Quotation of the Day…

by Don Boudreaux on September 7, 2011

in Myths and Fallacies, Trade, Work

… is, like yesterday’s QoD, from Krugman’s wonderful 1993 essay “What Do Undergrads Need to Know about Trade?”; the following quotation is found on page 123 of Krugman’s indispensable book Pop Internationalism:

[T]he level of employment is a macroeconomic issue, depending in the short run on aggregate demand and depending in the long run on the natural rate of unemployment, with microeconomic policies like tariffs having little net effect.  Trade policy should be debated in terms of its impact on efficiency, not in terms of phony numbers about jobs created or lost.

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Rayray September 7, 2011 at 9:48 am

Good Lord…

Mark September 7, 2011 at 9:59 am

Is that Paul Krugman or Bizzarro Paul Krugman.

Don Boudreaux September 7, 2011 at 10:02 am

The quotation today (and yesterday) are from Krugman, pre-NYTimes columnist.

L. F. File September 7, 2011 at 10:05 am

Can you provide some reference that shows his position on free trade – as expressed in the quote at least – has changed? I read him pretty regularly and cannot recall anything he has written in the last few years that would contradict the quote but I might have missed something.


Don Boudreaux September 7, 2011 at 10:08 am
L. F. File September 7, 2011 at 4:44 pm

Well he makes it clear that he is only speaking of a special case (“…these are not normal conditions”) suggesting a policy for the short run, and that it is a second best solution to making stimulus spending work better. I don’t see any big inconsistency with his book where he was not talking about policies for special cases but general principles for teaching students.

Krugman is not an ideologue who would suggest applying general principles dogmatically – he makes that clear in the article. Isn’t this a plus?


vikingvista September 7, 2011 at 4:57 pm

Apparently general principles are what Krugman lacks.

Methinks1776 September 7, 2011 at 5:43 pm


Try telling your wife that, as general principle, she should expect fidelity. Except on special occasions.

Methinks1776 September 7, 2011 at 5:46 pm

You don’t want to be ideologue.

rhhardin September 7, 2011 at 10:03 am

The reason you want people employed is not to keep them off the streets, but because they make a mutual profitable exchange – they get paid more than their effort is worth to them, and they get paid less than their work is worth to the employer.

That difference, a surplus, is new wealth.

Add it up over the nation, and it raises the nation’s standard of living by that much.

While fake jobs have no such mutual surplus, trade restriction creates its surplus at the expense of a greater surplus that it destroys.

Dick Fitzwell September 7, 2011 at 10:11 am

That’s funny. There’s a New York Times columnist with the same name as the guy you’re quoting!

brotio September 7, 2011 at 11:11 pm


John V September 7, 2011 at 10:58 am

Amazing what being a high profile political idol does to your judgment and integrity.

So sad.

dsylexic September 7, 2011 at 11:20 am

ditto with greenspan. ron paul has a signed copy of his famous article in the Objectivist from 1960s-he agreed he would not change one word.but his actions were in total contrast to what he had written.
power corrupts 99.99% of the people

John V September 7, 2011 at 1:01 pm


vikingvista September 7, 2011 at 7:34 pm

That’s because the epiphany he had from the housing crash is that free markets don’t self regulate.

Methinks1776 September 8, 2011 at 7:48 am

Particularly when they’re not free.

Fearsome Tycoon September 8, 2011 at 8:59 am

Indeed. It takes a visionary Federal Reserve chairman to crash them good and hard.

expat September 7, 2011 at 11:25 am

I remember the old Krugman too – anybody know what happened to him ? Is it just his NYT job ?

@TedBarnhart September 7, 2011 at 11:36 am

Here is another one from James Taranto on wsj.com

Former Enron adviser Paul Krugman takes note in his New York Times column of what he calls “the incredible gap that has opened up between the parties”:

Today, Democrats and Republicans live in different universes, both intellectually and morally.

“What Democrats believe,” he says “is what textbook economics says”:

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade):

unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Krugman scoffs: “To me, that’s a bizarre point of view–but then, I don’t live in Mr. Kyl’s universe.”

What does textbook economics have to say about this question? Here is a passage from a textbook called “Macroeconomics”:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

So it turns out that what Krugman calls Sen. Kyl’s “bizarre point of view” is, in fact, textbook economics.

The authors of that textbook are Paul Krugman and Robin Wells. Miss Wells is also known as Mrs. Paul Krugman.

John V September 7, 2011 at 1:18 pm

“Textbook Economics” is a vague term.There is a text book to give weight to (or at least allow room for some doubt for) almost any idea.

Moreover, Krugman is far too generous in projecting what he believes onto Democrats. Democrats as a voting bloc are far more economically illiterate when it comes to basic undisputed economics than Republicans. And I say this as someone who doesn’t think very highly of the basic economic sense and prowess of Republicans either. The parties are diverse groups and each party, and independents like me, has layers of voters with differing levels and sensibilities from academics and well educated down to ignorant know-nothings. Nonetheless, the chasm between the basic economics of Democratic economists like PK and most rank and file Dem voters is far greater than the one between “Republican economists” like Mankiw and Becker and most rank and file GOP voters.

Invisible Backhand September 7, 2011 at 12:10 pm

Ah, the dreaded ellipsis, meaning something has been left out. The whole bit about American unemployment is different. How conveeeenient, as the Church Lady would say.

Here’s the whole quote, it’s from Google Books so I can’t copy & paste.


The Other Tim September 7, 2011 at 2:17 pm

You don’t have a point. Are Americans somehow immune to the structural problems that plague Europe because we’re just magically protected, or something? Or do we simply suffer this problem less because our benefits are less generous, as Krugman himself wrote? In which case, when Krugman argues, as he is wont to do, that longer and bigger unemployment benefits mean more aggregate demand and thus more jobs, he is arguing that America move in the direction of the European-sized benefits which he claimed cause structural unemployment.

kyle8 September 7, 2011 at 4:04 pm

He always does this, he racks his brain trying to find some tangential fault to something Don or Russ has posted. Then he does a frantic google search to find some sort of citation that more or less fits, then he thinks he has scored some sort of points. Sad to see that he puts so much effort into it.

TedBarnhart September 7, 2011 at 4:37 pm

You beat me to the punch Tim.

Not to mention the fact of how out of context PK took Kyl’s “opposition” to an extension of benefits.

Eric September 7, 2011 at 12:16 pm

Another example of Dr. Krugman and Mr. Krugman… it’s a pity that Mr. Krugman no longer believes the work of Dr. Krugman to be relevant.

kyle8 September 7, 2011 at 4:06 pm

There is another person who has changed nearly 180 degrees. That is Ben Stein. Ben runs around now saying that we need more taxes, that is the only thing holding this economy back, for sure! our rates are too low!

When did Ben go batcrap crazy?

dsylexic September 7, 2011 at 4:28 pm

i think after peter schiffbots attacked him post 2008 ;-)

vikingvista September 7, 2011 at 4:59 pm

He’s always been a devout keynesiac. A Republican, and a keynesiac. His ugly call for taxing the rich is his way of supporting government spending.

L. F. File September 7, 2011 at 5:25 pm

I think Krugman’s comment on protectionism arguments applies:

“What’s the counter-argument? Don’t say that any theory which has good things to say about protectionism must be wrong: that’s theology, not economics.”


Methinks1776 September 7, 2011 at 7:02 pm

Do you actually comprehend anything you read or are you just copying and pasting random stuff?

vikingvista September 7, 2011 at 7:36 pm

Applies how?

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