Paul Krugman Quotes (1953-)

“One response to the failure of the Lucas project was the rise of New Keynesian economics. This basically went back to ad hoc assumptions about wages and prices, with a bit of hand-waving about menu costs and bounded rationality. The difference from old Keynesian economics was the effort to use as much maximizing logic as possible to interpret spending decisions. I find NK economics useful, if only as a way to check my logic, although it’s not really clear if it’s any better than old-fashioned Keynesianism.”

“The clear and present danger is, instead, that Europe will turn Japanese: that it will slip inexorably into deflation, that by the time the central bankers finally decide to loosen up it will be too late.”

“It remains to be seen whether the Occupy Wall Street protests will change America’s direction. Yet the protests have already elicited a remarkably hysterical reaction from Wall Street, the super-rich in general, and politicians and pundits who reliably serve the interests of the wealthiest hundredth of a percent.”

“Even when Econ 101 is right, that doesn’t always mean that it’s important – certainly not that it’s the most important thing about a situation. In particular, economists may delight in talking about issues where 101 refutes naïve intuition, but that doesn’t at all mean that these are the crucial policy issues we face.”

“...Exxon Mobil is a worse environmental villain than other big oil companies...Exxon, headed by Mr. Raymond, chose a different course of action: it decided to fight the science....And that's just what Exxon Mobil has done: lavish grants have supported a sort of alternative intellectual universe of global warming skeptics....the fact is that whatever small chance there was of action to limit global warming became even smaller because ExxonMobil chose to protect its profits by trashing good science.”

“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'”

“Real business cycle theory never got close to the world of policy—not even the most extreme conservative politicians were prepared to tell the American people to welcome recessions as part of the natural and optimal course of events. And instead of spreading its intellectual range, the movement became increasingly ingrown over time. Indeed, one observer described it as becoming like a fringe political movement that successively purges itself of the ideologically impure until only a handful of members are left.”

“Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.”

“In the late 1970s Lucas and his disciples worked feverishly, attempting to produce theoretical models in which firms and households can observe stock prices and interest rates, yet still be subject of the kind of rational confusion needed to create booms and slumps. They failed. The theory underlying a rational expectations business cycle just didn't work out. At the same time, it was becoming increasingly obvious that the rational expectation story didn't work in practice either. Here the difficulty is easier to explain: economic slumps last too long.”

“Over the past 70 years The General Theory has shaped the views even of those who haven’t heard of it, or who believe they disagree with it. A businessman who warns that falling confidence poses risks for the economy is a Keynesian, whether he knows it or not. A politician who promises that his tax cuts will create jobs by putting spending money in peoples’ pockets is a Keynesian, even if he claims to abhor the doctrine. Even self-proclaimed supply-side economists, who claim to have refuted Keynes, fall back on unmistakably Keynesian stories to explain why the economy turned down in a given year.”

“On the whole, the monetarism for which Friedman first became famous seems clever, brilliantly argued, but shallow—and perhaps even a bit disingenuous. Friedman's writings from that period have the feel of a smart man who knows what he wants to believe looking hard for supporting arguments.”

“Keynes was no socialist – he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was, given the time it was written, a conservative book.”

“The example of Galbraith is not an accidental one: in many ways, Galbraith broke important new ground in the relationship between politics and economics. He was the first celebrity economist (where the definition of a celebrity is the usual one: someone who is famous for being famous). His rise as a policy entrepreneur was one marker of the growing dominance of style (which he has in abundance) over substance in American political discourse, even among those who image themselves to be well informed about public affairs.”

“How could such a difficult, technical intellectual structure acquire the force first of a crusade, then of a dogma? [...] First, Lucas's approach to macroeconomics seemed to offer a way to heal a deep wound in the heart of economic theory. [...] When Lucas seemed to be able to do was derive business cycles from microeconomic model. [...] Second, the technicality and difficulty of Lucas's theory [...] was, in the world of academic economic, an asset rather than a liability. [...] Finally, we cannot ignore the role of political bias in making rational expectations macroeconomics attractive.”

“The right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling.”

“But the Hayek thing is almost entirely about politics rather than economics. Without The Road To Serfdom — and the way that book was used by vested interests to oppose the welfare state — nobody would be talking about his business cycle ideas.”

“I picked up a copy of Lionel Robbins’s 1934 book The Great Depression in a used book shop in Norwich.  It's quite revealing: judicious in tone, full of tables and facts, clearly meant to be seen as the work of a wise observer – indeed, a Very Serious Person.And utterly, utterly wrongheaded”

“Each individual family, then, does almost as well with a good rule of thumb as it would with perfect rationality—close enough to make perfect rationality an irrational goal. But now comes Akerlof's big insight: "near-rational" behavior and perfectly rational behavior have very different implications for policy.”

“My old teacher Charles Kindleberger used to say, “Anyone who spends too much time thinking about international money goes mad” — by which he meant that you start to believe subjects like the world’s choice of reserve currency aren’t just interesting and glamorous, but are what drives everything. They don’t.”

“Paul Krugman's attack on Brian Arthur ("The Legend of Arthur") requires a correction of its misrepresentations of fact. Arthur is a reputable and significant scholar whose work is indeed having influence in the field of industrial organization and in particular public policy toward antitrust policy in hightech industries. Krugman admits that he wrote the article because he was "just pissed off," not a very good state for a judicious statement of facts, as his column shows.”

“Critics of Paul Krugman call him acerbic and boastful, unfair on the attack and unwilling to make concessions on the defense, certain that he is correct, and always sure that those who disagree are mendacious or foolish (or both). And I cannot deny that these criticisms are accurate. But all these are outweighed by one fact: he is almost always--not always, but almost always--right. He is the closest thing to an heir to John Maynard Keynes we have today.”

“Krugman is right about democracy in a sense: Democracy is essentially one big organized act of bullying whereby a larger group bullies a smaller group in order to plunder it with taxes. The “Civil War” proved that whenever a smaller group has finally had enough, and attempts to leave the game, the larger group will resort to anything—even the mass murder of hundreds of thousands and the bombing and burning of entire cities—to get its way. After all, in his first inaugural address Lincoln literally threatened “force,” “invasion,” and “bloodshed” (his exact words) in any state that refused to pay the federal tariff , which had just been more than doubled two days earlier. He followed through with his threat. This is “the kind of nation I believe in,” says Paul Krugman on his blog.”

“I was just reading an excellent and appropriately approving account of your work. It tells of those who vigorously oppose. My admiration and my personal reward from what you do has no qualification, so it is with all those I wittingly know. Do realize that this is your worthwhile majority and that dissenters are an essential proof of your merit. I should be clear: your column is the best regular reading on economics and politics that I’ve encountered over the last seventy-five years and even a few more.”

“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.”

“Like clockwork every election cycle: Krugman forgets everything he wrote about inequality and legalized corruption in Washington, sides w/ the candidate most likely to give him a power job, and screams at the left for doing what primaries are supposed to do: vet the candidates.”

“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.”

“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.”

“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.”

“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.”

“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.”

“(Which writers — novelists, playwrights, critics, journalists, poets — working today do you admire most?) ...Because of “The Daily Show,” most of my reading time these days is consumed by journalists. Paul Krugman is always great. ...”