.  In fairness, I'll give Horowitz credit for at least linking Krugman's blog post, which he so ineptly mischaracterizes, so that anyone can simply click through and expose the fallacies on his own.  Beyond that, there are no positives.  This really deserves a deep stupid, but I don't have the energy today.

First, a little dissection:

A)   The result is that actions which we might find highly distasteful can have positive effects. Thus we cannot afford to be overly concerned with morality if the goal is to get out of the recession.

Wrong, wrong, and more wrong.  First, Krugman was talking about the paradox of thrift: in a liquidity trap at the zero-interest bound, thrift, which is normally a personal virtue, becomes collectively counter-productive due to the short-fall in aggregate demand.  Second, neither spending nor thrift is highly distasteful, so that particular red herring literally makes no sense.  Third, the fact is that economic forces, like gravity or the chemical reactivity of fluorine, are irrelevant to anyone's view of morality.  Economics does what it does, and woe to you if you are in the wrong place at the wrong time.  Putting this in the context of violating morality to solve the recession is blatantly dishonest. 

B) Specifically, Krugman defends the claim that World War II got us out of the Great Depression, because . . .

Specifically, no.  Krugman's view - one that is held by economists of many persuasions, though I happen to disagree with it*, is that war spending expanded GDP, and that was the end of the depression.  Clearly, the expansion of GDP is manifest - an increase of just over 80% from 1938 to 1945, and the war brought GDP above the long range trend line for the first time since 1929.  That is a simple statement of fact, not defending a claim.  The Krugman quote that follows the referenced sentence is about stimulus spending, which will work - even if it's wasteful and objectively foolish - to make up for the shortfall in aggregate demand.

Specifically, Horowitz fails to mention the end of the Krugman  post, where he says, "The point is that it would have been much better if the Depression had been ended with massive spending on useful things, on roads and railroads and schools and parks.  But the political consensus for spending on a sufficient scale never materialized; we needed Hitler and Hirohito instead."

Does this look anything like: "war, though not ideal, is morally acceptable because it produces economic growth?"

My comment at Freeman follows.
Steven -
Krugman derangement syndrome is alive and well. A few months back the meme was that he promoted the housing bubble. Now it’s that he’s a war monger.
What you should do is reread his article. He dismisses your frankly stupid accusation in the first few sentences. I defy you to find anything he has ever written either there, or anywhere else, that suggests that war “is morally acceptable because it produces economic growth.” That grotesque distortion is your mental construct, not Krugman’s.
This is what I always find in Krugman’s self-styled critics: a blatant disregard for reality and/or honesty. If Krugman were actually wrong, you could confront his actual statements and do an actual refutation. Instead, you are reduced to distortion and innuendo.
It’s impossible to take you seriously, when you aren’t criticizing Krugman at all. You are constructing a straw man by distorting what he said, and ignoring what he meant – which was that at the zero interest bound there is a paradox of thrift. But one would have to read Krugman regularly to have the context of what he talks about, and not just cherry pick and distort.
What is going on here? Are you so blinded by ideology that you can’t do a rational report on someone you disagree with? Are you incapable of reading with comprehension? Or are you simply a liar? Whichever, you are a crank.
This is particularly beautiful: No critic of free-market economics can ever again accuse us of being irrational and immoral.
I just did. Clearly, you must be one or the other of these, or just plain stupid – which I seriously doubt. It is possible, however, that you are both, or all three.
This is really, really sad,

Interestingly, if you click through from Krugman to Delong to a post at Business Insider by Gonzalo Lira, promoting the same idiocy as Horowitz, though quite a bit more viciously, you'll find it's been taken down, replaced with this notice.

The post that previously appeared at this URL by the writer Gonzalo Lira makes some claims about Paul Krugman's stance on war being necessary for the economy that we feel distort Krugman's actual stance

It can still be found at Lira's blog, along with a lot of commentary (including by me) telling him he's nuts.

Incidently, this is not my first encounter with the reality denying Steven Horowitz.  In a particularly sweet irony, it was Krugman who set me straight.
 * The reason I disagree with Krugman is that I believe it's clear that the Depression was over before the war ever started.  By the most generous definition, the second recession of the GD (never mind the first one ending in 1933/4) occurred when GDP stopped declining - sometime in '38 or '39.  By the most conservative definition I can imagine, it occurred when the output gap was completely filled, and that was in 1941.

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