Paul Krugman and "Blob" Economics
I have no idea if Paul Krugman writes editorials for the New York Times, as well as his own columns. I do know that his excoriation of Europe’s governments in today’s missive is similar to an editorial that appeared last Friday attacking the European governments for not spending to Larry Summers’ liking.
Krugman, who I remember a year or so ago declared that the European economies were doing just fine, does provide praise for the heavy welfare burdens that governments on the Continent place upon taxpayers:
The only thing working in Europe’s favor is the very thing for which it takes the most criticism — the size and generosity of its welfare states, which are cushioning the impact of the economic slump.
This is no small matter. Guaranteed health insurance and generous unemployment benefits ensure that, at least so far, there isn’t as much sheer human suffering in Europe as there is in America. And these programs will also help sustain spending in the slump.
But such “automatic stabilizers” are no substitute for positive action.
We see the results of the vulgar Keynesianism that Krugman employs in his columns and blogs. Capital isn’t important, nor is the structure of production important in an economy. In fact, to Krugman, I think we can substitute “blob” for “structure.”
You see, at the Hallowed Halls of MIT and Princeton (and the other “elite” institutions of “higher” learning), an economy is nothing more than a “blob” of goods and spending, a perpetual motion machine that must continue to be greased by more spending. Capital is useful only in the money spent to create it, and (according to Frank Knight, when he dominated the University of Chicago’s economics department), capital simply appears on its own and automatically sustains itself.
For all of the supposed sophisticated math that dominates the “elite” or “A” journals of economics, it pretty much comes down to “blob” economics. Economists create extremely crude models of an economy, and then have the chutzpah to tell the rest of us that they have the ability to replace the workings of an economy and its billions of prices and transactions with their Own Infinite Wisdom.
Lest anyone disagree, I would urge them to read the Krugman column today. (Yes, I know it is difficult and painful, but it helps to know what Really Bad Economists Who Are Influential are saying.) Anyone who even hints at responsible action is smeared with the worst label that Krugman can imagine: calling someone a “Republican.”
I can only imagine the horror Krugman would have experienced had he been to the ASC last weekend. Yes, he would have heard things about “structure of production,” and “profligacy,” and he would have heard Peter Schiff telling us that borrowing a trillion or more dollars and blowing them on consumption goods is the sure road to a long and deep depression. I suspect Krugman would have been in depression, himself, had he been forced to listen to sound economic thinking.