Story of Sam and Janet, with added tale of when Gus join in.Follow

But the cost of the solution is greater than the harm being done by the form of debt he's proposing to eliminate. High inflation does not create a boom to commerce, employment rates, or general productivity. It normally does the exact opposite. Krugman knows this, yet still suggests we do this anyway.

Which is why I speculated that he has other reasons for suggesting this than fixing an economy slowed down by debt.



Sure. And I suppose if GDP grows faster than inflation that might work. But nothing in Krugman's article suggests this, and it's pretty absurd to assume that it would happen anyway. He just kinda hand waves that away and ignores it.



Yes. But as I've stated repeatedly: That has never happened as a result of high inflation. Ever. it doesn't work. Demand will increase, but supply will drop because you are hurting the profit prospects of the producers of the goods. This is what happened in the 1970s when we last tried this moronic idea. It doesn't work! What happens is that demand outstrips supply, prices rise, inflation becomes harder to control or predict, and then your economy starts wobbling out of control. Meanwhile, the same supply issues relating to goods affect jobs, leading to higher unemployment. If you step in to address that (usually via entitlement in order to keep that demand/consumption process going), you just make matters worse.


The net collective effect is negative. Not just a little bit negative, but a whole hell of a lot negative. What Krugman is suggesting in that article is the equivalent of fixing a paper cut by amputation of the limb. And he knows it! He's just not quite that dumb. At least I assume he's not. It's why my initial response was to assume that he didn't actually think this was a good idea, but had other reasons for suggesting it. He doesn't (I don't think) actually want to drive us into hyper inflation to eliminate debt, but more likely wants people to be more accepting of the broader notion that consumption helps drive economic growth. Because the more people who believe that, the more support his buddies in the government have for their wealth redistribution policies.



You have to understand that the particular variation of economic school of thought that Krugman belongs to isn't derived as a result of examination of economic principles, but evolved out of a desire/need to justify an existing socio-political ideology. To support the idea of protecting people's "rights" by transforming wealth into entitlements you have to do two things:

1. Convince people that rights are either balanced by that transfer or even increased collectively as a result.

2. Convince people that there are either no economic negatives to doing this, or even that there are economic gains to doing so.


Krugman's entire economic ideology is based on fulfilling number 2. It isn't about making economically sound decisions, but about sacrificing economic soundness for the cause of a social agenda. And to do that, he has to lie to people about what will "work" economically.

Krugman is a fair economist. His greatest skill IMO is his ability to poetically write about Keynesian economic principles in ways designed to make them understandable to the lay person. And it seems like he makes sense. Kinda. His problem is that he doesn't really understand people and how they act in the real world. Most of the models and assumptions he's operating on don't work outside an academic environment (looks great on paper, but...).

I didn't read the context for this, because I'm lazy and, honestly am bored with your mangling of economic theory. I did find it funny enough to log in, however, that your critique of Krugman is the opposite of any valid one. If anything, he errs on the side of prospect theory and behavioral economics probably too much. If there's a fundamental distinction between new Keynesian theory and free market/Austrian/fantasyland theory it's human nature as a factor in markets. Anyway, there's a lot I disagree with Krugman about, and his ego gets in the way of him writing effectively about important issues frequently, but he's right about many things and his unrelenting determination when debunking the idea that there are any serious ideas from the right *at all* to deal with the current crisis is fun to read. His exposing Paul Ryan as a ludicrous fluff headed lightweight are great. His neverending surprise at the media not doing so are tiresome.

Anyway to the point about what Keynes himself would have called "animal spirits", the role of human nature in markets, I was unable to find a puppet show to explain it to you, but I did find this:

http://econstories.tv/2010/06/22/fear-the-boom-and-bust/

Probably won't help.

Smash, that was hilarious.

Blanket dismissal. Check.




By "valid one", you mean one from a far far far left perspective. Like yours, right? You do get that because you and I hold polar opposite economic positions, any critique we have of Krugman is also going to be opposite. It's not some amazing revelation to say this.




From your perspective, where the human elements don't matter at all (or should not be allowed to matter), that's not surprising. But from my perspective, where human elements are paramount to economic policy, I view Krugman's attempt to portray his ideas within that human context absurd. That's precisely what I was talking about btw. He's trying to argue the issue by looking at each player involved and predict how they'll act. But, as I said repeatedly (if you'd bothered to read all that "context") that he fails to accurately represent how the players will act to changes to the game.

He's trying to appeal to that other viewpoint of economics, but fails at it utterly. It's like he's just smart enough to realize that human elements do matter (which is the part you aren't smart enough to realize), but still can't quite get his head out of his base ideology far enough to do it properly. He manages to still miss the entire reaction from the supply side of the equation. I guess he imagines (and this is not a shocker), that the supply side will just always act the same way no matter what the market is doing. He's fully able to accept that buyers change what they're doing as conditions change, but still has that liberal economic blindness when it comes to recognizing that both sides change their behavior when the rules change.




Yes. The sane people realize that both sellers and buyers will change their behaviors based on changed market conditions, while the nutty people (like yourself and Krugman) think that only the buyers will.


As I've stated numerous times on this forum the reason for that isn't because of any sort of sound economic theory, but purely because... and I really can't state this strongly enough... it's required to be able to support a broader socio-political ideology that he believes in. It's pure cart-before-the-horse illogic. Any rational person should be able to see that both sides matter, but for some reason your guys just can't see half of the equation.


If I have the time (and if it's still available), I'll see if I can dig up the posts from like 8 years ago where I predicted just this. I remember when we were talking about how supposedly poorly Bush was doing at recovering the economy back in 2003. I commented that he was taking the correct actions, and said that had Gore won the election in 2000, he would be employing the same form of Keynesian theory that Carter used (and which Obama is acting on today). I said the same thing I'm saying now: That because they refuse to see the economic benefits of the supply side, they would focus only on demand/consumption. As a result, they'd ignore half the tools needed to fix a recession, and that we'd still be sitting at the bottom of a recessionary hole wondering how to get out.


Kinda like right now. Same deal. The left's only response to economic problems is to spend more money. But while some minor things can be adjusted for by more spending, once you get a serious downturn, you have to use the supply side tools to get you out. The left can't use them because to do so would be to admit that there is any value at all to having money held in the hands of producers. They can't do that because it would undermine their whole social ideology. So they hurt us economically because they can't bring themselves to admit that they are wrong. They've lied to the public about the lack of economic harm caused by their policies for so long, that they have to keep on lying. Even when they full well know that by doing so, they are putting people out of jobs, and causing them to lose their homes, and their savings, and their futures.


But what's a bit of pain for the common folks in the face of the brave new world you guys want to build, right? Heck. Might even help out. Get enough people poor, and you have more people begging for their government to help them. It's a win all around!