Mises Wire

Krugman Kontradictions

I am a long-time critic of NYT columnist and Nobel laureate Paul Krugman. In addition to my podcast “Contra Krugman” (co-hosted with Tom Woods), over the years I’ve also written dozens of online articles pushing back against our era’s most influential disciple of Keynes. Some of my favorite essays are now available in my new book, Contra Krugman: Smashing the Errors of America’s Most Famous Keynesian. The book is 600+ pages, grouped together by topic, including such issues as fiscal stimulus, the Fed’s QE programs, climate change policy, the minimum wage, and Krugman’s bogus history of the Great Depression.

Besides pointing out the economic fallacies in his arguments, I also document the numerous examples of Krugman’s inconsistency. Indeed, on my blog I’ve had to invent a new term for this practice: a Krugman Kontradiction. It’s not a literal contradiction, but rather the type of assumptions and points of emphasis that change from argument to argument, so that Krugman always ends up promoting more government intervention (at least if it’s from a Democrat).


In the present article, I’ll list some examples of Krugman Kontradictions. For more details, and for other examples (which don’t lend themselves to a pithy summary in the present list), I refer you to my new book.

On Bond Vigilantes:

Nov. 10, 2012:

“I argued yesterday that even if the heretofore invisible bond vigilantes materialize one of these days, their attack won’t have the effects the deficit hawks imagine. Because America has its own currency and a floating exchange rate, a loss of confidence would lead not to a contractionary rise in interest rates but to an expansionary fall in the dollar.”

March 11, 2003:

“With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.”

On World War II as Example of the Keynesian Multiplier:

Aug. 15, 2011:

“World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy.”

Jan. 22, 2009:

“[T]he prospect of a Keynesian stimulus is having a weird effect on conservative economists, as first-rate economists keep making truly boneheaded arguments against the effort.

The latest entry: Robert Barro argues that the multiplier on government spending is low because real GDP during World War II rose by less than military spending.

Actually, I’ve already taken that one on. But just to say it again: there was a war on. ... I can’t quite imagine the mindset that leads someone to forget all this, and think that you can use World War II to estimate the multiplier that might prevail in an underemployed, rationing-free economy.”

Is Social Security a Ponzi Scheme?:

Oct. 22, 2012:

“Take the common claim on the right that Social Security is a Ponzi scheme because the system has few real assets. It’s true that Social Security is mainly a system in which each generation pays for the previous generation’s retirement, in the expectation that it will receive the same treatment from the next generation. But like monetary circulation, this process can go on forever; there’s nothing unsustainable about it (yes, demography, but that’s about the levels of taxes and benefits, not the fundamental nature of the scheme). So there’s nothing Ponziesque at all.”

1996/97 Issue of Boston Review:

“I like Freeman’s idea of providing each individual with a trust fund when young rather than retirement benefits when old, but we had better realize that this is a significant change in the character of the social insurance system. Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

On the Case for Fiscal Stimulus:

Feb. 20, 2014:

“The case for stimulus was that we were suffering from a huge shortfall in overall spending, and that the hit to the economy from the financial crisis and the bursting of the housing bubble was so severe that the Federal Reserve, which normally fights recessions by cutting short-term interest rates, couldn’t overcome this slump on its own. The idea, then, was to provide a temporary boost both by having the government directly spend more and by using tax cuts and public aid to boost family incomes, inducing more private spending.”


“What continues to amaze me is this: Japan’s current [1999] strategy of massive, unsustainable deficit spending in the hopes that this will somehow generate a self-sustained recovery is currently regarded as the orthodox, sensible thing to do - even though it can be justified only by exotic stories about multiple equilibria, the sort of thing you would imagine only a professor could believe.”

On Whether 2013 Provided a Good Test of Market Monetarism vs. Keynesianism:

April 28, 2013:

“But as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now [in April 2013], with the Fed having adopted more expansionary policies even as fiscal policy tightens.

And the results aren’t looking good for the monetarists: despite the Fed’s fairly dramatic changes in both policy and policy announcements, austerity seems to be taking its toll.”

January 4, 2014:

“Incidentally, these other factors are why I don’t take seriously the claims of market monetarists that the failure of growth to collapse in 2013 somehow showed that fiscal policy doesn’t matter. US austerity, although a really bad thing, wasn’t nearly as intense as what happened in southern Europe; it was small enough that it could be, and I’d argue was, more or less offset by other stuff over the course of a single year.”

Does 1990s Canada Have Lessons for the US During the Great Recession?

September 21, 2014:

“Oh, my. Josh Barro tells us that conservatives are once again touting Canada as a role model, in particular using its experience in the 90s to claim that austerity is expansionary after all.”

March 24, 2012:

“I’d argue that Canada in the 1990s is a good model for America now: a severely depressed economy, suffering very much from lack of aggregate demand, in which the effects of downward nominal rigidity can all too easily be misinterpreted as signs that there isn’t actually a lot of slack.”

Did Krugman Think Alan Greenspan Should Inflate a Housing Bubble?

June 17, 2009:

“One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy…The latest seems to be that I called for the creation of a housing bubble — in fact, the bubble is my fault!...

Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.”

October 30, 2006:

“As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. “

Do Unemployment Benefits Reduce Employment?

Jan. 12, 2014:

“There’s a sort of standard view on this issue, based on more or less Keynesian models. According to this view, enhanced UI [Unemployment Insurance] actually creates jobs when the economy is depressed. Why? Because the economy suffers from an inadequate overall level of demand, and unemployment benefits put money in the hands of people likely to spend it, increasing demand.

You could, I suppose, muster various arguments against this proposition, or at least the wisdom of increasing UI. You might, for example, be worried about budget deficits. I’d argue against such concerns, but it would at least be a more or less comprehensible conversation.

But if you follow right-wing talk — by which I mean not Rush Limbaugh but the Wall Street Journal and famous economists like Robert Barro — you see the notion that aid to the unemployed can create jobs dismissed as self-evidently absurd. You think that you can reduce unemployment by paying people not to work? Hahahaha!”


“People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job.”

On Admitting Error:

October 23, 2017:

“Again, everyone makes forecast errors. If you’re consistently wrong, that should certainly count against your credibility; track records matter. But it’s much worse if you can never bring yourself to admit past errors and learn from them.

That kind of behavior makes it all too likely that you’ll keep making the same mistakes; but more than that, it shows something wrong with your character.”

June 22, 2015:

“Those who can, cite evidence to support their position; those who cannot play gotcha. Events have overwhelmingly supported a Keynesian view of the effects of fiscal policy, but the anti-Keynesians have responded, not by reconsidering their views, but by seeking to discredit the messengers. In particular, there’s a lot of “Krugman said X would happen, and it didn’t, so Keynesian economics is wrong.” 

“I know what the response will be: “But you said blah blah blah!” So what? Even if I did, and even if my remarks aren’t being taken out of context, I am not the Oracle of Keynes, and my fallibility says nothing about how the economy works. If gotcha is all you’ve got, then you’ve got nothing.”


Now to reiterate, my examples above are of Krugman Kontradictions — that’s with a “K,” meaning they are not literal contradictions. Believe me, I am well aware of “what Krugman was trying to say” in each of the above examples. (That’s partly why I’ve provided links to everything — I encourage you to go read the discussion in context.) Nonetheless, I think even the fairest of readers will conclude that Krugman has a disturbing habit of mocking and/or vilifying people who use arguments that he himself employed earlier in his career, or under slightly different circumstances.

Besides the fun of catching Krugman in his flip-flops, my new book shows just how weak the empirical case for Keynesian fiscal policy is. I imagine many Austrian readers will be surprised to see how well the data support their position. Indeed, in several of the chapters I take the very numbers Krugman digs up, and show that they come down on the side of Mises and Hayek, not Keynes and Krugman.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute