Take out the garbage <rant>

2009-01-02 · Original WordPress address

Normal economists worry about the fact that deficits lead to inflation or higher taxes. Neither’s good. Normal economists care about the so-called multiplier in which government expenditures magically increase GDP by a multiple of their value. Normal economists have measured the multiplier and found it to be close to 1, i.e. there is no magic. Krugman’s basically argues we’re not in normal times so all those normal results don’t apply. We’re living with so-called “depression economics”. With lack of sufficient evidence about what happens with government expenditures in abnormal times — depressions are relatively rare— we’re just suppose to believe Krugman’s conjectures are right. Also, he ignores the few data points we do have and that are contrary to his conjectures, e.g. the fact that Japan had been stimulating the crap out of its economy during its “lost decade” or the fact that when Roosevelt fixed monetary policy the economy started recovering from the Depression (i.e. fiscal stimulus doesn’t do much). Krugman and team social democrats want a “green economy” and they want nationalized medicine. This crisis has people crying for government to do something. Using Krugman’s depression economics as psuedo-intellectual backing, social democrats have a political window to bring those things about. As political cover, “depression economics” is brilliant. As a scientific theory, Krugman’s conjectures have little going for them.