On Another Columnist

Needless to say, Chinese investment in Maytag is precisely what we want from China's mercantalist dollar surplus, as long as U.S. government doesn't subsidize Maytag's yield, as state and local governments have often subsidized foreign investment in the U.S. in the past, and as long as U.S. laborers, consumers and investors remain free to produce and distribute washing machines in competition with Maytag if they don't like the new management.

We don't want Chinese authorities exchanging their forcible impositions on Chinese citizens for the forcible impositions of U.S. authorities on U.S. citizens, but that's what we actually get. Chinese monetary authorities create entitlement to consume Chinese produce (Chinese currency) while U.S. authorities create obligations of U.S. taxpayers (Treasury securities), and the authorities exchange these forcible impositions for their mutual benefit.

Yes, there's an international class war, but "labor" and "capital" are not the two classes. Labor is capital (a means of production), after all. The two sides are "statesmen" and "subjects". The statesmen are all on one side, and the subjects are on the other.

I guess I do need to say it. Ralph Raico says it better here.

Karl Marx and Nixon had a baby, and named it Paul. That's not an epithet, read up on Karl Marx's personality, methods, and writing style. I was struck by how much he reminded me of Krugman.

And kudos for having the courage to call out a member of your profession. Non-leftist economists are always being too polite to economists who are being intellectually dishonest.

An interesting backgrounder is the New Yorker piece here. I used to enjoy reading Krugman before his elevation to sainthood as a NY Times columnist, but his partisanship and economic flip flops changed all that. I wonder if the influence of Wells is truly as much as Larissa MacFarquhar paints in the article.

We’ve taken care of everything,
The words you read, the songs you sing
The pictures that give pleasure to your eyes
It’s one for all, all for one
So we’ll work together, common sons
Never need to wonder how or why

Krugman’s NYT credo. As a high priest, he entitles himself to macro environmental "changes of heart." Don't fret; he'll likely change it again.

Has Famous Economist changed his mind?
I can't say, because I've never met Famous Economist. And I'm unable to read minds or to gaze into other person's souls.

And you realize that is not your role as More Famous and Far More Insightful Economist. ☺

(It also presumes Less Famous Economist isn’t the Scarecrow)

Intent and incentives. Follow both. Attempt to divine neither.

Beware of people who know everything and understand nothing.

Mcwop,

I suspect that Fisher's view is slanted toward what benefits his ilk with little regard for the rest of us. Stiglitz puts it thus:

"The reserve country can be thought of as exporting T-bills; but the export of T-bills is different than the export of cars or computers or almost anything else: it does not generate jobs."

But, as we are currently experiencing, the stock market has become less dependent on domestic factors. So Fisher has a point about the importance of the global view's importance.

It may also be worth mentioning though that Fisher's so-called 'savings': "In 2006, that charge was $1 trillion. GDP was $13 trillion. That’s 7% of GDP right there!" Has vanished. Savings though may be different things to different people.

Thank goodness you told us who Famous Economist is. Otherwise we could never have guessed!

It is interesting though how much false information is part of our national conversation, and what some people are allowed to get away with.

The major media is practically a fourth branch of the government. Its purpose is not to expose lies and question power, rather its purpose is to spread lies and promote power.
Science has been similarly corrupted.
Once the purpose of science was to answer questions.
Now conclusions are determined for political reasons, and "scientists" like Krugman are tasked with shamelessly finding intellectual cover for those conclusions.
I find it to be disgusting.

And here is a good example:

Fisher: We do whatever it takes. The goal is to do better than the global equity return. One of the things that I endlessly preach in the book is that you can’t really even understand America today if you don’t spend your time thinking globally. The world is the laboratory where you learn how to engage everything local.

People always say that the trade deficit will cause the dollar to be weak. Right now, the deficit is a little more than 5% of GDP, and this trend that disturbs people. This is the reason to think global. If you look at Britain, you’ll see that their trade deficit, as a percentage of GDP, is the same as America’s. No one can argue that this makes the dollar weak, and this makes the Sterling strong.

This is a perfect example of the global approach teaching you that something everyone says about America is false.

Bernard: Why do people see the trade deficit this way?

Fisher: People misunderstand what causes it. The trade deficit is always marketed in America and around the world as a problem.

Bernard: So the trade deficit good?

Fisher: Yes. When we have a current account deficit, it means cash flow is coming to America. The current account deficit happens first. Once the money is here and gets spent, that creates the trade deficit. Current account deficits show that the world thinks it’s better to invest in America than to invest in Africa. It’s better to invest in America than to invest in Germany. Germany gets the surplus. We get the deficit. That money is actually good for America.

Bernard: So in Germany, it’s the opposite.

Fisher: Yes. A healthy surplus is not good. Let me give you a parallel. You’ve heard that Americans have a 0% savings rate. This is true if you use the government savings rate data, which is a broken index.

The savings rate data do not include capital gains, which is the main way people save here. If you believe the savings rate data, Bill Gates became the richest person in the world by never saving. There is an accounting charge in the savings rate data called the imputed rent charge. This is an estimate the government makes of how much homeowners should be paying to rent their homes from themselves. The theoretical justification for this is that it’s kind of a depreciation replacement.

In 2006, that charge was $1 trillion. GDP was $13 trillion. That’s 7% of GDP right there! America saves more than anybody in the world. The savings rate data doesn’t measure it. Once you start getting these concepts, you less likely to buy in to that ‘we’re all going to die because of the trade deficit’ nonsense. There’s this unfounded fear that a terrible day of reckoning is coming.

http://www.equitiesmagazine.com/interview_ken_f...

Bottomline is that Krugman likes his new found fame as a partisan Democratic polemicist. THAT COMES FIRST on his list of priorities. Being an economist with integrity is now a distance second...or third or fourth for all we know.

Nowadays, he picks and chooses which parts of his economic knowledge to use in his writings. He will no longer tell liberals that (while he agrees with their general sensibilities) he simply cannot and will not cross the line into economic sophism and nonsense...as he once did in the 90s. He gladly joins them now and tells them what they want to hear.

He LOOKS for ways to disagree with other economists. He is no longer happy to lock arms with all economists on areas of agreement and stress those points so as to not puzzle or upset his readers. He wants their happy, eager eyeballs on him now at all costs.

But in the end, one HUGE difference I have noticed with Krugman and economists who aspire to be like him on one side and others like our site hosts on the other side is NOT that Krugman understands market failure any better than the others like Drs. Boudreaux and Roberts but rather that he takes his evidence of possible market failure (which has simply come to mean "suboptimal" by his standards and tastes) in the sterile abstract too seriously and gives the even bigger danger of government failure to soundly address the problem as intended only a fleeting consideration before disregarding it. Markets fail to be perfect? USE THE BLUNT INSTRUMENT OF GOVERNMENT to make the corrections according to theory. No questions asked. EVER. That's like seeing the need to give someone a hip replacement and then giving the duty to a gorilla.

Yes, that's quite an irony. The tunnel vision about market failure and the need to "fix it" no matter how minute or complex or subjective the case the may be is at a perfect 180 with the unflinching trust in the implementation process that could THEORETICALLY fix it as planned.

What?? No DanielKuhn here yet to defend Krugman? I figured he'd be the first one here to overanalyse and tell us why a spade isn't really a spade or that if it quacks like a duck and walks like duck...it isn't really a duck.

John V,

I was wondering the same thing.

Oh, there he is, right on cue.

Got to see what our intrepid contrarian has to say.

There's not much to respond to. Don calls it a "flip-flop" when in the very 2005 article Don links to, Krugman explains why he has different views of the Japanese situation and the China situation.

Instead of actually engaging that argument (which you would think Don would be happy to do, since he's been talking about currency markets all week), Don goes off on a tangent about how Krugman somehow doesn't like skillful foreign investment but likes reckless foreign investment. Anyone who reads the 2005 article Don links to knows that issue doesn't even come up.

So I ask - what, precisely, is there for me to respond to? I can't even make heads or tails of Don's point about reckless vs. skilled investment.

I think Don's point is that Krugman changes his tune for ideological reasons and is not consistant at all. This is transparent to anyone who takes inventory of Krugman's pronouncements across time, depending on which party-of-majority occupies which branches of government.

I think that John V's comment is a shot at your frequent behavior of rushing to the defense of Krugman on this blog; shielding Krugman from any criticism and even interpreting Krugman-speak for us to desguise the guy's inconsistancies. Furthermore, he's probably wondering what had taken you so long to post.

I can't say, because I've never met Famous Economist. And I'm unable to read minds or to gaze into other person's souls ~ Don Boudreaux

I'm thinking that Don is either admitting his limitations here or he's taking an indirect shot at someone such as yourself. I'm no mind reader either, but I'm curious as to what your take is; you have these abilities, don't you? In fact, I do recall you demonstrating these very abilities in the past.

And I've gotta say - part of why its always frustrating for me is that it would be nice for Don - by all accounts a brilliant economist - to actually engage Krugman's arguments. That's what you get on Scott Sumner's blog with this revaluation thing. Scott runs through the points of the argument itself. He doesn't go on some tangent about putting up tariffs between counties or about Krugman serving an ideological purpose. Sumner actually gets into the exchange rate concerns and either agrees with him or disagrees with him (lately it's been disagreeing). I guess I'm just pointing this stuff out because I wish Don would actually engage like that.

"I think Don's point is that Krugman changes his tune for ideological reasons and is not consistant at all. This is transparent to anyone who takes inventory of Krugman's pronouncements across time, depending on which party-of-majority occupies which branches of government."

Oh I understand Don's position - I'm just saying I disagree with it. Which seems strange in this case because Don doesn't even mention the two reasons that Krugman listed for why he treats China and Japan different - he sort of just declares it a flip flop. The same with the concern over the debt that Krugman had during the Bush years which he doesn't have now. The reasons why he views it differently are pretty obvious - Keynesians view debt during boom periods differently than they view debt during deep recessions. Don could just say "I disagree with Krugman's analysis, but I understand why he treats the Bush debt and the Obama debt differently". Instead he plays this game of takling about partisanship.

"I'm thinking that Don is either admitting his limitations here or he's taking an indirect shot at someone such as yourself."

I can't read minds either. All I can do is read the column itself. My powers go no farther than that. I find it very strange that when Don reads the column and says what he think it means you call that "admitting his limitations", but when I read the column and say what I think it means I think I can "read minds" or that I have some special insight. Could you explain to me why you understand what I'm doing and what Don is doing differently. It seems to me that we're doing precisely the same thing.

"Krugman from any criticism "

And this is also intersting. If we go back I'm confident that I disagree with Krugman far, far, far more than Don agrees with Krugman. If there's one person on here that's not a broken record when it comes to Krugman, its me. I can't even recall the last time Don agreed with Krugman (much less some of you others). I disagreed with Krugman just a couple posts back on the tariff he was suggesting to force the Chinese to revalue their currency. I've also disagreed with Krugman recently on the health insurance mandate. I'm not the one that chooses to base every other post on my blog about this guy. This oughta be called Cafe Krugman - it's more about Krugman than it is about Hayek.

Why even engage Krugman's arguments when Don is simply pointing out that this NYT economist is arguing with himself?

The whole point is that yes, if you ignore his explanation for WHY he treats China and Japan differently or WHY he treats the Bush and Obama deficits differently it looks like he's arguing with himself. But that seems like a strong justification for thinking about the explanation he provides!

You presumably hold opinions on things that are conditional on context, right? You will wear a coat when it's cold but you will not when it is warm. Does it make sense for me to just throw up my hands and say you flip-flop when you wear a t-shirt in June but a coat in January?

You invent Krugman's contradictions when you ignore the actual argument!

Weather and clothing as an anology for context and position/opinion? You seem to be comparing apples and bok choy here, Daniel.

As for the context in which Krugman contradicts and argues with himself: it seems to me to depend on where Democrats are at in relation to their ability to legislate and policy-make. That would be my whole point that I'm trying to make. I cannot speak for Don but that's pretty much what I've taken away from his recent posts.

"As for the context in which Krugman contradicts and argues with himself: it seems to me to depend on where Democrats are at in relation to their ability to legislate and policy-make. That would be my whole point that I'm trying to make."

I guess I'm just curious why you privelege that explanation over the explanation that Krugman provides.

It's an especially strange explanation for something like this where he is unconcerned about Japan during both the Reagan and Clinton administration but concerned about China during both the Bush and Obama administrations. And although my understanding of Asian domestic politics is a little rough, I'm pretty confident that neither the Republican nor the Democratic party held any elected offices in either Japan or China during this period.

It seems to me you need to do mental gymanstics to make the point you're making. I don't mean to impugn your gymanastic abilities - I just wish you would explain to me why the existence or absence of a Democratic majority is relevant here.

>>I guess I'm just curious why you privelege that explanation over the explanation that Krugman provides.<<

I just believe this to be the case and I feel that PK has morphed from being a serious economist to a less serious economist who is more focused on policy -- policy that extolls the supposed virtues of regulation and egalitarian redistribution of wealth -- than he is about embracing markets.

>>It seems to me you need to do mental gymanstics to make the point you're making.<<

As a fellow competitive gymanist, I'm flattered that you can recognize my talents. However, I do realize my place on the platform during the ceremony: below you, to your left, and wearing the bronze...and that's if it was just us two competing.

"I just believe this to be the case" is implicit in your earlier statement about what you believe to be the case. I'm more curious why.

This is going to go nowhere no matter how much time I would dedicate to digging up PK's earlier writings. He makes contradictory statements and seems to abandon some economic principles as it suits him and his pet policies and then adopts them as the 'context' changes. Need proof? I'm not providing any...this is my opinion and I'm not going to spend the time to, for example, show you where PK is both a weak-dollar proponent and a weak dollar worrier just six years apart only to have you dredge up a few qualifying words that you'll use to protect PK from criticism.

I think that's the only time anyone on here has ever claimed to be to my left.

Look, I appreciate your embrace of my illustration, but I still can't help noticing you didn't really address the question.

I did address your non-question/statement but just not to your satisfaction.

So you can read the attached quotes from the 2005 article mentioned and not see reckless (squandered) vs skilled (shrewd) investment.

"One difference is that, judging from early indications, the Chinese won't squander their money as badly as the Japanese did."

"The Japanese, back in the day, tended to go for prestige investments - Rockefeller Center, movie studios - that transferred lots of money to the American sellers, but never generated much return for the buyers. The result was, in effect, a subsidy to the United States."

"The Chinese seem shrewder than that. Although Maytag is a piece of American business history, it isn't a prestige buy for Haier, the Chinese appliance manufacturer. Instead, it's a reasonable way to acquire a brand name and a distribution network to serve Haier's growing manufacturing capability."

Seems fairly clear to me.

Dr. Krugman sees the two as different because he has abandoned economics and embraced populism.

How can you say the "issue doesn't even come up"? Of course it does -- and quite clearly.

According to Krugman, when it came to investing in the U.S., the Japanese squandered their money and the Chinese are unlikely to. Thus it was okay for the Japanese to invest here, but it's not okay for the Chinese to invest here. Krugman may not have called it "reckless" vs. "skillful," but that's the point he was making.

OK - perhaps I should clarify. In the article, Krugman highlights two things: (1.) currency issues, and (2.) the strategic (rather than merely symbolic) significance of some of China's acquisitions. I don't know why, but Don doesn't engage either of those points which formed the basis of Krugman's article. I agree with Krugman more or less on the first one, and probably disagree with him on the second. I have a feeling Don disagrees with Krugman on both, and would therefore have plenty to talk about - and yet he spent his time talking about something that Krugman doesn't really deal with in his article.

And of course you're the ultimate arbiter of fairness, always rushing to Krugman's rescue! Gotta save him from the dastardly Cafe Hayek writers!

I love that you're still parroting that in response to a comment where I didn't even defend Krugman from Don :)

On the planet from where you come from, of course, you didn't. But here on earth, we mere humans interpret it differently.

Krugman's ambition to be a celebrity has become a liability. He is as guilty as anyone of turning the health-care debate into a distorted fiasco. He made the admin-cost claim without recognizing the cost shifting and/or the Medicare fraud. He compared the US system to those of Switzerland and Japan without considering illness and injury rates. And then he held up the VA's medical system as a shinning example of efficiency when all the 60 Minutes crew was required to do to show the contrary was to ask the VA's top administrators a couple of questions. Turns out the VA's efficiency is the opposite of what Krugman claimed it to be.

Paul Krugman:

"You see, we actually have a real live case of impressive cost control in health care: the VA system. The CBO reports:
"'Adjusting for the changing mix of patients (using data on reliance and relative costs by priority group), the Congressional Budget Office (CBO) estimates that VHA’s budget authority per enrollee grew by 1.7 percent in real terms from 1999 to 2005 (0.3 percent annually).2 Though not the decline in cost per capita that is suggested by the unadjusted figures, that estimate still indicates some degree of cost control when compared with Medicare’s real rate of growth of 29.4 percent in cost per capita over that same period (4.4 percent per year)'."

Krugman again:
"So if you really think that Medicare as it is is doomed, why not propose converting it to a VA-type system as opposed to simply declaring it bankrupt and shutting it down? I mean, the standard argument — socialized medicine! loss of choice! — doesn’t seem to apply if the alternative is no health care at all."
----------------------------

And... from an article written about the 60 Minutes segment:

"Indeed,"60 Minutes" exposed delays of ten months to even have an application reviewed; delays of four (4) years if a veteran disagrees and appeals from the VA's decision on an application; snafus in governmental record-keeping which prevents vets from proving up claims; and, among other things, a backlog of over 1,000,000 unprocessed applications."

"In short, delay, delay, delay -- until many claims are resolved by the death of the veteran during the government's processing (or failure to process) the applications."

"Moreover, if the government cannot effectively and competently provide health and disability services to veterans through government-controlled VA care, some 1-million of whose applications are backlogged and still unprocessed at this time, then the government has no business with great hubris taking over, transforming, nationalizing, and socializing-by-new-bureaucracies, the delivery of health and disability services needed by 300-million Americans."
[Rees Lloyd, a longtime civil rights attorney, is an activist in veterans affairs.]

So unless Krugman's idea of cost control has to do with patients dying while waiting for approval for procedures and care, I think his research on this may have come up well short of competent. It is interesting though how much false information is part of our national conversation, and what some people are allowed to get away with. Krugman though, or the presenting of his partisan views as objective analysis, has a distorting influence that is proportional to his status as an economist. A distorting influence in other words that is misleading to a degree that is beyond any that I am aware of in my lifetime, and I am not young.

I went to Google to ensure my spelling of "Ellsworth Toohey". Krugman comes back as the third image suggestion.

Krugman sounds more and more like Confucious. We must rely on old ideas. Business is of no value......

"That argument is, to put it mildly, odd."

Oh, come on! Why didn't you say 'bizarre'? You know wanted too! LOL.

Back to the column...