Friday, July 2, 2010

Mixture of scholarly theoretical economics with hard line politics is deadly, Krugman wants to punch critics

This is getting ridiculous. Talk about emotionally vested. Either he's right, or he's wrong - the problem that most critics have with Krugman is that he's highly suspected of being politically motivated. As such - a highly crucial debate regarding where the economy is headed and what ought to be done is becoming a circus show.

Great depression or not - debate continues.
Angry Keynesian: Krugman Threatens to 'Punch' Detractors 'In the Kisser'
Paul Krugman is known for throwing a bomb or two from his platform in the New York Times, but it's really tough to take him for a violent fellow.

In his July 2 blog post, "I'm Gonna Haul Out The Next Guy Who Calls Me ‘Crude' And Punch Him In the Kisser," Krugman lamented criticism of his support for more stimulus spending. A July 1 editorial in The Economist noted that the economy needs more private spending, not more government spending.

"Mr Krugman's crude Keynesianism underplays the link between firms' and households' behaviour and their expectations of future tax and spending policy," the editorial said. "For example, firms across the rich world are hoarding cash. Their reluctance to invest may have more to do with regulatory, financial and fiscal uncertainty than weak consumer demand (see article). If governments address those worries, businesspeople may start spending."

But Krugman argued he does get it, but disagrees - although he didn't seem to address this argument of long-term spending. Instead, he called for more Keynesian medicine.

"All through this debate, a recurring theme among anti-Keynesians has been that Keynesians like me or Brad [DeLong of Grasping Reality with Both Hands] are ignorant primitives who don't know anything about modern macro," Krugman wrote. "It's really hard to see where that comes from, since I've done plenty of intertemporal optimizing in my time. Part of the problem seems to be that the people saying this are taken aback by what we're saying because they don't actually understand the implications of their own models."

Over the past couple years, Krugman has been an outspoken advocate of government stimulus spending, criticized a $775 billion stimulus plan for being too small, called for a second stimulus, and even claimed in 2008 that "we probably have $10 trillion of running room" when asked how much the government could spend to turn the economy around.

But that begs the question - could a conservative economist get away with suggesting he wants to "haul out the next guy who calls me ‘crude' and punch him in the kisser? Doubtful.

Even if he'd get what he calls for - it would still create one massively dangerous market. I fail to see how the market can find upper momentum in the near term with all this absolutism regarding a second dip recession or depression. Merely raising this notions in every forum causes them to materialize. Spooky market to react accordingly IMHO.


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