There was a time, not really that long ago, when I respected Paul Krugman as much as I did any economic thinker. I suggest the following profile, from New York Magazine.
What’s Left of the Left: Paul Krugman's Lonely Crusade
Economics is closer to psychology or sociology than a "hard science." Six economists can study the same moment and history and develop at least seven plausible explanations for economic events. Mathematical models have proved themselves wrong more than once. The 2008 Federal Reserve unemployment predictions are merely one example: way, way off the mark.
Krugman's fatal flaw, one empirical economists of all persuasions repeat, is having too much confidence is how he reads the data -- while being too dismissive of how other people read the same numbers. It's a cockiness that screams, "I am smarter than everyone else, and I know it."
As Benjamin Wallace-Wells writes:
I am inclined towards the Austrian School of economics, one that recognizes models are useful, but never definite. We can model things, but humans are more complex and events constantly conspire to ruin our projections. In other words, I wouldn't dare predict the path of our economy because there are too many variables. You can really only predict an idealized, closed-system model. But, Krugman views economics as such a closed system.I brought up the work of the legal scholar Cass Sunstein, now with the Obama administration, who has studied the radicalizing effects of ideological isolation—the idea, born from studies of three-judge panels, that if you are not in regular conversation with people who differ from you, you can become far more extreme. It is a very Obama idea, and I asked Krugman if he ever worried that he might succumb to that tendency. “It could happen,” he says. “But I work a lot from data; that’s enough of an anchor. I have a good sense when a claim has gone too far.”This is the claim of a supreme self-confidence. To say “I am anchored in the data” is really to say “I understand exactly what the data mean.” But it is also the logical extension of a particular view of human nature, one equipped with such a clear view of the way society should be arranged that it can’t comprehend the greed, weakness, and compromise that forestall it. There is society, beautifully. And then there are people.
Krugman wasn't always this way. He was a trailblazing moderate, willing to admit there are too many variables in a globalized economy -- and his award-wining research explored globalization as a potential positive force.
I still respect his intellect, but it has been clouded by political convictions. Maybe that's okay, but I would rather have economists explaining the moderate route and pressuring our politicians to behave responsibly. Rejecting compromise only makes sense if you view the "other side" as evil, dangerous, trolls. Sadly, I fear Krugman is now among the chattering class that cannot (publicly, at least) advocate for compromise and moderation. He's now certain his political and economic vision is the only way things should be.
I've co-owned several businesses. That real-world experience has often taught me that models and theories don't always function "properly" in the economy. The real world isn't pleasantly predictable.
A simple example that ideological economists struggle to address:
Economists generally agree that there is a point at which taxes dissuade productivity and innovation. What is that point? The reality is, we only know it when we reach it.
Cutting taxes when they are too high definitely can and does encourage productivity and innovation. There is a floor below which any additional cuts are not stimulatory. What is that floor? We don't know until we reach it.Krugman is certain he knows the answer to what tax rates should be. He is certain his models predict what the minimum wage should be. He implies that government can be "perfected" if only the right economic models were used -- his.
A study I've cited before reveals that Krugman has flipped his positions on various economic policies depending on the occupant of the White House and the congressional leadership. See the following post: