Commerce

Krugman’s Great Problem

February 24, 2010

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Krugman’s Great Problem

I think we’ve found the secret of Paul Krugman you know. No, really, an excellent little piece in the New Yorker gives us what we need to analyze the great man. Yes, he is indeed a great man but like all of us he has his flaws and this piece gives us the necessary clues to them.

Actually, what it is: he doesn’t understand politics.

A fairly brave statement about someone who is one of the leading commentators upon politics in our day, who has worked inside the belly of the beast, and one who is clearly and obviously vastly more intelligent than you or I.

We’ll try to claim greater intelligence when we’ve got our own Nobel Prizes, shall we?

If we look back at Krugman’s work there is some excellent economics in there. And if we look at his writing there is, on top of that excellence, a man with a real gift for both writing and for explaining complex subjects so that all can grasp them (his “Ricardo’s Difficult Idea” is a masterpiece). There’s even great fun to be had in his academic work.

I’m certainly not going to try to criticise his economics…well, except for one area….for if we were to try and get into a dick measuring contest I’m the micro-penis and he’s wielding the Ron Jeremy.

However, running through that New Yorker piece is Krugman’s incredible naivety about politics and the political process. It’s laid out for us: he didn’t pay much attention to politics, he consorted only with economists, he built his career, thought about economics and not the sausage grinder of the legislatures.

His work (his writing that is, not his academic work) in the 90’s has a lot of explanation and debunking of various silly ideas floating around. He famously defended sweat shops: not because they’re good per se, but because they’re better than the alternatives on offer to those who work in them. He pointed out that higher wages do not in themselves lead to less turnover of workers, do not lead to less absenteeism and so on—as those arguing for a higher minimum wage (or even a “living wage”) argue. It is having higher wages than the others in town that does this: you offer people a better deal and you get better labor. If everyone raises wages then you don’t.

“His head may well be far above the clouds that shroud our own plans for the world but he’s incapable of understanding the slime and the mold that his plans depend upon for implementation.”


Since he’s moved to The Times he’s moved, a lot, from measuring the proposals of others to having proposals of his own. This has become much more noticeable in recent times, since Obama ascended the throne. And you can see Krugman’s frustrations being writ large.

Now whether his proposals are indeed the ne plus ultra of possible economic ideas or not isn’t the point. What he’s ignorant of is the way that politics actually works.

There’s a view that politicians are in it all for our good. Perhaps, if you dare to be cynical enough, that they’re in it for the good of those who elect them, perhaps even the interest groups that fund those election campaigns. This is the sort of naivety that disappears with most adults’ first real contact with the political classes. No, they’re not in it for us, whoever us is. They’re in it for them.

Chuck Schumer, Trent Lott, Murtha, Webb—take any politician from any part of the political spectrum. They’re in the game so that they can stay in the game. They’ll do whatever it takes to win the next election….and in the interim they’ll do whatever else they can to feather their nests. We note and expect this behavior from bankers, businessmen, the school bully and all too often from our about to be ex-spouses. There is no illogicality in noting that politicians do the same. Indeed, the failure is to expect different behavior from those who gain their jobs from our votes.

This whole, adult, view tends to come under the banner of public choice economics. Politicians and bureaucrats tend to do what is good for politicians and bureaucrats. Just like we do and just like we would if we had the opportunities that politicians and bureaucrats do.

This is the part that Krugman hasn’t absorbed yet. Assume that his ideas are wonderful, that he really does know how big the stimulus should be, how health care insurance should be reformed, how to beat Wall Street in favor of Main Street. As of course he does believe of his own ideas: then watch his frustration as the politicians don’t do what he thinks they should be doing….what is obvious to him that they should be doing. He actually trusts politicians to do the right thing by us instead of the right thing by politicians.

And that’s the error, that’s his feet of clay. His head may well be far above the clouds that shroud our own plans for the world but he’s incapable of understanding the slime and the mold that his plans depend upon for implementation. He actually thinks that politicians are trying to do the right thing.

So despite my having already lost the dick waving competition I’d suggest that there is an area of economics which Professor Krugman really does need to study. It’s that public choice theory thing, the one where we start our economics by assuming that politicians are indeed lying weasel felchers right at the beginning. The world makes so much more sense that way. It’s also so less frustrating when you see your best laid plans going the way of all mice and men, to a dusty grave, when you start with the knowledge that of course they’ll fuck it up….they’re only in it for themselves anyway.

A good place for him to start would be the Nobel Prize lecture by his fellow Laureate, James Buchanan.

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