Thursday, 31 May 2012

Krugman...Or When You Get Stuck Change the Subject


I have just watched Paul Krugman's master class in punditry (note the use of this term rather than the term "economics" - there wasn't a great deal of economics in evidence) from yesterday evening's Newsnight. You can follow the link from the Great Man's blog .

What struck me wasn't that Krugman succeeded in putting the case against "austerity" although this was the billed intention but that whenever he reached the point where he might trip over his own argument he shifted the subject.

When confronted with the moral argument that debt means having something now rather than later - meaning of course that we, given the likely timescale for debt repayment, are taking that from future generations - Krugman chooses instead to talk about the lack of graduate job prospects. Rather than addressing the real issue raised - government debt as deferred taxation, Krugman chooses to talk about a relatively minor labour demand issue.

And then when Angela Leadsom raises supply side considerations - how to help the economy create jobs - Krugman lapses into accusations that Ms Leadsom and others are ideologically motivated and using the current crisis to shrink the size of the state. At no point in this does Krugman respond to or consider whether there are any supply side constraints. He waffles vaguely that there's no evidence of supply side constraint (in the US) and states baldly that the whole problem is a matter of demand. More seriously - from the point of debate - he accuses others of insincerity and exploitation without evidence.

On one level this was great telly - a clever pundit parading his skills and, no doubt, successfully flogging a few of his books (the real reason for his presence, of course). But, given that Krugman is billed as a "Nobel prize-winning economist" it was really disappointing that he chose political and ideological arguments as the basis for his opposition to austerity rather than economics.

Maybe that's because he doesn't have an economic leg to stand on? I wanted to understand the arguments - the economic arguments - against austerity but instead got political argument. And, whenever the challenge got close to denting that argument, Krugman either made ad hom attacks or changed the subject. We had the spectacle of two very polite 'opponents' allowing this man to attack them rather than responding to the serious points they raised. Rather disappointing really.



Frances Coppola said...

SImon, there is no general argument either for or against austerity as such. It entirely depends on your view of the economy.

Krugman's view is that in a depressed economy austerity makes matters worse, and if you take Greece as an example it is evident that this is correct - austerity is indeed driving the economy deeper into recession. But the UK is not Greece, and Krugman's argument for fiscal stimulus to me looks quite thin in the present economic circumstances.

Leadsom's argument in essence is that the UK is not so deeply recessed that austerity would have this effect, and that supply-side reform is necessary. She has a point, but I personally think she went too far with the crowding-out argument. There is not much evidence that the private sector at the moment is able or willing to expand into the gap that would be left by the sort of public sector cuts she wants to see. Once the private sector is evidently expanding, public sector cuts may well be appropriate to allow it space. At the moment I'm not convinced - not least because we have the Eurodisaster on our doorstep and if that blows up all bets are off. It seems to me that making radical changes to the balance between private and public sector when there is a potential catastrophe on the horizon isn't all that bright an idea.

Jackart said...

He's just a shill for punk-keyensian head-bangery. His Nobel isn't for macro.

Yup. Good post.