Did Krugman read "Human Action" recently?

Economics Economics Questions
1

I stumbled over an interview of Krugman published in a German Newspaper (Handelsblatt) today:

http://www.handelsblatt.com/politik/nachrichten/oekonomie-nobelpreistraeger-krugman-will-alte-vwl-weisheiten-beerdigen;2510582

I had to take a look since it was titled “Krugman wants to “bury” old wisdom of economics”.

The more I was surprised hearing Krugman talking about the irrationality of human behavior in this interview and how it is not considered in today’ economical models. Including his own which earned him the nobel prize.

The first question in the article is:

-How shall economics look like in the the future?

Krugman answers: “Economic science must be based on a more realistic description of human behaviour - not as up to now on the assumption, that we all act rationally.”

-How fast will this discipline change?

…Krugman expresses hope that a new generation may take up a new view - but it will take time…

And so on. It was simply “amazing” to read this interview. He is referring then to Samuelson and his work in 1948 and that it is more useful to understand the crisis of today than the book of the last 10 years are in comparison, the basic mathematical models being developed those days, he talks about the insufficiency of mathematical models to describe the economy and ends up in saying that anyway, also he is using mathematical models to bring order into his thoughts - for example with neo-keynesian models. And adds: “But I do not fully believe in them.”

-Why don’t you believe in them?

Krugman answers: “Because all of the actors act rationally and there is no room for irrational ardor. But these models are still useful. You just cannot blindly trust them, but you have to understand their limits. That’s a difficult balancing act.”

Some of you are rather fortunate not to be able to read the whole interview. Life is suffering.

However, just wanted to share parts of this interview since I may just not understood correctly what Krugman is up to. I do not follow at all what he is publishing but just would assume that as an economist he should be familiar with what the Austrians have to say.

Or did he finally start reading “Human Action”?

2

Not every economist or person believes in human rationality. There are other enemies of liberal thinking who didn’t believe that human rationality exists. Take fascism for instance. Fascists thought that human rationality was overrated and that the state should run their lives. Krugman may just be advocating that a socialist commonwealth must be maintained to run people’s lives since he thinks they can’t make decisions for themselves, or, at least guide them.

3

Mises believed that all human actors behaved rationally (rational in the economic sense, mind you), and so Krugman’s conclusions can be considered entirely different. Krugman is claiming that old models failed to account for human rationality; in other words, rational humans would have followed his models, and only irrational humans wouldn’t. An Austrian would disagree; rational humans failed to follow his models because his models do not allow for divergence in decision-making.

4

The term rationality is rendered useless in any sense but the economic sense. Those who don’t use it in the economic sense are usually conflating it with intelligence. What Krugman is saying is that people aren’t intelligent, and must therefore be directed into action by the benevolent and omnipotent state and liberal (in the Pelosi sense) economists. He attacks rationality because he dislikes the theories put forth by “conservative economists” like Robert Lucas. You can’t blame him for doing so, since Lucas’ theories are absurd. Unfortunately, his criticism is just that, as his solution is no solution at all.