Paul Krugman is being accused of hypocrisy for calling for an extension of unemployment benefits when one of his textbooks says “Generous unemployment benefits can increase both structural and frictional unemployment.” I think he can be rescued from this charge, if we recognize that economics is not like (some conceptions of) the natural sciences, in that its theories are not universally applicable but rather of only local and temporal validity.
I see from Mark Thoma that Chris Dillow is doing battle with the usual
idiotssuspects, who are once again accusing me of hypocrisy or something for saying that increased unemployment benefits would, under current conditions, reduce unemployment. “But your textbook says that UI raises unemployment!”
The substitution of “suspects” for “idiots” is from Krugman’s original post.
I won’t speak for Robert Murphy but if you read my post, I didn’t accuse Krugman of hypocrisy. (Or of being an idiot.) What upset me about Krugman’s blog on unemployment benefits was his eagerness to trash Robert Barro for thinking that unemployment benefits increase unemployment. That is not a ridiculous idea. Yes, as Krugman points out, if Keynesian economics is correct, there could be a negative effect on unemployment via aggregate demand. But to vilify someone for suggesting that unemployment benefits encourage people to be unemployed is strange given that you yourself have made the same point in your textbooks.
Krugman is the most prominent economist in America. He does a great disservice to economic literacy when he neglects to mention the potential offset from the incentive effects of unemployment insurance. Economics is about tradeoffs. We may disagree about the magnitudes of different effects. But to pretend that unemployment is something akin to a free lunch because the unemployed will spend their benefits and create jobs via an increase in aggregate demand is, well, not good economics. Nancy Pelosi said something like that once. I expect that of Nancy Pelosi. I expect better of a Nobel Prize winner. I expect him to explain that it’s not straightforward. It’s complicated. Politicians like simple. And magical. And the free lunch. I like to think our job as economists is to dispel magical thinking and to remind people of the unlikelihood of free lunches.
I understand that it’s defensible to suggest that the aggregate demand effect could outweigh the incentive effects of unemployment benefits in times of bad recession or sluggish growth or the zero lower bound or whatever. What is disturbing about Krugman’s public writing is that he doesn’t mention the possibility that there might be offsetting effects. We know he understands this–he has written about it in his textbooks. For me, that makes him worse than a hypocrite. It makes him a poor communicator of economic understanding to people who trust him to deliver truth. And his view of his intellectual opponents is part of what is wrong with public discourse.