Wednesday, March 2, 2011

I knew Krugman fans were sycophants, but...

Here's a Paul Krugman superfan's "view" of how economies work:
"Money goes to business from customers.

Customers without money therefore means less money goes to business.

This is why times of economic expansion as well as economic stability depend on money being available to the poor and middle class.

This is why times of economic recession always follow a lack or repeal of economic regulation.

History. It's good for you."
I was... uh... not impressed, to say the least:
"What in the... Holy god... fail. Jim... That fail was spectacular.

Do it again.
"Money goes to business from customers."
Good lord... I think you believe that what you said up there is actually a coherent view of the economy! I'm not sure whether I'm supposed to laugh hysterically at you or cry for the horrendous failure you've exhibited.

You're right though - learning some real history would be really good... for you.

I might start with "A History of Money & Banking" by Murray Rothbard:"
This guy, Jim, is incredibly confused because - much like his lover, Paul Krugman - his sense of how economies work is no more developed than that of a small child.

He persists...
"OK, just skimmed your pdf link. Basically it related the Great Depression's causes solely to monetary policy, and specifically banks' "inflating" and "overexpansion" - without even mentioning demand, inequality, or any other huge factors.

This monetary-only view, while apparently very ideologically comforting, is fundamentally unserious. It has been disproven about as thoroughly as such abstract theories can be. Paul Krugman has the most recent debunking. I can't post the link here apparently, but just google the title:

"Was the Great Depression a monetary phenomenon?"

So, if you can tell me how Krugman is wrong there, please do! I'd love to hear it. Sincerely - I like my views to be in step with reality.

And if the response is "Paul Krugman is a librullllll!!" or some such variation - more importantly, Paul Krugman is a liberal who's been **right**. He has repeatedly predicted and diagnosed issues for years before they've shown up, from the housing crisis to the incomplete stimulus that relied too much on tax breaks. He has yet to be proven wrong. Plus he won a Nobel prize, which also indicates he knows what he's talking about.

So, it appears you have some history to re-learn, in order to be in step with reality. Here's hoping you get to it."
By "in step with reality", I think we can all be rather certain that what he meant was to be "in step with the intellectual seepage leaked out of glorious Paul Krugman's tiny little brain"...

Shifty-eyed and slow-witted...
Jim claims to have "skimmed" Rothbard's seminal, "A History of Money & Banking" [PDF] in a couple minutes, in spite of the fact that it is actually 510 pages long, and then concludes that Krugman - in a pitiful, 206 word response on a totally different topic, no less! - "debunks" the whole book.

Here's a little newsflash for Jim... The blog-post he linked me to is Paul Krugman attempting (yet failing miserably) at "debunking" Milton Friedman & Anna Schwartz' view of the cause of the Great Depression in their book, "A Monetary History of the United States, 1867-1960" [alas, not available in PDF format]. It doesn't even begin to address the arguments that Rothbard (or anyone else from the Austrian School) are making.

Honestly... It's kind of hilarious - if not for people like Jim blindly slurping up the drivel Krugman spews out all over the country. Here's Krugman:
"A central theme of Keynes’s General Theory was the impotence of monetary policy in depression-type conditions. But Milton Friedman and Anna Schwartz, in their magisterial monetary history of the United States, claimed that the Fed could have prevented the Great Depression — a claim that in later, popular writings, including those of Friedman himself, was transmuted into the claim that the Fed caused the Depression.

Now, what the Fed really controlled was the monetary base — currency plus bank reserves. As the figure shows, the base actually rose during the great slump, which is why it’s hard to make the case that the Fed caused the Depression. But arguably the Depression could have been prevented if the Fed had done more — if it had expanded the monetary base faster and done more to rescue banks in trouble."
Here's Krugman's "proof", a FRED chart of the monetary base (M0) during that time period.

See Krugman's predictable, yet epic failure yet?

If you, like Jim, can't be bothered to read Friedman & Schwartz... Then I suppose maybe you'd have trouble seeing the flaw. But let me spell it out for you...

Friedman argues that the Federal Reserve's contraction of the money supply at the very beginning of the Great Depression - i.e. late 1929-1930 - caused a chain reaction of bank failures which contributed to the bank runs and mass hysteria we're all familiar with.

Does the St. Louis Federal Reserve chart Krugman supplied contradict that position factually? No. No it does not.

Instead of "debunking" Friedman, he strengthens Friedman's actual argument by showing the FRED monetary base chart... And then he goes on to create a strawman where he claims that Friedman blamed the Fed for the continuation of the Great Depression by deflating the currency still further That was never Friedman's argument - as that obviously didn't happen. I may disagree with Milton Friedman on a number of things, but he was nothing if not a consummate researcher.

Also, Friedman has a lot to say on the prolongation of the Great Depression, much of which I certainly agree with like price controls, tariffs/trade wars, massive public spending initiatives & regime uncertainty (among many other factors), but rest assured - he did not attribute it to non-existent deflationary Federal Reserve policy beyond the initial spark that lit the fire.

Rothbard, however, speaks to an entirely different point.

As a key figure in the Austrian School, and the heir apparent to folks like Ludwig von Mises, F.A. Hayek, and probably more importantly Eugene Böhm-Bawerk, Rothbard's view starts long before the proximate causes of the Great Depression and exposes the monetary origins of the boom. Amusingly, I'll quote Friedman & Schwartz here from Page 241 of "A Monetary History":
"1. The Course of Money, Income, Prices and Velocity

The Decline of 1920-21, like earlier severe contractions, was followed by an extremely vigorous expansion. From the reference trough in July 1921 to the peak in May 1923, the Federal Reserve Board index of industrial production rose no less than 63 per cent, wholesale prices, 9 per cent, and the stock of money, 14 per cent (see Chart 16).
The next six years, from 1923 to 1929, were years of relatively steady growth... The stock of money grew at a fairly steady rate until early 1928, after which it declined very slightly until the end of 1929 as a result of the restrictive monetary measures arising out of the Federal Reserve System's concern with the contemporaneous stock market boom -- a feature of the period which is not reflected in our chart but which had far-reaching effects on the conduct of monetary policy."
Now... Friedman overlooks the problems associated with vigorous monetary expansion - of the type he highlighted during the "Roaring 20's" years - and indeed, I think that's Friedman's major failing as an economist...

However... By contrast, Rothbard focuses on it.

According to Austrian School Economists - who, unlike Krugman, have amply demonstrated their case over & over with verifiable historical evidence and rational arguments - the expansion of the currency gives rise to mal-investment building up throughout the economy and creates an unsustainable economic boom based not on real savings & investment, but on the artificial creation of new money as debt. This type of boom cannot last for very long, and necessarily collapses painfully in on itself eventually as people's predictions based on the faulty price information supplied by the new money fail to materialize.

There's more to it than that, but that - in essence - is the Austrian Business Cycle Theory.

Krugman has never, to my knowledge, acknowledged or properly accounted for this viewpoint - and he most certainly does not do so in the post above.

But, I mean... C'mon.

Jim claims that Krugman "is a liberal who's been **right**" all the time - so obviously I should be gushing praises of the New York Times' bloviating moron pretending to be an economist.

But here's my question... If Krugman has been "right" so damned often... On what?

As far as I can tell, Krugman has done a fairly decent job of hacking apart his previous writings and pretending/claiming to have been right all along well after the fact, which his sycophantic followers obsequiously lap up with each vapid post, but has he actually been "right"?

No. Not so much...

I keep a great number of reasons why Krugman is a moron on hand constantly specifically to counter idiots like this Jim character.

Here are a few of my Krugman posts:
Possibly my favorite example of Krugman being oh-so-right about everything is when he decided to agitate for a housing bubble shortly after the tech bubble burst and subsequent 9/11-related recession:
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

-Paul Krugman, August 2002
Uhh... Oops!

The real problem here is, as I explained to Jim, Paul Krugman - and really all Keynesian economists - lacks a functioning theory of capital.

They start with consumption (as Jim did) and fail to understand the role of prices & entrepreneurs in market coordination. They also fail to see how various laws actually effect people's behavior, and most importantly, they don't grasp the limitations of their own methodology - and thus they regularly mistake statistics based on weak aggregated data (not to mention predictions based on models incorporating that weak data) with the reality of how people actually act... whereas far better economists don't make that mistake.

Krugman is also regularly guilty of the Broken Window Fallacy, Parmenides Fallacy, Excluded Middle/False Dichotomies, and any number of other serious logical problems - at least in virtually every article of his I've ever had the misfortune of reading... and I've read far more of his writing than I'd care to recall.

...I'm not sure if I really even need to bother touching on Jim's brilliant statement about Krugman having won a Nobel Prize - as if that guarantees that he knows what he's talking about.

Arguments from Authority are pretty crap to begin with, and when the "authority" is Paul Krugman, you should probably just lobotomize yourself right from the start. It will definitely save you time. Note that many of the economists I reference regularly have Nobel Prizes too... F.A. Hayek, Milton Friedman, and James Buchannan for instance (Buchannan I rarely call out by name, but his work in Public Choice Theory comes up constantly in my writing between the lines)... But ya know what? Slavishly believing what someone says because of some awards they've won is stupid, and when people like Jim rely on those ideas, it demonstrates to me that they care more about theatre than about quality reasoning.

More importantly to me, around 163 years ago, Fredric Bastiat perfectly explained the difference between the good economist & the bad economist:
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."
This actually describes Krugman's bad economics pretty much to a T.

So no... My response to Jim isn't; ZOMG "Paul Krugman is a librulllll!!". I don't really care if he's a liberal - except to the extent that his poorly-constructed political philosophy has turned him into a completely worthless hack as an economist.

What I care about is that Paul Krugman is a f**king idiot.

Hilariously, Jim read my response - which included much of the points I've just made - and responded:
"First, you haven't addressed how I entirely debunked your pdf, and it's ludicrous attempt to blame the Great Depression solely on monetary policy. So, you're ditching that entire line of argument means that my original comment still stands.

Second, re: Paul Krugman - you are correct that Krugman suggested creating a bubble in housing to overcome the effects of the dotcom bubble. But what you fail to note, because it destroys your argument, is that Krugman later also correctly predicted the bubble was growing out of control - and wasn't heeded. Spam filter isn't letting me post links, so google "Krugman on the US housing bubble " (youtube video).

Krugman also predicted that Obama's stimulus was too heavy on tax cuts and too light on direct stimulus, and might result in a flat slow growth rather than faster growth needed. google "
Krugman: Obama's Stimulus Doesn't Go Far Enough".

So, I've refuted your statement re: Krugman. Now please refute those two specific statements. Or, kindly get your worldview in touch with reality."
Yes. How thoroughly have I been refuted. Jim's genius knows no limitations... Alternatively... Here's my actual response:

You did nothing of the sort. You lamely pointed to Paul Krugman, who you claim "debunked" "my" PDF. You didn't even read the PDF in question, you didn't address a SINGLE argument made by Rothbard, you didn't cite a single contradiction to his historical analysis, your knowledge of economics is so woefully minute that you wouldn't even begin to comprehend his economic analysis...
PS. Krugman only "predicted" the housing bubble was way out of control looooong after other economists (i.e. Mark Thornton) had been saying so for years. And as an added bonus, Mark Thornton never advocated blowing up a bubble in the first place - nor did he pretend, as Krugman has done countless times, to not understand how monetary expansion produces bubbles.

Krugman doesn't get to have it both ways, after all. Either he was right that Alan Greenspan, then chair of the Federal Reserve could create a housing bubble via monetary inflation... OR... He's right that monetary expansion has nothing to do with booms & busts as he also likes to claim. They can't simultaneously be true (and since the first statement is empirically true, then we can be damn sure the second is false).

The other point is that the stimulus "didn't go far enough"? Well... That'd only be true if you fundamentally have no clue how prosperity & economic growth occur - which Krugman has demonstrated multiple times that he doesn't.

"Spending", by which I (and Krugman) mean consumption, does not produce economic growth, government spending least of all. Robert Barro has estimated, and history certainly bears him out on this that the true "multiplier" for government expenditures is about 0.8 - meaning we lose about 20% on all government spending initiatives.

There is no multiplier greater than one as Krugman would have you believe, and more over, there is utterly no logical way that there could be in any circumstance. Government gets its money from taxes only to pay off bureaucrats, favored industries, political allies and buddies, not to mention the army of administrators... long before it uses tax money for so-called "productive" purposes like building roads or what-have-you. Besides which, very little of government expenditures go towards that kind of neutral infrastructure anyway. Most of it goes to bombing brown people or straight out wealth transfer.

ALL of this is based on broken window fallacy reasoning... Krugman's favorite. For example on September 14th, 2001, Krugman wrote:
"These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack like the original day of infamy, which brought an end to the Great Depression ? could even do some economic good.

...So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects.

First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending."
Unfortunately, I'm going to guess that you haven't got the slightest clue why this is such a retarded comment coming from an economist (especially a "nobel prize winner").

So I'd encourage you to read up on the Parable of the Broken Window, and on the essay from which it was taken, "What is Seen and What is Not Seen".

No, I stand by my original claim that Krugman is a f**king idiot. If you'd like to attempt to make an argument on economics that wasn't propagated by a useless hack, then by all means... fire away."
Unfortunately, Krugman is so far out of step with reality - as discussed on this blog time & time again - that it's not really worth the debate. But here I am "having" the debate with people like Jim because they are ultimately comprise the terrifically ignorant throngs who support all sorts of economically destructive policies.

I've spent too much time reading the comments on Paul Krugman blogs, but I encourage you to go over to one of his posts some time and peruse the user-generated content for a few minutes as objectively as you can.

Here's a sample from "Lloyd" on November 23rd, 2008:
"Wow. Tbat’s the kind of insight that clarifies like Patton in WW deuce!

The kind of insight that might get a guy a Nobel Prize.

Go Krugman!

Believe me... This is quite typical, if not even a little above par for the level of critical thinking and intelligence found among Krugman's readership. But Jim... Oh boy... Jim gets on board with a ridiculously stupid premise (i.e. economic growth comes out of people buying stuff - with no thought given to where the "stuff" comes from, where the money comes from or what is being bought) right out of the gate, and then he rams is stupidity home with a banal combination of arrogance and unwillingness to even make an attempt at understanding a non-strawman viewpoint.

I can't be sure whether or not Krugman creates these tools, or if they're just drawn to him like a flies to a bugzapper, but my god they are dumb.


Anonymous said...

I assume that you realize merely on the level of credentials you don't measure up to Paul Krugman on paper. I'm not personally a Paul Krugman fan, but he has PhD. in economics from MIT and is a professor of economics at Princeton. You have a B.A. in percussion from a state school in the Midwest. You're not as credentialed. That's clear. The only way I can figure that you believe yourself qualified to make the assertions that you do (most of which are just name-calling)is that you are a narcissistic idiot. Nice flat cap, douche.

Sean W. Malone said...

Ya know... I debated whether or not to post that comment. I moderate the comments on this blog mostly because I get a lot of spam compared to legitimate comments, but anyone who makes a valid argument can usually get through.

The above is not quite spam... It's not quite trolling... But it isn't a legitimate argument or point either.

Arguments from authority were even covered in the very blog post this comment is attached to... and of course, quite unlike Anonymous' comment, my calling Krugman an idiot and then backing up arguments against his positions with sound reasoning and facts doesn't make for an ad hominem fallacy at all.

Noting that Krugman is an idiot is unnecessary, that's true... But sometimes it's just the right thing to do.

Since I clearly provided examples of moments where I think it should be clear to anyone that it's a relatively accurate statement (i.e. arguing to blow up a bubble in housing, later writing against the very idea that it's possible for the Fed to create bubbles, arguing that the destruction of the WTC towers was "good" because it would create economic activity, etc.), I don't even feel like it should be that controversial.

Of course... Since I have a BA from a state school (and a Masters from a prestigious East Coast private school... both in composition, by the way, not percussion), I guess I'm not qualified to use my own brain and the literacy I developed when I was 3 or 4 years old to parse good from bad arguments.

Yep... For the record, Anon's counter argument can be summed up by: "Ph.D, Nobel Prize, Princeton. Douche."

There's a true winner for ya.

Thanks for making my point, Anonymous.

Anonymous said...

I agree that the school you went to is not the be-all-end-all with regard to the merits of someone's argument. (Ditto for the Nobel) But, comparing your resumes, I would tend to give Krugman more weight.

Let me make a point here. An ad hominem attack (for those who don't know) is an attempt to discredit a proposition by attacking a person's character. Let's assume the proposition you are trying to discredit is "Paul Krugman and his fans support an accurate view of economics"
ad hominem attack 1: Krugman fans are sycophants
ad hominem attack 2: Paul Krugman has "a tiny brain" (puerile and irrelevant. Neandertal men had significantly larger brains than homo sapiens)
ad hominem attack 3: Paul Krugman is "shifty-eyed and slow-witted"
I can't decide whether this is name calling #1 or ad hominem attack 4: ". . . Krugman is a moron . . ."
Clearly name calling: "Paul Krugman is a f**king Idiot"
Name calling: Krugman fans are "tools."

The distinction between ad hominem attacks and name calling is tenuous here which is not a good indicator for your argument.

This unwitting Jim is quite the strawman you've set up to ultimately get at Krugman. Whose economics you dismiss summarily (with no nuanced treatment of his argument at all. It makes you look like a ranting fool, and it makes your last sentence particularly ironic: "he rams is[sic] stupidity home with a banal combination of arrogance and unwillingness to even make an attempt at understanding a non-strawman viewpoint."
I don't doubt that your research was thorough, but you have your Krugman strawmen in a row: Jim, Krugmans argument regarding the Fed, etc. write (and seem to think) like an arrogant, and unwittingly self-contradictory blogger. Here is a prime example.
You say Krugman's M.O. is "hacking apart his previous writings and pretending/claiming to have been right all along." If i read between the lines you are saying that Krugman reprints the things he has been right about in order to indicate that he has been right. your rebuttal "but has he been right?" is an ad hominem attack. And the proposition "Paul Krugman has never been right" is absurd.

I read your other posts re: Krugman as a fraud. Your writing is partisan hackery. Hate to be the bearer of bad news. Paying lip service to the idea of political neutrality a la O'Reilly's "No Spin Zone" doesn't make it true.

All that being said. Stop being a dick and use your drive and research skills to make some real, good nuanced argument that isn't just an attempt to discredit a high-profile liberal and some of his dumb followers. And drop the condescending tone. It's trite in blogs.

Sean W. Malone said...


Anonymous is back making an attempt at a real point. Good stuff... Well, I'll make an attempt at a real response then.

1. You can give Krugman all the additional "weight" you want, but if arguments from authority are what interest you, then there's no reason you should rely on my word for a single thing I'm saying anyway. As I've noted a dozen times or more - everything I've written on economics and more is backed by many dozens of highly competent economists who strongly disagree with Krugman's theoretical & methodological viewpoints. These economists also have Ph.Ds in Economics from highly prestigious universities, many have or had if deceased teaching posts at other well-respected universities, and quite a good number of them also have Nobel Prizes.

Incidentally - I know a number of these economists personally.

This is first off, why arguments from authority get you nowhere, and secondly why trying to compare my personal credentials against Krugman's is hardly a winning point. Krugman also has a nationally syndicated column on economics in a widely read newspaper and I have a blog which I primarily keep to try to keep from going utterly insane.

There are quanititative & qualitative differences there but not a damn bit of it means that Krugman is actually any good at being an economist - or maybe to be fair, any good at opining on certain aspects of economics. I'm sure he is quite good at the highly specialized areas of international trade theory on which basis he won his Nobel for instance. He's just truly abysmal at general theory.

At any rate, as a friend of mine put it, it doesn't matter how one comes upon the knowledge, it's how effective one is at using it and Krugman has repeatedly shown that he isn't.

2. The difference between your original post, Anonymous, and the usage of insults within my posts on Krugman - particularly the one above - is that your point utterly falls apart without the insults and personal attacks, because it is fundamentally based on those attacks, where as mine does not.

Your entire first point relied on discrediting me personally - from strangely misrepresenting my education (omitting years of self-study and professional work around the topics I normally opine on in the process, I should ad), to commenting on my levels of narcissism and even my hat choice. Now, not only were your attacks poor and mostly incorrect (or purely matters of aesthetics), they also didn't constitute any form of counter argument. The same is true of much of the post I'm currently responding to.

However... There is nothing in my post that relies on me calling Krugman or Jim, or anyone else, any kind of a name in order to make my point. It's just style and tone. By citing examples of me using insults in the post, you hope to make the point that I rely on them - you haven't remotely demonstrated that.

Take out every single one of them and I stand behind the arguments being made 100% - and there's the big difference. be con't.

Sean W. Malone said...

3. As Jim is a real person, he is not - in fact - a straw man. Additionally, I've been having discussions with people and paying specific attention to the writings and yes, to the comments, of Paul Krugman for over 4 years now and to my experience Jim is a fairly representative sample.

Part of the problem is that he - like Krugman - starts with a view of the economy that entirely misses how production happens. It lacks a robust capital theory, and over-uses aggregation & statistics in processing economic data. That in turn, has put people like Krugman (and a lot of other economists) in a position where they actually have roughly a 180o twist on how economic growth comes about.

Again, this is hardly something you need to rely on me to explain. It just so happens that I am capable of explaining it because I've spent years studying it and years professionally in part working in brining economic education to a wider audience through media.

4. Perhaps you didn't actually read what I wrote about Krugman hacking apart his earlier writings to later pretend to have predicted things he did not predict, but the examples are peppered throughout his NY Times columns.

What I mean specifically is that Krugman will take little pieces of his earlier writings, and ignore the context or his original meaning, in order to claim ex post facto that he said or believed something that he clearly did not say.

Now... You can go to the tape on all sorts of things and find out this stuff on your own. I have done so and provided links to that effect. Krugman contradicts himself regularly.


Also, I provided what I felt was a couple relatively clear examples. Krugman, for instance, in 2002 clearly advocated that Federal Reserve Chairman use his power to inflate a housing bubble. This was objectively Krugman's policy recommendation at the time.

This means two things. 1. Krugman's foresight on these issues is seriously questionable, and more importantly, 2. that Krugman actually does recognize that the Federal Reserve is fundamentally a major cause of booms & busts through inflationary monetary policies.

Contrast that with Krugman of 2011, where he vehemently denies that the Fed has anything to do with the creation of the housing bubble, and instead blames it all on greedy bankers. And then he points to articles in 2007 where he finally started recognizing that the housing bubble was a serious problem and claims that he predicted the coming collapse all along. Never mind the fact that his original policy recommendations were at the heart of its cause or that much better economists had been warning of the real dangers as early as 2002 and 2004 when Krugman was still demanding more inflation (as he is today).

Likewise, I'm not sure how you can accuse me of all people of "partisan hackery", but while we're on that note one way you can tell that Krugman the economic columnist is a pitiful economist is because if you match up what he said during the Bush years, and what he's saying now, his partisanship is crystal clear. When Bush was in office, Krugman wrote of high deficits and Federal spending as unsustainable and dangerous for the economy (and before you say we weren't in a recession, in 2002, we most certainly were), but he cheerleads the same type of policies instituted by Obama.

I am, by contrast consistent.

Running $1.5+ trillion dollar deficits is an extremely bad idea regardless of which party is in power charging the national credit card.

So... Yeah, I guess I'm a big ol' hack then.

Sean W. Malone said...

And lastly... Thank you for your concern, but my drive & research skills go to much more broad use than picking on poor Dr. Krugman.

This blog has over 250 posts at this point, many of which on economics, but only a handful are on Krugman... I figured that with his millions of dollars, his professional speaking engagements, his popular NY Times column and his pile of obsequious readers, he could probably stand up to the occasional fact & logic check from critics like myself.

Of course... Considering Krugman refuses to actually debate with his critics directly, maybe he can't.

If you find my writing style trite, don't read it, it makes little to no difference to me. I do the blog as a hobby and as a repository of ideas. I certainly hope that occasionally other people get some benefit from it - but if they don't - well, it's not really for them anyway.