Tuesday, January 12, 2010

Paul Krugman's Appeal to Mediocrity

As readers of my blog should probably be aware, I hate Paul Krugman.

He is a god awful economist (make no mistake, the Nobel Prize he won is for some derivative work he did in the 1970s on new trade theory - which basically just glorifies Mercantilism - and he hasn't done anything remotely useful since).  Not only god-awful, but positively one of the worst ever released on the unsuspecting public.  His critical thinking skills are lowest-common-denominator at best.  And worse than that, he attracts the dumbest people of all time to his weekly New York Times column.  Did I mention that he's also the textbook definition of "Backpfeifengesicht"?  Yeah, that too.

He is also the modern embodiment of Ayn Rand's character, Ellsworth Toohey... For those who aren't familiar with this particular literary villain, Toohey appears in the book, "The Fountainhead", and is a thoroughly mediocre Architecture Critic modeled off of Harold Laski (a British "economist" & Fabian Socialist/Marxist, primarily responsible for India's spectacularly miserable economy from basically 1950 until market liberalization began in 1990).  Toohey is a man of mediocre intellect who is largely motivated by jealousy and bitterness, combined with a constant need for the approval of those men of actual genius who's work he typically pans.  The famous quote is: 

"Don’t set out to raze all shrines—you’ll frighten men. Enshrine mediocrity, and the shrines are razed."

I'm not sure anything sums up Paul Krugman better than this, and his recent NY Times article, "Learning from Europe", and the resultant reader comments perfectly illustrate the point.

In this article, Krugman uses anecdotal evidence, bad logic and weak data to pretend that Europe's economy is thriving, proving that "social democracy" (otherwise known as socialism-lite) works!  Here's Krugman's basic thesis:

"But the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works."

Europe is an economic success! 

Well, thank goodness... That proves it.  But in case you're looking for evidence, apart from Krugman's appeal to the anecdotal experience of wealthy US travelers to Paris & London, that's a commodity in very short supply.

"For those Americans who have visited Paris: did it look poor and backward? What about Frankfurt or London?"

Fortunately, I am one of those Americans!  What's more, unlike most Americans who've traveled for business or pleasure, I'm actually a rather curious sort who likes to leave the central tourist hubs, hop on a local bus or train and occasionally go on the all-day walk to "nowhere" to discover what the rest of these cities look like.  For instance, Copenhagen is a lovely city... Provided that you stay downtown, and visit the major sights, like the Little Mermaid Sculpture (although that is apparently regularly defaced and often decapitated by vandals, as a point of fact).  However, if you leave the city center, you find a very different picture... Even in the bright spots of Europe, you see people living in what (to me) are actually pretty poor and run-down conditions in comparatively middle class areas.

This is all relative, of course. I've also been to the home of a bus-driver in San Jose, Costa Rica (who was pretty well to do by local standards) who lived in the neighborhood next to one filled with houses made primarily of corrugated steel salvaged or stolen from previously demolished buildings.  Plus I have friends from Indonesia and Sri Lanka who's local living conditions are substantially worse than that.

But this isn't about anecdotes.  I'm merely trying to point out that while Krugman is correct that;

"when the question is which to believe — official economic statistics or your own lying eyes — the eyes have it."

He's just way off base if he thinks that most American travelers (or ex-patriate workers for that matter) actually do "see" the real Europe.  Most Americans find their way to the prescribed places when they travel - to the Eiffel Tower, Big Ben, the Louvre, the Guggenheim... Etc.  What they almost never do (and believe me, I've spent a great deal of time specifically around American tourists, while running instrumental music for 4 of Holland America's cruise ships) is leave those areas and go look at the conditions of the average people.

It's like people going to Aspen, Colorado and thinking that most people living in that part of the world are wine-swilling, sweater-wearing ski bunnies who spend their evenings eating $50 steaks and hanging out at the lodge.

But that cluster of bad reasoning and anecdote pales in comparison to the hilarity that follows it though!  Krugman goes on to claim that the statistics back up the fact that Europe's economy is just as good (if not better) than that of the United States.  He then provides almost NO hard numbers at all...  Here's what you get:

  • "It’s true that the U.S. economy has grown faster than that of Europe for the past generation. Since 1980... America’s real G.D.P. has grown, on average, 3 percent per year. Meanwhile, the E.U. 15 — the bloc of 15 countries that were members of the European Union before it was enlarged to include a number of former Communist nations — has grown only 2.2 percent a year."

Note that Europe has grown at a rate about 1/3rd less than the United States over the past 30 years, and that's pretty substantial in any case - if you start with $100 and add 3% to it for 30 years you get $242.73, whereas you get $192.10 with a 2.2% growth rate... Now, multiply that by trillions and you can see how big a deal a little thing like .8% is.  But that's also a handicapped figure!!  Krugman discounts all those formerly communist nations for no reason except it skews his numbers south and hurts his already weak point.  But are those nations not also part of the EU?  Oh, I think they are.

Krugman is just trying to eliminate the evidence that doesn't fit his thesis, or tweak the existing numbers so that his point looks better than it is.  Lame.

He goes on to claim that this is just a reflection of differences in populations growth:

  • "Since 1980, per capita real G.D.P. — which is what matters for living standards — has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there."

Ok... But the rates of population growth are very similar, compared to the GDP growth numbers.  Also, I should probably note that there's a pretty severe problem with GDP as a measurement anyway, since it includes government spending.  If government spending balloons by some large number, but isn't actually funded by anything but borrowing or printing money - as has happened in the US and all throughout Europe then it looks like the economy is growing when it isn't.  It's all just fictional numbers pulled out of thin air, and in the process devaluing everyone's standard of living via the time-honored method of coin-clipping.

Krugman's other "statistics" are just as pitiful... He tries to make the case that Europe is doing just as well, yet everything he says makes exactly the opposite point - and here he scrupulously avoids giving any real numbers (emphasis added): 

  • "In the late 1990s you could argue that the revolution in information technology was passing Europe by. But Europe has since caught up in many ways. Broadband, in particular, is just about as widespread in Europe as it is in the United States, and it’s much faster and cheaper." 

Here's the thing... Europe's internet systems are newer, built on the innovation of the technology in the US... Krugman clearly admits this.  It's pretty typical of Europe though: Let Americans invent something hugely beneficial, take all the risks, make all the mistakes, fix all the bugs - then adopt the technology in its developed form for a fraction of the cost.  Then idiots incapable of logical reasoning like Krugman forget all the important stuff and just comment on how much cooler it is to be in free-riding Europe.

  • "And what about jobs? Here America arguably does better: European unemployment rates are usually substantially higher than the rate here, and the employed fraction of the population lower."

At least he admits it.  But of course, Krugman re-frames this as being totally cool, because teenagers and old people really don't need jobs anyway.  Naturally he forgets to mention the connection between Minimum Wage laws and the under 25 unemployment rate here in the US and abroad and that perhaps those of us in our mid-20s  trying to develop our careers, start families and make our fortunes might actually want a decent job market.

  • "And Europeans are quite productive, too: they work fewer hours, but output per hour in France and Germany is close to U.S. levels."

Why limit ourselves to France & Germany?  

This is just another trick to help Krugman skate over reality.  The productive output of Spain, Portugal, Italy, Greece, Romania, Hungary, Bulgaria, Czech Republic, Cyprus, Latvia, Slovakia, and the rest of Europe isn't even remotely comparable to that of the US, and last I checked they're all part of the EU as well.  

Krugman does this repeatedly though.  When the facts don't fit the story, he just narrows his view to only cover the couple nations that make his point... And even then, the best he can do is say that the productivity is "close to" that of the United States.

Yet Krugman concludes;

"But taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own."


Every single piece of evidence he presents - even the anecdotal bits - do not remotely promote that conclusion.  They promote the conclusion that Europe is substantially worse off economically than the United States.  And as readers of Logicology should know, I'm *not* remotely a fan of US economic policy... We are far too close in reality to how Europe's economy is structured... Like Europe, we have a central bank controlling our money supply & interest rates (from my vantage, one of the worst ideas in the history of man kind), we have ever increasing regulations on what people are allowed to trade for, and from where... We have import tariffs on goods from other nations, like the recent trade war started with China, for no reason except that some companies don't like the competition and have buddies in Washington.

There's very little I'm happy with with regards to Economic policy, but the one saving grace for me is often "It could be worse... I could live in Europe".

Ironically, this is all prelude to Krugman's real - and extremely twisted - point that vastly higher tax rates and leviathan-sized social programs are oh-so-good for us.

"After all, while reports of Europe’s economic demise are greatly exaggerated, reports of its high taxes and generous benefits aren’t. Taxes in major European nations range from 36 to 44 percent of G.D.P., compared with 28 in the United States. Universal health care is, well, universal. Social expenditure is vastly higher than it is here."

Of course, Krugman also totally ignores the free-rider issues.  He doesn't admit that the US produces the vast majority of technological innovation for the rest of the world in everything from communications and electronics to medicine.  He doesn't acknowledge that when he talks about "Universal Health Care", what he's really talking about is "universal" health insurance.  This is actually a pretty important distinction as there is an ever-increasing amount of "medical tourism" out of Europe to places like India in order to get life-saving and other treatments which people need and are either not covered by the government insurance plans or are needed in a timely manner and can't simply be delayed for the 6 months one might spend on a waiting list.

But the big elephant in the room is the massive amount of spending the US provides in the form of military protection.  Europe spends a tiny fraction of what we spend, and as a result has had 70+ years of being a freeloader, never really having to worry about protecting themselves from any of the aggressors from Hitler & Stalin to Kim Jong Il and Al Qaeda.

Of course, discounting all that (i.e. ignoring about 50% of reality - all the parts that don't "fit")... Sure, Europe's economy is functioning perfectly well.

What happens if the US (as it absolutely should, for a million reasons) actually stops being a military superpower?  What happens when European countries actually have to put up for their own military protection?  What happens when they have to put up for their own medical technology?  I'm guessing, very bad things.  

And don't get me wrong, I actually like a lot of Europe. There are aspects of certain countries like Spain or France which are more free than the US - particularly in terms of what people are allowed to eat, so that's definitely a good thing.  The thousands of years of history, art & architecture and ancient cultures shouldn't be discounted either.  Additionally, the US is in just as bad or even worse shape in the long term - precisely because we have been following the model of creeping socialism for about a century.  Everyone with any sense of history realizes that the US economy was radically restructured in the early 20th Century, and then again during the Great Depression.  What guided that restructuring was not a rekindling of economic liberty, but a great admiration for socialists & fascists.

Almost no honest historian or economist would deny this...  FDR was a huge admirer of socialism & socialists like Mussolini (note that fascism is just one variant of socialism), and most of the intellectuals in the US absolutely loved socialists of all stripes - even if they were mass-murderers.

W.E.B. DuBois once said;

"Joseph Stalin was a great man; few other men of the 20th century approach his stature. He was simple, calm and courageous."

These are the people who shaped American society and economic policy throughout the 20th Century, and yet thanks to a tradition of individual liberty and a Constitution that frowns on an all-powerful state, the US has adopted socialist policies much slower than Europe, and in general we are much better off for it!

But the assault on sound economics and liberty haven't ever really ceased, though the fall of the Soviet Union (something almost no public intellectuals except the likes of F.A. Hayek, Milton Friedman and Ludwig von Mises predicted) at least produced a lull for a little while.

Krugman's whole point is ludicrous, and I suspect that deep down - much like Ellsworth Toohey - he knows it.  He's mangled all of the evidence to fit his argument, and even then, since he stops short of actually lying, the actual "substance" of his article leans completely the other direction, showing that in fact Europe is doing much worse from a statistical point of view.  Krugman, as usual, pulls a completely nonsensical conclusion out of thin air - and what a surprise, it does nothing but support higher taxes, less freedom and a panacea for central government to take even more control of people's lives.

Fortunately for the good doctor, the comments section are filled with people who are even worse at basic reasoning and understanding reality than he is... Take Mike Harry of Boston, MA:

"I could not agree more on this, Mr. Krugman. Social democracy not only works but also reduces the income gap between the rich and the poor and ensures a better living standard. Europe (EU 15) had to face two World War scenarios and the threat of Communism but still the growth and economic propsperity prevailed. USA faced the Great Depression and caused the recent Financial Crisis which devastated most of the dveloped economies in the world- all as a result of capitalist democracy. USA has a great deal to learn from Europe."

I guess the US had nothing to do with World War II or "facing" the threat of Communism.

There is no shortage of similarly sycophantic comments.  It's a struggle even reading most of them, and even worse because the NY Times moderators have this lovely open way of sending the most obsequious right to the front of the line, presumably designed specifically to drive me insane.  

I just don't know what to say about Paul Krugman anymore.  The guy is one of the best examples I've ever seen of someone who has had praise and publicity heaped on him throughout his life for completely inexplicable reasons.  He is the quintessential "intellectual".  As he looks down from his ivory tower and writes utter piffle that appears intelligent to his weak-minded audience, he manages to influence public discourse, and thus public opinion and public-policy.  But look at what he's advocating?  Throughout this entire article he is literally trying to convince his readers that Europe's perpetual economic mediocrity is a good thing.

Interestingly though, he doesn't ever seem to set out to raze the shrines of greatness... Krugman perfectly fits Ayn Rand's observation of Harold Laski;

"He [is] very subtle and gracious, he rambled on a great deal about nothing in particular--and then he made crucial, vicious points once in a while..."

With a soft voice, an arrogant tone, the appearance of real intellect and absolutely no substance what-so-ever, Paul Krugman merely enshrines mediocrity.  Sadly, he seems to have a mindless audience always at the ready to cling to his every word.


clay barham said...

America proves Ayn Rand’s ideals. America was the only country that started a tradition of individual freedom and legal elbowroom for creative pebble droppers to lift the freedom and prosperity of community. We saw this expressed in how well local government worked, how vigilantes righted wrongs of the greedy takers, and the Tea Parties today challenge tyranny in Washington, D.C. Those who cower in the shadow of community interests criticize Rand for things that are not true, such as selfishness being held up as self-centeredness, which leads to pride, envy and anger. This she opposed, and Howard Roark sets the example of the outer-centered innovative individual, as expressed in his jury summation in Fountainhead. Her ideals are cited in SAVE PEBBLE DROPPERS & PROSPERITY on claysamerica.com.

Will said...

The Omaha World Herald just published a version of Krugman's article this Sunday. I wrote to the Pulse to counter it and I mentioned this article. Hopefully it gets posted! Keep up the good work, Sean!

Sean W. Malone said...

Hey, thanks Will!