include $_SERVER['DOCUMENT_ROOT']."/include/analytics.php"; ?>include $_SERVER['DOCUMENT_ROOT']."/include/people-header.php"; ?>
Paul Robin Krugman (born February 28, 1953) is an American New Keynesian economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times.
Born: February 28th, 1953
Quotes: 72 sourced quotes total (includes 11 about)
|Words (count)||67||12 - 252|
|Search Results||22||10 - 90|
By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.
If there were an Economist's Creed, it would surely contain the affirmations 'I understand the Principle of Comparative Advantage' and 'I advocate Free Trade'
If growth in East Asia is indeed running into diminishing returns, however, the conventional wisdom about an Asian-centered world economy needs some rethinking.
So the story of the baby-sitting co-op is not a mere amusement. If people would only take it seriously—if they could only understand that when great economic issues are at stake, whimsical parables are not a waste of time but the key to enlightenment—it is a story that could save the world.
… politics determine who has the power, not who has the truth.
I wonder whether the gods read Slate. If so, they know what to do.
If there is one single area of economics in which path dependence is unmistakable, it is in economic geography – the location of production in space.
What saved the economy, and the New Deal was the enormous public-works project known as World War II, which finally provided a fiscal stimulus adequate to the economy's needs.
If economists ruled the world, there would be no need for a World Trade Organization. The economist's case for free trade is essentially a unilateral case- that is, it says that a country serves its own interests by pursuing free trade regardless of what other countries may do.
To make a harsh but not entirely unjustified analogy, a government wedded to the ideology of competitiveness is as unlikely to make good economic policy as a government committed to creationism is to make good science policy, even in areas that have no direct relationship to the theory of evolution.
The idea of comparative advantage—with its implication that trade between two nations normally raises the real incomes of both—is, like evolution via natural selection, a concept that seems simple and compelling to those who understand it. Yet anyone who becomes involved in discussions of international trade beyond the narrow circle of academic economists quickly realizes that it must be, in some sense, a very difficult concept indeed.
When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right.
The best you can say about economic policy in this slump is that we have for the most part avoided a full repeat of the Great Depression. I say “for the most part” because we actually are seeing a Depression-level slump in Greece, and very bad slumps elsewhere in the European periphery. Still, the overall downturn hasn’t been a full 1930s replay. But all of that, I think, can be attributed to the financial rescue of 2008-2009 and automatic stabilizers. Deliberate policy to offset the crash in private spending has been largely absent.
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. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.
There are three kinds of writing in economics: Greek-letter, up-and-down, and airport.
Many of those who reject the idea of economic models are ill-informed or even (perhaps unconsciously) intellectually dishonest.
This is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.
Many liberals have changed their views in response to new evidence. It’s an interesting experience; conservatives should try it some time.
Sometimes economists in official positions give bad advice; sometimes they give very, very bad advice; and sometimes they work at the OECD.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing.
Many of the stories economists tell take the form of models—for whatever else they are, economic models are stories about how the world works.
Things could have been even worse. This week, we managed to avoid driving off a cliff. But we’re still on the road to nowhere.
Until the emergence of Democrat leader John Kerry, Paul Krugman had virtually become the leader of the opposition in America, an unusual position for an academic economist.
In short, the success of macroeconomic activism, in both theory and practice, has made it possible for free market microeconomics to survive--again both in theory and in practice.
Economists can often be remarkably obtuse, failing to see things that are right in front of them. But sometimes a bit of obtuseness is not entirely a bad thing.
It is a bit funny, but also quite sad: Those who preach the doctrine of global glut are tilting at windmills, when there are some real monsters out there that need slaying.
The history of economic geography of the study of the location of economic activity is more like the story of geological thought about the shapes and location of continents and mountain ranges.
Despite its flaws, Peddling Prosperity has much to recommend it. There is no book written for a lay audience that explains the economics profession with more perception or clarity than this one.
...and Newt [Gingrich] — although somebody said "he’s a stupid man’s idea of what a smart person sounds like," but he is more plausible than the other guys that they’ve been pushing up.
Krugman [...] was not cheerfully advocating a housing bubble, but instead he was glumly saying that the only way he could see to get out of the recession would be for such a bubble to occur.
When you are dealing with the revolutionary power, it’s important to realize that it will make whatever argument advances that goal. So, there should be no presumption that the claims makes any sense in their own terms.
We’re now in the seventh year of a slump brought on by Wall Street excess; the wizardly job of “allocating the economy’s investment resources” consisted, we now know, largely of funneling money into a real estate bubble.
Paul Krugman has been doing a lot of very effective writing attacking non-economists writing about economic matters. Paul is speaking for the whole profession in a very effective way and addressing the most important questions in social science.
The world is full of self-organizing systems, systems that form structures not merely in response to inputs from outside but also, indeed primarily, in response to their own internal logic. Global weather is a self-organizing system; so, surely, is the global economy.
So you can take your pick as to which Mundell you prefer; but the Nobel committee basically honored Mundell the younger, the economist who was iconoclastic enough to imagine that Canada, of all places, was the economy of the future--and was right.
The serious lesson of the antics in Argentina, then, is that the big issues of monetary economics--fixed vs. flexible exchange rates, whether countries should have independent currencies at all--are still wide open. It's an eternal controversy, and not even the pope can resolve it.
If you want a simple model for predicting the unemployment rate in the United States over the next few years, here it is: It will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.
Do some homework to find out what these people really want. I’m not talking about deeply hidden motives; usually the true goal is in the public domain. You just have to look at what the people said before they were trying to sell it to the broad public.
A temporary evolution of ignorance, a period when our insistence on looking in certain directions leaves us unable to see what is right under our noses, may be the price of progress, an inevitable part of what happens when we try to make sense of the world's complexity.
In the course of describing my formative moment in 1978, I have already implicitly given my four basic rules for research. Let me now state them explicitly, then explain. Here are the rules:1. Listen to the Gentiles 2. Question the question 3. Dare to be silly 4. Simplify, simplify
It’s a tribute to the importance of Friedman’s work that questions about his legacy bear so directly on contemporary policy issues. But for that reason it’s also important not to engage in hagiography. Friedman was a great economist, but like every other great economist in history, he was also wrong about some important things.
Paul Krugman is a respected trade theorist. But he does not speak authoritatively on subjects on which he has no expertise. Monetary economics is not his field of expertise. Krugman’s research background does not qualify him as an authority on Milton Friedman’s work. … Friedman’s reputation is intact despite Krugman’s deplorable efforts to denigrate him and his contributions.
The raw fact is that every successful example of economic development this past century – every case of a poor nation that worked its way up to a more or less decent, or at least dramatically better, standard of living – has taken place via globalization, that is, by producing for the world market rather than trying for self-sufficiency.
Consider John Kenneth Galbraith or Lester Thurow, both leading economists in the view of the general public, both with all the formal qualifications, both totally ignored by the academic mainstream. Or consider Robert Mundell, who is still revered for his contributions to international monetary theory, yet whose later incarnation as the father of supply-side economics has similarly been ignored.
We’re living in a Dark Age of macroeconomics. Remember, what defined the Dark Ages wasn’t the fact that they were primitive — the Bronze Age was primitive, too. What made the Dark Ages dark was the fact that so much knowledge had been lost, that so much known to the Greeks and Romans had been forgotten by the barbarian kingdoms that followed.
We will not achieve the understanding we need, however, unless we are willing to think clearly about our problems and to follow those thoughts wherever they lead. Some people say that our economic problems are structural, with no quick cure available; but I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.
International trade in goods and services has expanded steadily over the past six decades thanks to declines in shipping and communication costs, globally negotiated reductions in government trade barriers, the widespread outsourcing of production activities, and a greater awareness of foreign cultures and products. New and better communications technologies, notably the Internet, have revolutionized the way people in all countries obtain and exchange information.
The whole subject of the liquidity trap has a sort of Alice-through-the-looking glass quality. Virtues like saving, or a central bank known to be strongly committed to price stability, become vices; to get out of the trap a country must loosen its belt, persuade its citizens to forget about the future, and convince the private sector that the government and central bank aren’t as serious and austere as they seem.
I know that when I look at today’s Mexicans and Central Americans, they seem to me fundamentally the same as my grandparents seeking a better life in America. On the other side, however, open immigration can’t coexist with a strong social safety net; if you’re going to assure health care and a decent income to everyone, you can’t make that offer global. So Democrats have mixed feelings about immigration; in fact, it’s an agonizing issue.
As was the case with Smith's original observations on specialization and market size, we shall need a tractable analytical framework to make progress on this issue. The two Helpman and Krugman monographs have amply shown that when Smith's ideas are developed within a clear theoretical framework, they contain some surprising implications. They are, I think, outstanding illustrations of why we work to construct useful, explicit theories rather than being content with good rules of thumb.
It’s a great honour to be asked to give this talk, especially because I’m arguably not qualified to do so. I am, after all, not a Keynes scholar, nor any kind of serious intellectual historian. Nor have I spent most of my career doing macroeconomics. Until the late 1990s my contributions to that field were limited to international issues; although I kept up with macro research, I avoided getting into the frontline theoretical and empirical disputes.
There is no economic policy. That's really important to say. The general modus operandi of the Bushies is that they don't make policies to deal with problems. They use problems to justify things they wanted to do anyway. So there is no policy to deal with the lack of jobs. There really isn't even a policy to deal with terrorism. It's all about how can we spin what's happening out there to do what we want to do.
To be a progressive, then, means being a partisan—at least for now. The only way a progressive agenda can be enacted is if Democrats have both the presidency and a large enough majority in Congress to overcome Republican opposition. And achieving that kind of political preponderance will require leadership that makes opponents of the progressive agenda pay a political price for their obstructionism—leadership that, like FDR, welcomes the hatred of the interest groups trying to prevent us from making our society better.
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. … There was a Twilight Zone episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don't need it, we need it in order to get some fiscal stimulus.
Whether the influence of increasing returns on trade and geography is rising or falling, one thing is clear: much was learned from the intellectual revolution that brought increasing returns into the heart of how we think about the world economy. It wasn't just that economists could make sense of previously puzzling data, we found ourselves able to see things that had previously been in an intellectual blind spot. Many people contributed to this process of enlightenment; I'm proud to have been a part of the journey.
Here, then, is a revised version of Marshall's rules: (1) Figure out what you think about an issue, working back and forth among verbal intuition, evidence, and as much math as you need. (2) Stay with it till you are done. (3) Publish the intuition, the math, and the evidence - all three - in an economics journal. (4) But also try to find a way of expressing the idea without the formal apparatus. (5) If you can, publish that where it can do the world some good.
Critics of fiscal stimulus pointed out that the U.S. stimulus had failed to deliver a convincing fall in unemployment; stimulus advocates, however, had warned from the start that this was likely to happen because the stimulus was too small compared with the depth of the slump. Meanwhile, austerity programs in Britain and elsewhere had also failed to deliver an economic turnaround and, in fact, had seemed to deepen the slump; supporters of these programs, however, argued that they were nonetheless necessary to head off a potential collapse of confidence.
If you grew up in the 80s you probably remember Voltron. Although the show often had convoluted plotlines, it would somehow always end with Voltron (a super-powerful robot formed from five mechanical lions) facing off against a monster called a "Robeast". Voltron had plenty of weapons, but he would invariably strike the killing blow with his "Blazing Sword". Eventually the show became kind of routine, but to a four-year-old, it was pure gold. In the econ blogosphere, a similar dynamic has played out over the last few years. Each week a Robeast will show up, bellowing predictions of inflation and/or soaring interest rates. And each week, Paul Krugman...I mean, KrugTron, Defender of the Blogoverse, will strike down the monster with a successful prediction of...low inflation and continued low interest rates. Goldbugs, "Austrians", New Classical economists, and harrumphing conservatives of all stripes have eagerly gone head-to-head with KrugTron in the prediction wars, and have been summarily cloven in twain.
Whose fault is the replacement of serious discussion of world trade by what I have come to think of as "pop internationalism"? To some extent, of course, it is the result of basic human instincts: intellectual laziness, even among those who would be seen as wise and deep, will always be a powerful force. To some extent it also reflects the decline in the influence of economists in general: the high prestige of the profession a generation ago had much to do with the presumed effectiveness of Keynesian macroeconomic policies, and has suffered greatly as macroeconomics has dissolved into squabbling factions. And one should not ignore the role of editors, who often prefer what pop internationalists have to say to the disturbingly difficult ideas of people who know how to read national accounts or understand that the trade balance is also the difference between savings and investment. Indeed, some important editors, like James Fallows at The Atlantic or Robert Kuttner at The American Prospect are pop internationalists themselves; they deliberately use their magazines as platforms for what amounts to an anti-intellectual crusade.
I cannot forbear to lengthen an already long paper by adding some remarks about what Paul Krugman calls the "new international economics" (Strategic Trade Policy and the New International Economics, MIT paperback, 1986) and "new trade theory" (in "New Trade Theory and the Less Developed Countries," a paper submitted to the Carlos F. Diaz-Alejandro memorial conference held in Helsinki, August 23-5, 1986). The "new" theory rests on economies of scale. As I told Krugman at Helsinki, I find it a bizarre notion that increasing returns in international trade are new. I developed it at length in my 1953 textbook, based on the 1929 article of John Williams, reprinted in the AEA, "Readings in the Theory of International Trade." Jan Tinbergen developed it in his textbook, International Economic Integration (1954). I recall the joy in Cambridge, Massachusetts, when Kenneth Arrow made increasing returns respectable by formalizing Alfred Marshall's description of long-run decreasing costs historically with his paper on "Learning by Doing," a paper rapidly incorporated into international-trade theory by those who need formal models to understand the intuitively obvious. I confess to some irritation over Krugman's defense of his international-trade theory as new because it offers a well-worn truth in equation form.
I grew to understand how the Chicago School argued, and I can do it myself, but they were lying about how they arrived at their conclusions. I could see that they were obviously lying, but I was just annoyed and shocked that they continued to lie about how they got to the questions that they got to. And then it gradually occurred to me that if this is true, then maybe the whole profession is lying, and that belief has gotten stronger as I have gotten older. People say, "We do econometrics, and that tests our hypotheses." Baloney. We do theory. I was just rereading last night Paul Krugman's famous article where he tries to introduce geographical considerations into economics, and it is a very skillfully done article. It's rhetorically very skillful. I can show you how it works rhetorically, but it is complete nonsense scientifically, not because it is wrong but because it is arbitrary. There are a zillion other ways of formalizing geography in economics that would come to opposite conclusions to those he comes to, and yet he's kind of airily saying that this is a contribution. Then there are a thousand other articles modifying that. It doesn't get anywhere: they modify it and get completely different conclusions. If you change your assumptions, you get different theorems. So the whole exercise, it gradually dawned on me, was complete nonsense, so that's what turned me. But it is unfair and kind of stupid to say that I stopped doing economics.
Now I’m not saying that Keynes was right about everything, that we should treat The General Theory as a sort of secular bible - the way that Marxists treat Das Kapital. But the essential truth of Keynes’s big idea - that even the most productive economy can fail if consumers and investors spend too little, that the pursuit of sound money and balanced budgets is sometimes (not always!) folly rather than wisdom - is as evident in today’s world as it was in the 1930s. And in these dangerous days, we ignore or reject that idea at the world economy’s peril.
I am proud of my generation of policy economists. You know their names: Walter Heller, Milton Friedman, John Kenneth Galbraith, Arthur Okun, Herbert Stein, Peter Drucker, and many more. But, as some sage has said, science progresses funeral by funeral. Paul Krugman is the rising star of this century and the next, and the world beats a path to his door. International finance is his thing, but that is only one of the many strings to his fiddle. The World Bank, the IMF, the Bank of Japan, and the Boston Fed all seek to tap his fountain of wisdom and new ideas.
I was explaining Nordhaus’s work in a graduate course I was then teaching on the economic theory of natural resources. As a strong believer in economics as a handicraft industry, I mentioned, teasingly, to the class that this remarkable piece of work had been done by an extraordinarily powerful research apparatus, not to be undervalued by advocates of Big Economics: one professor and one undergraduate research assistant. When the class was over, one of the students came shyly up to me and said, “I was the undergraduate research assistant.” It turned out to be Paul Krugman. Teaching can be an unexpected pleasure.
But the honest truth is that what drives me as an economist is that economics is fun. I think I understand why so many people think that economics is a boring subject, but they are wrong. On the contrary, there is hardly anything I know that is as exciting as finding that the great events that move history, the forces that determine the destiny of empires and the fate of kings, can sometimes be explained, predicted, or even controlled by a few symbols on a printed page. We all want power, we all want success, but the ultimate reward is the simple joy of understanding.
More than four years after the financial crisis began, the world's major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. And the reason is simple: we are relying on the same ideas that governed policy in the 1930s. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature, and the appropriate response.These errors have taken deep root in public consciousness and provide the public support for the excessive austerity of current fiscal policies in many countries. So the time is ripe for a Manifesto in which mainstream economists offer the public a more evidence-based analysis of our problems.
In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there’s a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I’d argue, is a counter-counterreformation.
The appeal to the intellectually insecure is also more important than it might seem. Because economics touches so much of life, everyone wants to have an opinion. Yet the kind of economics covered in the textbooks is a technical subject that many people find hard to follow. How reassuring, then, to be told that it is all irrelevant -- that all you really need to know are a few simple ideas! Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them.
Will the tax cut destroy America’s prosperity? Probably not. As Adam Smith observed, there’s a deal of ruin in a nation. We have a huge, resilient economy that can survive and recover from even quite bad government policies. Yet while the tax cut may not be a matter of economic life or death, it is a very serious issue. For one thing, like it or not, the tax cut has become the central political issue in the United States right now. Conservatives who want to reshape America view passage of a large tax cut as a first step toward realizing their vision. For that reason, those who do not share this vision feel, rightly, that they must oppose the plan.
Economists, like everyone, have their political biases, but these are by no means as strong an influence on what they are willing to consider as you might think. For example, one might have thought that strongly liberal economists like, say, James Tobin would be at least mildly sympathetic to the views of radical economists who draw their inspiration from Marx, or of heterodox economic thinkers like Galbraith. After all, in such fields as history and sociology the Marxist or post-Marxist left has long received a respectful hearing. And yet you don't find this happening: liberal economists are almost as quick as their conservative colleagues to condemn heterodox leftist ideas as foolish it was the liberal Robert Solow, not Milton Friedman, who defended orthodoxy in the bitter "capital controversy" with British radicals.
The hangover theory, then, turns out to be intellectually incoherent; nobody has managed to explain why bad investments in the past require the unemployment of good workers in the present. Yet the theory has powerful emotional appeal. Usually that appeal is strongest for conservatives, who can't stand the thought that positive action by governments (let alone—horrors!—printing money) can ever be a good idea. Some libertarians extol the Austrian theory, not because they have really thought that theory through, but because they feel the need for some prestigious alternative to the perceived statist implications of Keynesianism. And some people probably are attracted to Austrianism because they imagine that it devalues the intellectual pretensions of economics professors. But moderates and liberals are not immune to the theory's seductive charms—especially when it gives them a chance to lecture others on their failings.
I do not think that word “compromise” means what Mr. Ryan thinks it means. Above all, he failed to offer the one thing the White House won’t, can’t bend on: an end to extortion over the debt ceiling. Yet even this ludicrously unbalanced offer was too much for conservative activists, who lambasted Mr. Ryan for basically leaving health reform intact.Does this mean that we’re going to hit the debt ceiling? Quite possibly; nobody really knows, but careful observers are giving no better than even odds that any kind of deal will be reached before the money runs out. Beyond that, however, our current state of dysfunction looks like a chronic condition, not a one-time event. Even if the debt ceiling is raised enough to avoid immediate default, even if the government shutdown is somehow brought to an end, it will only be a temporary reprieve. Conservative activists are simply not willing to give up on the idea of ruling through extortion, and the Obama administration has decided, wisely, that it will not give in to extortion.So how does this end? How does America become governable again?