Krugman on Greece

Economics Economics Questions
1

I don’t usually read Krugman much anymore as he is a bit of a polemicist, and can be an annoying personality / pundit- this is aggrevated more because I don’t usually agree with his aesthetics or politics - so it does little good for me to read Krugman when I am apt to get hot headed. (For thr record there are a couple of Austrians who I tend not to read due to their polemical / confrontational nature, even though I am obviously apt to agree with them more than Krugman).

Anyway the article isn’t all that bad - and I actually do tend find at least some Keynesianism / post Keynesianism (though not usually the Krugman kind) more interesting than most economics out there.

Anyway here is the article:

http://www.nytimes.com/2012/06/18/opinion/krugman-greece-as-victim.html?_r=1

The good:

  1. He isn’t as polemical as usual

  2. He notices that the Euro is a failure

  3. He may genuinely care about this and not be thinking of any political motivations, which may be why I was able to actually read the article. It was palatable, even though I disagreed with the main points.

  4. This is an interesting and humanistic fact to point out and care about, and should not be ignored:

On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.

or

And this is an interesting paragraph as well:

So, about those Greek failings: Greece does indeed have a lot of corruption and a lot of tax evasion, and the Greek government has had a habit of living beyond its means.

Though how it helps his central case I have no clue

Now on to the bad:

Beyond that, Greek labor productivity is low by European standards — about 25 percent below the European Union average. It’s worth noting, however, that labor productivity in, say, Mississippi is similarly low by American standards — and by about the same margin.

or

Ask yourself, why does the dollar area — also known as the United States of America — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.

I could go on, but Mises is getting all glitchy on me, and let’s face it his answer is baffling and bizarre. But some things to point out

  1. He seems obsessed with making actual human action fit a random model, and than insisting we follow the model and mathematics, because he and most economists have an “austistic nerd” streak in them.

  2. He doesn’t see economics as a process that simply “shows” what happens. It has to be an active and useful"thing". He wants to turn Biology in to the practice of medicine.

  3. He is concerned soley with “the middle”, the bell curve, etc - he can not think of outside crises or major events wrecking his model. He has created a nice neat world that must conform. There are no “side effects” that are actually where the interesting things lay, no “unseen” worth caring for, and “the extreme” is somehow marginalized even though there is no logical reason why it ought be

  4. He is suffering from a narration fallacy and conformation bias with his selections (consider Florida, etc)

Whatever the faults of austerity, decentralization, or whatever he disagrees with may be - he is going to have to come to terms with the fact that no one can make such bold claims. And to think in a “meta” top down strong centralized / federalized approach is an act of insanity or supreme arrogance

Also a quick pondering:

He is adressing a newspaper audience, not a technical economic audience. What he says ought be good and true enough to print and critique off that printing. Appealing to “technical economics and professionals” is moot. If that is the appeal the economists in favor of this are simply wasting our time at best by wasting our time with newspaper articles, or feeding us dirty dirty propaganda at worst.

It’s funny that no matter how hard they try not to, and to keep “pristine, acadameic and Platonistic” economics or any social sience or humanity - these people are always going to be stuck dealing with real actual factual people, actors, and situations to “sully” their good disciplin. The sooner they realize the nature of this, the better off they will be.

2

Funny, I always thought he was on crack, not greece. But at least there’s general agreement he’s smoking something silly.

3

The thing about Krugman is that all those ‘good points’ you mention are points he’s highly likely to completely disregard/contradict/abandon in his future writings when it’s convenient for him.

This is why it’s hard for me to credit anything to him since he’s such a chameleon.

4

says the clapping chameleon

5

Crocodile…

6

What Krugman (and many, many other econonomists, as well learned as they are) leaves out are two things.

1)Sure Greeks aren’t lazy. They just suffer from the common Club Med problem of low capital investments resulting in lower overall productivity. You cannot call lazy the farmer plowing his field under the scorching sun with his ox team but no matter how hard he tries he will never be as productive as the farmer with a John Deere tractor. The issue of low capital investments in many parts of Europe has never been tackled seriously, mostly because economists from countries such France and Italy tend to fall prey to the old fallacities “Our workers earn less than the German ones because they are being exploited”. They are catering to socialist audiences after all. And of course German economists will just keep quiet about it.

2)The question of which part of GDP goes into welfare is a source of ferocious debate in Europe. Club Med countries tend to repeat the old mantra “Germany spend more than we do”. Data are conflicting (some countries tend not to be entirely honest about them, what a shock) but, for example, the Italian government recently had to admit about 15% of their GDP goes into retirement benefits, not including medical expenses. But that’s only part of the picture. In countries such as Sweden, Germany and The Netherlands, where capital investments are high, wealth is still being created, albeit at an ever slowing pace, welfare expenditure is less of an issue because, after all, the country is getting richer as a whole and can afford it. In countries like Italy, Spain or Greece, where wealth is being eroded at an ever increasing pace, welfare expenditures are more of an issue because, plainly put, the country as a whole is going broke. Also let’s not forget Club Med countries tend to be extremely wasteful when it comes to welfare: countries such as France and Greece have enormous bureaucracies whose sole purpose is handling payments. Sure, Germany has those bureaucracies too, and they are wasteful, but they pale in comparison to those in Rome or Athens. I wouldn’t be too surprised if the Greek government took the bureaucratic costs (“handling fees”) out of the picture.