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Edited on Sun Mar-22-09 12:25 PM by ProSense
1996:
Paul Krugman criticizes supporters of government activism as nothing but policy peddlers and economic illiterates, but describes himself as a liberal. What is MIT's prodigy really up to? Robert Kuttner | September 1, 1996 A generation ago, mainstream economics provided intellectual support for a mixed economy. Keynesianism gave legitimacy to macroeconomic intervention and public spending generally. The regulation of leading industries was anchored in the respectable economic ideas that many industries either were "natural monopolies" or displayed positive and negative spillovers not captured in market pricing. Social insurance and redistributive taxation enjoyed wide political support, and economists could explain why a more equal income distribution was good for growth as well as equity. Today, nearly all of the mainstream economics profession, whether nominally Republican or Democratic, has become the ally of laissez-faire conservatism. This has partly to do with the latent reverence for markets at the heart of neoclassical economics. It also reflects a professional resentment of non-economists as policy intellectuals who don't adequately appreciate markets. The career of Paul Krugman epitomizes, if in extreme form, how the conventions of the economics profession work to block a resurgence of liberal activism. Krugman is a self-described liberal. Yet his counsel on a wide range of issues is that nothing can be done. And he is far more charitable to very conservative fellow economists (Milton Friedman, Robert Lucas, Martin Feldstein) with whom he ostensibly disagrees than to fellow liberals such as Lester Thurow, Robert Reich, and Laura Tyson, whom he dismisses as pseudo-economists and mere "policy entrepreneurs." On close examination, his disdain is often less about serious policy differences than about membership in the right disciplinary club. As a sometime liberal, Krugman is resolutely critical of supply-siders (both as intellectual frauds and as nonmembers of the neoclassical fraternity). He has also written forcefully, including in this journal, on the widening inequality of income and wealth. But for the most part his message is that public remedy is a futile pursuit. Thus, Krugman is the conservative's ideal liberal. He ridicules some of the most effective spokesmen for liberal economic policies, and he generally ratifies the conservative view that not much is worth trying because the market economy is doing about as well as it can. <...> Thus, "we don't really know why productivity growth ground to a near halt. That makes it hard to answer the other question. What can we do to speed it up?" His chapter on the subject concludes, "Productivity growth is the single most important factor affecting our economic well-being. But it is not a policy issue, because we are not going to do anything about it." Krugman couples this dismal conclusion with a warning. Watch out for "popular nostrums" by people "on the left," as Krugman characterizes Robert Reich (a "non-economist") and Lester Thurow (an "economic heretic"), as well as for supply-side schemes by the likes of Arthur Laffer, an economist but a heretic, and Jude Wanniski "(a journalist)." According to Krugman, lumping the two groups together, "They offered free lunches--a chance to invigorate the economy without pain." How about income distribution? Again, Krugman confirms that the rich have indeed been getting richer and the poor, poorer. But he offers the same disabling combination of professional hauteur--mistrust everyone but licensed economists--and depressing modesty: We experts just don't know what to do. "The most important causes of the growth in the underclass," he avers, "like the sources of the productivity slowdown, lie more in the domain of sociology than of economics." Sociology is Krugman code for unscientific. Of course, smart sociologists like William Julius Wilson have implicated declining wages in the growth of an underclass--surely more of an economic cause than a sociological one. But for Krugman it logically follows that if his brand of economic analysis cannot find an explanation, then anyone proposing solutions is a quack. His chapter on income distribution, like the one on productivity, concludes with the same counsel of despair: "The growing gap between rich and poor was arguably the central fact of economic life in America in the 1980s. But no policy changes now under discussion seem likely to narrow this gap significantly." Nor does Krugman offer other remedies not under current discussion. <...> Krugman goes on to debunk the idea of pervasive downsizing, by adding up all the layoffs reported in a recent Newsweek, and calculating that they total only 1 worker in 300. He then turns around and attacks Reich for using "anecdotes rather than statistics." This is what psychologists call projection. Krugman cites as an example of a good representative of the Clinton administration--a fully credentialed one who does not play fast and loose with statistics--fellow Stanford economist Joseph Stiglitz, chair of the Council of Economic Advisors and author of a recent report that, in very delicate wording, computed that most newly created jobs were in occupations or industries that had historically paid "above median wages." This, of course, did not mean that the newly created jobs actually paid above-median wages. Stiglitz, threading his way between the administration's need to paint a rosy election-year picture and his own professional integrity, allowed as much. But Krugman blandly asserts, at least for the purposes of sandbagging Reich, that "Both the number of 'good jobs' and the pay that goes with those jobs has been steadily rising." However, in a different context, in Peddling Prosperity, Krugman himself writes, "In 1991, the typical family had a real income only 5 percent higher than its 1973 counterpart, and it achieved that income only by working longer hours; most workers were bringing in lower take-home pay than in 1973." This certainly sounds like an anxious class. Occasionally, as part of his penchant for lobbing little grenades, Krugman capriciously offers an aside that blows away his own previous position, and makes one wonder if he is serious. Having excoriated supporters of industrial policy as economic illiterates, Krugman abruptly declares late in The Age of Diminished Expectations, almost as a throwaway line, that "The U.S. government should make a decision to frankly subsidize a few sectors, especially in the high-technology area that may plausibly be described as 'strategic.' . . . Federal expenditures of, say, $10 billion a year to support industrial R&D consortia would produce at least some benefits." Ten billion dollars a year! Not even Ira Magaziner in the depths of statist depravity proposed an industrial policy costing ten billion dollars a year. The most eager defenders of DARPA and SEMATECH haven't asked for ten billion dollars a year. After great struggle, the Clinton administration, in 1993, got the U.S. Commerce Department's Advanced Technology Program funded at less than half a billion, and the Republicans killed most of that. Economic heretics, journalists, and lawyers are fools for proposing rather more modest industrial policies, but the Economist pronounces that a nice round ten billion a year seems about right. A fine example of how Krugman's intuitive solidarity with fellow economists leads him to get the story backwards concerns the Clinton health plan. For Krugman, it is a travesty that non-economist industrial policy advocates such as Reich and Magaziner landed key policy positions in the Clinton administration. Thus predisposed to dislike Magaziner, Krugman recounts this anecdote: If you had asked most people in the field to list the leading experts on the economics of health care, almost all of them would have mentioned Henry Aaron of the Brookings Institution, an economist with solid liberal credentials and a strong backer of Clinton during the election. But when the Clinton administration formed its health care task force, a huge effort involving more than five hundred people, Aaron was not involved. Why? The answer appeared to involve a kind of guilt by association. The task force was headed by Ira Magaziner, a business consultant by profession but a strategic trader by inclination. . . . Now, in the great confrontation over industrial policy in 1983 and 1984, economists from Brookings had been highly critical of strategic traders in general and Magaziner in particular. It was not too surprising that Magaziner would exclude a Brookings economist from his deliberations, or even that he would, as appeared to have been the case, have excluded virtually anyone with prior background in health care economics. Note that this little anecdote, rendered in complex subjunctives, is all inference and surmise, as opposed to reporting. (We journalists may not be too great at running regressions, but we do try to find out what actually took place.) In fact, the Clinton task force did include several health economists, including Professor David Cutler of Harvard. More to the point, Henry Aaron did participate in health policy discussions, both during the campaign and the transition, and made clear his preference for controlling health costs directly via a cap on hospital revenues, rather than with the "managed competition" approach of the Clinton group. Ironically, the Clinton task force was partial to a more "marketlike" approach, which built heavily on the work of the noted health economist Alain Enthoven. Aaron also recalls the notable chilling effect of his December 1992 New York Times op-ed piece, describing as "fantasy" the Clintons' claim that cost savings from managed competition would be enough to buy coverage for the uninsured. So the Clinton group and Aaron could not get together because the Clinton model was too much like textbook economics to suit Aaron, while Aaron, despite the Brookings connection, was proposing a form of direct price regulation. Krugman's little story is not just wrong, but wrong in a way that is characteristically Krugman. The only guilt by association is Krugman's own premise-reported as fact-that Magaziner would naturally "exclude a Brookings economist." THE PEDDLER What, finally, is Krugman up to? In Peddling Prosperity, he notes that the "policy entrepreneurs," like Reich and Thurow, in contrast to the humble academics, tended to publish "in newspapers and in semi-popular magazines like Foreign Affairs, the Harvard Business Review, and the New Republic." Well, since 1994, Krugman has published six articles in Foreign Affairs and two in the Harvard Business Review. His latest Harvard Business Review piece, "A Corporation Is Not a Country," takes essentially the same view of the global economy as Robert Reich's "Who is Us?" <...> So Krugman has become the most prolific policy entrepreneur of them all. He may be peddling fatalism rather than activism, but he is no less a peddler. Alas, Krugman's earlier counsel is correct. It is very difficult to be both a conscientious academic and an effective policy entrepreneur. There aren't enough hours in the day, and you begin to make mistakes. Your own glibness becomes your worst enemy. In his high-professor role, Krugman equates "anecdote" with unscientific. This apparently leads him to conclude that when in anecdotal, policy-entrepreneur mode, you don't need to look things up. And as for intellectual cheap shots, well, you can read him yourself. link
2002:
By Nicholas Confessore, Washington Monthly. Posted December 2, 2002. Krugman has a knack for describing -- and condemning -- Bushonomics in plain English. <...> Very soon, however, Washington disappointed Krugman again. His writing and congressional testimony about income inequality brought him to the attention of Bill Clinton's campaign in 1992, which used some of his findings to attack the Bush administration. When Wannisky and other conservatives argued that skyrocketing income inequality was in fact a myth, Clinton's aides enlisted Krugman to help them fight the ensuing propaganda war. When he published a defense of Clinton's economic plan in the Times that August, it was widely assumed that Krugman would be Clinton's pick, should he win, as chairman of the Council of Economic Advisers. Clinton did win. But his economic transition team was headed by Robert B. Reich, a Harvard lecturer, journalist, and author who had penned the early '90s other big policy tome, "The Work of Nations." Not only had Reich tussled with Krugman over trade policy during the 1980s; he had also gone to Oxford with Clinton. Eventually, Reich became Secretary of Labor in the new administration, while Berkeley economist Laura D'Andrea Tyson was named chair of the CEA. Many other economists were drafted into top administration slots, including Krugman's colleague from the Reagan days, Larry Summers. But Krugman was passed over -- largely, say former Clinton officials, because he was deemed too volatile. (After clashing with fellow attendees at Clinton's Little Rock economic summit, for example, he had appeared on "Larry King Live" to declare the meeting "useless.") Krugman didn't take the rejection well, and lashed out at Clinton's appointees. To Washingtonians, the key division on the Clinton economic team lay between the stimulators, such as Reich and Tyson, and the deficit hawks, notably Treasury Secretary Lloyd Bentsen and budget director Leon Panetta. But for Krugman, the key division was between real economists qualified to set national policy and policy entrepreneurs, who were not. In a Times article that January, he was quoted as saying Tyson lacked "analytical skills" -- just a few weeks after giving a speech at the annual meeting of the American Economic Association lambasting Reich and Ira Magaziner as "pop internationalists" who "repeat silly clichés but imagine themselves to be sophisticated." Reich, Tyson, and a handful of other alleged policy entrepreneurs came in for further attack in Krugman's next book, "Peddling Prosperity" (1994). It wasn't just that they were wrong, Krugman declared. It was that they were all dangerous hacks, snake-oil salesman selling foolish remedies to credulous politicians (like Clinton). Real economists eschew policy, insulating themselves from the intellectual compromise endemic to the political world. Policy entrepreneurs, however, tend to write "in newspapers and semi-popular magazines like Foreign Affairs, the Harvard Business Review, and the New Republic." Moreover, the "fault line between serious economic thinking and economic patent medicine, between the professors and the policy entrepreneurs," Krugman wrote, "is at least as important as the divide between left and right." But what was strange about "Peddling Prosperity," as economics journalist Robert Kuttner would note in a lengthy assessment of Krugman published in the American Prospect two years later, was that Krugman quickly became the most prolific policy entrepreneur of them all. (Reich and Kuttner are co-founders of the Prospect, where I was a staff writer for four years.) By 1996, Krugman had published enough articles in Foreign Policy, Fortune, the Economist, Harper's, the Washington Monthly, and, yes, Foreign Affairs and the Harvard Business Review to fill a second mass-audience book -- "Pop Internationalism". His defense? "What I eventually realized," he wrote in the introduction, "was that an effective answer to pop internationalism would require a new kind of writing ... essays for non-economists that were clear, effective, and entertaining." Evidently, the urgency of combating pop internationalists outweighed the dangers of popular writing, and Krugman took to his new task with great enthusiasm. Slate signed him up for a column, as did the New York Times Magazine, and he quickly mastered the form. Some of Krugman's best writing dates from this period, and he was acclaimed as the heir to John Kenneth Galbraith. His pieces in Slate, especially, were funny, revealing, and exceptionally fluid, if occasionally dismissive to those with whom he disagreed. As always, a good portion of his writing was devoted to debunking them -- leftists who criticized the World Trade Organization, supported protectionism, and still believed in Keynes; conservatives who argued that the Dow could reach 36,000 and still believed in supply side economics. It was largely on the strength of Krugman's writing for the Times Magazine and Slate -- plus, of course, his burgeoning academic reputation -- that Howell Raines, then the Times editorial-page editor, approached Krugman about writing a regular column. This was in 1999, at the height of the boom, and Raines felt that the Times needed someone who could, as Krugman puts it, "write about the vagaries of business and economics in an age of prosperity." Krugman's early Times column was notably less droll than his earlier writing and covered the kinds of topics he and Raines had discussed: the AOL Time-Warner merger, Bill Gates, and, when it finally happened, the stock market plunge. But Krugman still had a taste for the blood of the "hired gun" -- "usually a mediocre economist," he wrote in an April 2000 column, who "has found a receptive audience for work that does have an ideological edge." The Anxieties of Influence There's a sense, then, in which Krugman hasn't changed. His writing about the Bush administration, like that about policy entrepreneurs, is primarily concerned with stupid economic policy -- or at any rate, what Krugman considers to be stupid economic policy. He hasn't changed his substantive views on comparative advantage or monopolistic competition. It's worth noting, moreover, that Krugman was passed over for a Clinton economic post for precisely the qualities that make him such an effective Bush critic: His peevishness; his confidence -- bordering on arrogance -- in his own ideas; his lack of concern for the niceties of political or bureaucratic culture, and his resulting isolation from Washington life. more
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