Paul Krugman takes on the 1921 argument

Economics Economics Questions
1

Krugman has issued the following jab, straight, hook combo today to Woods’ oft-used 1921 argument:

Every once in a while I get comments and correspondence indicating that the right has found an unlikely economic hero: Warren Harding. The recovery from the 1920-21 recession supposedly demonstrates that deflation and hands-off monetary policy is the way to go.

But have the people making these arguments really looked at what happened back then? Or are they relying on vague impressions about a distant episode, with bad data, that has been spun as a confirmation of their beliefs? …

http://krugman.blogs.nytimes.com/2011/04/01/1921-and-all-that/

http://krugman.blogs.nytimes.com/2011/04/02/more-on-1921/

http://krugman.blogs.nytimes.com/2011/04/02/even-more-on-1921/

I would be interested in a reaction from the community here.

2

Whatever the case is, his policies wouldn’t have helped. All his policies would amount to is a rearrangement of capital. Besides, Krugman isn’t much of an historian (his fellow at the NYT says he is known for twisting and distortion of facts and sources) and not much of an economist, from what I understand.

3

  1. He still proves that it is the correct policy under certain situations

  2. He does not explain why it was not the correct policy during the great depression

  3. He does proivde a good point about the debt levels of the time period as opposed to now

  4. The biggest problem in his proposed solutions is that he doesn’t fully understand the cause of the recession

  5. He doesn’t give an extensive reason about why it is that such policies wouldn’t work today, he just proved that the conditions were different

4

Yes, Harding cut taxes and slashed spending but he expands the tax base.
I think falling wages will help to recover the economy.
Interesting book :
http://ia700306.us.archive.org/5/items/wagesandhoursin00boargoog/wagesandhoursin00boargoog.pdf

Oh and… Keynesian stimulus never helped economy to recover.

http://www.economicthought.net/2010/06/interest-rates-1920-21-depression/

5

“indicating that the right”

What is this so-called right? Yeah, I know the answer. But I wonder how this differentiation between left and right people helps him build his argument. From here then, he, of course, takes into account some not-so-much relevant data as a premise. He is so boring, so elementary and so wrong. An economist who starts his argument with “right” or “left” is a sure sign for incompetence.

6

“An economist who starts his argument with “right” or “left” is a sure sign for incompetence.”

Exactly, it seems so often he starts with political ideology then moves on to economics.

7

Either a recession is a recession or it is something else.

All he has done is play a game of gotchya by drawing some arbitrary distinction that makes the 1921 recession a different kind of recession.

8

Maybe try emailing Tom Woods and asking him to respond to this on his blog?

9

Apparently he wanted to attack all kinds of history this weekend…not just in his blog, but in his actual column too…this was from yesterday as well:

Krugman mangles history — and I reply

(by Bill Anderson)

10

People like Krugman are utterly insane. Saying that cutting 61 billion dollars from a multi trillion dollar budget is the end of the goddamn world and amounts to “austerity” is so ludicrous and so mindbogglingly crazy that I am just mad right now. GODDAMN MAD

11

Blows my mind. Just shows how desperate people are to live in Fantasyland that these neo-Keynesian beliefs survive.

12

“An economist who starts his argument with “right” or “left” is a sure sign for incompetence.”

It’s a sure sign of competence as a writer for NYT.

13

I do not know how come I have till today missed the fact that the name of his blog is “The Conscience of a Liberal”. He is a joke. Do his blog postings represent his opinion as an economist, as a political philosopher or as a “citizen who in his free time writes about politics”? I am sure that it is not the first one…

14

It’s actually been speculated (on these forums, I believe, and apparently elsewhere) that his economist wife is the true author behind the majority of his columns. Doesn’t excuse him, but it’s possible he’s not the one who leans so far out in left field.