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LibertariCAN
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Paul Krugman: A Good Economist
Dec 12th, 2013 at 10:54am
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Now that I have your attention, let's have a thread where we pick apart his arguments.

Could be fun, and it's good practice too!

  

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Josh
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Re: Paul Krugman: A Good Economist
Reply #1 - Dec 12th, 2013 at 11:00am
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Grin

I haven't read anything from Krugman in a long time. Where's there anything specific you wanted to tackle?
  

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LibertariCAN
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Re: Paul Krugman: A Good Economist
Reply #2 - Dec 12th, 2013 at 11:11am
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Josh wrote on Dec 12th, 2013 at 11:00am:
Grin

I haven't read anything from Krugman in a long time. Where's there anything specific you wanted to tackle?


Since I've been reading a lot about the Austrian Theory of the Business cycle lately, as well as watching some of Guido Hulsmann's lectures on banking and monetary policy (which are great), throughout my searches some Keynesian B.S. often comes up featuring Krugman spewing nonsense.

The more I read about him the more I feel that he's perpetuating intellectually dishonest nonsense, and that he knows inflation and central banking harms the common person, but doesn't necessarily care.

He also refuses to ever answer questions directly:

http://www.youtube.com/watch?v=N8LmE5cfQKA

So at 14:00, Krugman starts talking after a ten minute speech from the other economist.

He then simplifies the Austrian view and essentially labels it as "Supply Side Economics", and goes on to spew nonsense that has nothing to do with the claims made by the previous economist. He sets up a straman and then tears it down. You can see the other gentlemen make sort of an eye-roll gesture at around 15:22, knowing full well what's going on.


If you actually watch what the previous gentleman's speech, Krugman doesn't really address any of the points. He addresses what HE perceives to be the view.
  

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Josh
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Re: Paul Krugman: A Good Economist
Reply #3 - Dec 12th, 2013 at 11:29am
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Yeah, he's a terrible debater and demonstrates a lack of understanding of Austrian economics, but are there arguments he makes for Keynesianism that you wanted to address? I wouldn't want to commit the same fallacy as him and dismiss the other side as "loony" without any serious consideration.
  

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Re: Paul Krugman: A Good Economist
Reply #4 - Dec 12th, 2013 at 11:32am
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Josh wrote on Dec 12th, 2013 at 11:29am:
Yeah, he's a terrible debater and demonstrates a lack of understanding of Austrian economics, but are there arguments he makes for Keynesianism that you wanted to address? I wouldn't want to commit the same fallacy as him and dismiss the other side as "loony" without any serious consideration.


Here's a synopsis on his Deflation views.

http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/
  

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Re: Paul Krugman: A Good Economist
Reply #5 - Dec 12th, 2013 at 12:19pm
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So first of all: when people expect falling prices, they become less willing to spend, and in particular less willing to borrow.

He's ignoring time preferences (which is, of course, what mainstream/Keynesian economists do). The funds don't disappear; they are put away for savings. In the long-run, this argument is very much an argument in favor of deflation, for it makes people more frugal and only willing to spend if they really decide they want something. This promotes the most efficient allocation of resources because if people are purchasing what they desire the most (and they've had time to think about), then that's where resources will be allocated, which improves overall utility. In the case of inflation, people want to spend now and don't have as much time to save or to analyze what will make them most better-off for the same reasons Krugman mentioned, which means resources are allocated to sectors that are not as beneficiary to the economy.

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And when that happens, the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed. Thatís the deflationary trap we keep worrying about.

Deflation doesn't create depression but it also does not create a short-term high that the Keynesians shoot for (without considering the long-term effects, of course, because Keynesians are incapable of seeing past two feet in front of themselves). Throughout the 1870's up to the 1890's, the economy was very stable -- production, employment, etc. levels were very high, but it's regarded as a massive depression by the Keynesians solely because there was deflation throughout the entire time.

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A second effect: even aside from expectations of future deflation, falling prices worsen the position of debtors, by increasing the real burden of their debts

Again, he's demonstrating the short-term mindset of Keynesians. "But people won't want to borrow money as much, and borrowing fuels the circular flow!" Living within your means and only borrowing if you are absolutely certain you want to carry the extra burden, etc. is a sign of a very safe economy. What got us in the most recent recession, Krugman?

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Finally, in a deflationary economy, wages as well as prices often have to fall Ė and itís a fact of life that itís very hard to cut nominal wages ó thereís downward nominal wage rigidity. What this means is that in general economies donít manage to have falling wages unless they also have mass unemployment, so that workers are desperate enough to accept those wage declines. See Estonia and Latvia, cases of.

I feel as if he's trolling us at this point. He says "nominal" wages fall; not real wages. Is he hoping his readers don't know what "nominal" means? That's the only explanation I can come up with because I don't think he's that stupid.

Anyway: his entire arguments can only be applied if the dollar is the exclusive medium of exchange.
Don't think of the "dollar" as a currency for a moment. Think of it as a single investment that can fluctuate in value. In a free market economy, competing currencies would not be violently prohibited, so you would be able to have multiple mediums of exchange. So you can put your money in the dollar, which is losing its value (inflation), or you can put it in another currency which keeps gaining value (deflation). The decision is yours. So Krugman can go buy up on investments that lose value over time while I can go buy up on investments that gain value over time. That's the magic of voluntarism.
  

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LibertariCAN
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Re: Paul Krugman: A Good Economist
Reply #6 - Dec 12th, 2013 at 12:58pm
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Josh wrote on Dec 12th, 2013 at 12:19pm:
He's ignoring time preferences (which is, of course, what mainstream/Keynesian economists do). The funds don't disappear; they are put away for savings. In the long-run, this argument is very much an argument in favor of deflation, for it makes people more frugal and only willing to spend if they really decide they want something. This promotes the most efficient allocation of resources because if people are purchasing what they desire the most (and they've had time to think about), then that's where resources will be allocated, which improves overall utility. In the case of inflation, people want to spend now and don't have as much time to save or to analyze what will make them most better-off for the same reasons Krugman mentioned, which means resources are allocated to sectors that are not as beneficiary to the economy.

Deflation doesn't create depression but it also does not create a short-term high that the Keynesians shoot for (without considering the long-term effects, of course, because Keynesians are incapable of seeing past two feet in front of themselves). Throughout the 1870's up to the 1890's, the economy was very stable -- production, employment, etc. levels were very high, but it's regarded as a massive depression by the Keynesians solely because there was deflation throughout the entire time.

Again, he's demonstrating the short-term mindset of Keynesians. "But people won't want to borrow money as much, and borrowing fuels the circular flow!" Living within your means and only borrowing if you are absolutely certain you want to carry the extra burden, etc. is a sign of a very safe economy. What got us in the most recent recession, Krugman?

I feel as if he's trolling us at this point. He says "nominal" wages fall; not real wages. Is he hoping his readers don't know what "nominal" means? That's the only explanation I can come up with because I don't think he's that stupid.

Anyway: his entire arguments can only be applied if the dollar is the exclusive medium of exchange.
Don't think of the "dollar" as a currency for a moment. Think of it as a single investment that can fluctuate in value. In a free market economy, competing currencies would not be violently prohibited, so you would be able to have multiple mediums of exchange. So you can put your money in the dollar, which is losing its value (inflation), or you can put it in another currency which keeps gaining value (deflation). The decision is yours. So Krugman can go buy up on investments that lose value over time while I can go buy up on investments that gain value over time. That's the magic of voluntarism.


Excellent points!

I also notice that in many statements and arguments from Keynesians and mainstream economists, like Krugman here, they often frame the debate as a "this or that" function of the market. What they seem to constantly imply is "either we have inflation OR deflation and that's it", and then they begin to tear down why a deflationary economy would be bad.

People that know the way a market would function can logically deduce that both inflation and deflation are things that an economy can deal with as just another phenomena that occurs. Both inflationary and deflationary periods are totally acceptable if they are the result of natural action of the market. The problem with artificial deflation is that it's based on the B.S. that central banks and financial marketeers try to push on the public.

At the end of the day, inflation and deflation both have different sets of effects on different people, and inflation benefits those on top the most. Stable deflation can benefit the everyman greatly.
  

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Re: Paul Krugman: A Good Economist
Reply #7 - Dec 27th, 2013 at 12:50pm
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LibertariCAN wrote on Dec 12th, 2013 at 11:32am:


Krugman is a simple-minded idiot and his proposition deserves a response that a simple-minded person would understand.

The government should NOT be involved in economic interventionism that affects economic outcomes as the economy does not belong to the government. The economy belongs to the People and all that the government should ensure is that the Economic Rights of the Person are protected.
  
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Re: Paul Krugman: A Good Economist
Reply #8 - Dec 27th, 2013 at 2:42pm
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I've heard his stuff about international trade is quite good (that's why he won the Nobel Prize).
  
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Re: Paul Krugman: A Good Economist
Reply #9 - Dec 28th, 2013 at 6:48am
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I've heard his stuff about international trade is quite good (that's why he won the Nobel Prize).


Barack Obama won a Noble Prize so I wouldn't give much credibility to it.

We have a world full of "economists" that believe fiat currency is "money" when it is not and they're the one's that vote for the Noble Prizes.

Money is a common commodity used to facilitate the barter system and nothing more. Gold, silver and copper have been the traditional forms of "money" for centuries.

The US Constitution authorizes the US government to "coin money" which is nothing more or less than taking "money" (gold, silver and copper bullion) and manufacturing tokens of certified weight and metallic content. The government cannot "create money" as it cannot create gold, silver, or copper. It is limited to producing official certified tokens from the actual money.

The day that "economists" preface all of their upinions and economic theories with this fact is the day I'll start to listen to them.

  
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