Mon, Feb 15 2010 11:26 AM
Krugman's errors - a critique to Keynesianism
There have been a lot of articles criticising Paul Krugman's ideas. People like Robert Murphy, William Anderson and many others have written great articles on the subject. Modestly, I have tried to contribute to these critiques with one article in which I try to summarise several points. The article was titled "Los errores de Krugman: una crisis de deuda no se resuelve con más deuda" (Krugman's errors: A Debt Crisis Cannot Be Solved With More Debt) published in Spanish at the economics section of LibertadDigital.com. Previously, I published another article describing the main ideas Krugman defends.
Several points of the critique: no logical rigor, bad diagnosis of the causes of the crisis (or ignorance about them) confusing cause with effect, likely unsustainability of the huge public debt and ultimately risk of default (even Krugman wants more debt), does public spending really improve the state of the economy?, the keynesian liquidity trap and absence of crowding-out (from an empirical and theoretical perspective), the role of the inevitable and necessary deflationary price readjustment Krugman seems to ignore, and regime uncertainty (Robert Higgs)
Some may argue that Krugman is a nuts and doesn't deserve to be argued against. But he has a huge influence and his ideas should be refuted.
Other articles on this:
La Alternativa Austriaca Frente a Keynes by me.
Henry Hazlitt and the Failure of Keynesian Economics by Ebeling. in Spanish http://www.libertaddigital.com/opinion/autores-invitados/hazlitt-y-el-fracaso-de-la-economia-keynesiana-51553/
Taking the Name of Lord Keynes in Vain by Mario Rizzo. in Spanish http://www.libertaddigital.com/opinion/autores-invitados/tomando-el-nombre-del-lord-keynes-en-vano-51322/
Rizzo has made an excellent job at ThinkMarkets by clarifying Keynes' own views: 1, 2, 3. He also establishes several points in common between Keynes and Austrian ideas: radical ignorance, subjectivism, or some methodological point (he was quite skeptic on the use of maths, for instance). Gabriel Zanotti, an argentinean philosopher, also wrote on this subject: “Keynes, austriaco”.
The Debt Crisis Cannot Be Solved with More Debt by David Saied. in Spanish: http://www.libertaddigital.com/opinion/autores-invitados/la-crisis-de-deuda-no-puede-resolverse-con-mas-deuda-50466/
Also, this recent debate on crowding-out between several Austrians and Brad DeLong is quite interesting. I have put some relevant pieces of the debate in this post, along with some comments of mine.
Filed under: crowding-out, keynesianism, Keynes, Krugman