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Home | Blog | I Agree with Paul Krugman

I Agree with Paul Krugman


In an unusually perceptive post, Krugman complains that "again and again, people on the opposite side prove to have used bad logic, bad data, the wrong historical analogies, or all of the above." He points out that one side of the macroeconomic debate "is, in essence, political," driven by "hostility to any intellectual approach" that might cast doubt on its preferred p0licies. "Too many influential people just don’t want to believe that we’re facing the kind of economic crisis we are actually facing," leading to "the spectacle of famous economists retreading 80-year-old fallacies, or misunderstanding basic concepts."

Of course, Krugman is talking about all non-Krugmanians — he doesn't provide names, because he sees Not Krugman as an amorphous blob of evil and stupidity — but he's really onto something, just with the players reversed. Old fashioned Keynesianism, as practiced by the likes of Krugman, resembles a set of religious dogmas, not scientific propositions. Austrians view economics as a science, a body of theory and application that helps us understand the world. Keynesians see economics as a set of political tools useful to rationalize and justify an a priori faith in unlimited government. Krugman, like Keynes himself, dislikes businesspeople, consumers, and especially entrepreneurs and investors, and prefers a world in which an elite cadre of intellectuals and bureaucrats controls most investment, production, and consumption decisions. Fine, everyone has a right to his personal belief system. But let's not pretend there's anything scientific about the multiplier, the marginal propensity to consume, the liquidity trap, and the other relics and sacraments of the Keynesian religion.

Engaging True Believers like Krugman on economic theory and policy is mostly a waste of time — one side uses reason and evidence, the other appeals to personal faith. (BTW this doesn't apply to New Keynesians such as Mankiw and the Romers, whom I regard as reasonable and serious folks.)

Peter G. Klein is Carl Menger Research Fellow of the Mises Institute and W. W. Caruth Chair and Professor of Entrepreneurship at Baylor University's Hankamer School of Business.

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