Earlier this week Paul Krugman took another step closer to conceding that the case against income inequality is mistaken. He said, “I’m actually a skeptic on the inequality-is-bad-for-performance proposition. … [I’m] worried that the evidence for some popular stories is weaker than I’d like.” Krugman laid some of the groundwork for his growing concession in his review of Piketty’s Capital in the Twenty-First Century where Krugman voiced cautious skepticism for ... Read More
Krugman Ignores Buyers Surplus and the Motivational Value of Status
In today’s “The Showoff Society” Paul Krugman continues to blame the drive for status among America’s most successful workers for abundant waste that yielded stagnant wage growth. Yesterday, he failed to recognize the drive for status fuels investment, risk-taking and innovation that helped spur U.S. job growth to twice the rate of Europe and three times the rate of Japan since 1980, and that the slowdown in wage growth likely resulted from open trade and immigration ... Read More
Does Rat Race Waste Resources? Krugman and I disagree
Paul Krugman demonstrates a laughable misunderstanding of economics in his blog post “Having It and Flaunting It” yesterday. He mistakenly claims “status competition…is a zero-sum game … where a lot of our economic growth has simply been wasted, doing nothing but accelerating the pace of the upper-income rat race.” The drive for status and the rat race it accelerates is not zero sum. Quite the contrary, it produces risk-taking, investment, and innovation. Would we ... Read More
Social Security Significantly Impacts Distribution of Wealth
In a post about a survey released this month showing Americans are much less concerned about income inequality than Europeans, despite similar perceptions about the distribution of income in their countries, Paul Krugman described Americans as “delusional.” He sees this delusion stemming from racism that results in a “unique suspicion of and hostility to social insurance and anti-poverty programs,” which “empowers right-wing groups … [to] issue a lot of propaganda ... Read More
Fed Data Shows Less Lending, Not More Saving, Factor in Recession
In their book, House of Debt, Princeton economist Atif Mian and University of Chicago economist Amir Sufi claim reduced consumption by subprime homeowners occurred when home prices fell and caused the Great Recession. Larry Summers thought the book was “likely to be the most important economics book of 2014.” Paul Krugman cited it as evidence of “problems created by debt overhang.” In a recent blog post, Krugman rails: “The process of deleveraging produces huge, ... Read More
Krugman Ignores Failed Keynesian Predictions
In his blog post yesterday, Paul Krugman claimed: “We have a pretty good model of aggregate demand, and of how monetary and fiscal policy affect that demand. … And it remains true that Keynesians have been hugely right on the effects of monetary and fiscal policy, while equilibrium macro types have been wrong about everything.” ... Read More
Summers and Krugman Justify Stimulus Using Mian and Sufi’s Hard-to-Believe Theory Subprime Savings Caused Great Recession
Larry Summer and Paul Krugman cite Atif Mian and Amir Sufi's hard-to-believe theory of the Great Recession to justify fiscal stimulus. In their book, House of Debt, Mian and Sufi claim falling home prices caused highly levered subprime households to reduce consumption and temporarily save a larger portion of their earnings. A more likely scenario is that subprime consumption fell back to sustainable levels when low-income households could no longer borrow against the ... Read More
