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In 1998, Krugman said: "During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?" To the question "...because that would only promote inflation instead of growth?" he responded "There is no danger of that!"<ref name="Hanke_Zinsen">Thomas Hanke. [http://www.zeit.de/1998/51/Runter_mit_den_Zinsen_ "Runter mit den Zinsen!"] (in ''German'', "Down with the rates!"), ''Die Zeit'', 51/1998. [http://www.pkarchive.org/global/welt.html Translation by Peter Bartl]. Referenced 2011-01-05.</ref>
In 1998, Krugman said: "During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?" To the question "...because that would only promote inflation instead of growth?" he responded "There is no danger of that!"<ref name="Hanke_Zinsen">Thomas Hanke. [http://www.zeit.de/1998/51/Runter_mit_den_Zinsen_ "Runter mit den Zinsen!"] (in ''German'', "Down with the rates!"), ''Die Zeit'', 51/1998. [http://www.pkarchive.org/global/welt.html Translation by Peter Bartl]. Referenced 2011-01-05.</ref>
==Krugman on Austrian Economics==
In 1998, Krugman wrote that he regarded the "Austrian theory" of the [[Austrian Business Cycle Theory|business cycle]] "about as worthy of serious study as the phlogiston theory of fire".<ref name="Krugman_Hangover">Paul Krugman. [http://www.slate.com/id/9593 "The Hangover Theory"], ''Slate'', December 4, 1998. Referenced 2011-01-25.</ref> In 2011, he conceded that (in his understanding of) the Austrian explanation both is theoretically possible and actually happens in the real world:<ref name="Krugman_Reply">Robert P. Murphy. [http://mises.org/daily/4993 "My Reply to Krugman on Austrian Business-Cycle Theory"], ''Mises Daily'', January 24, 2011. Referenced 2011-01-25.</ref>
<blockquote>So what is the essence of this Austrian story? Basically, it says that what we call an economic boom is actually something like [[China|China's]] disastrous [[Great Leap Forward]], which led to a temporary surge in consumption but only at the expense of degradation of the country's underlying productive capacity. And the unemployment that follows is a result of that degradation: there's simply nothing useful for the unemployed workers to do.
I like this story, and there are probably other cases besides China 1958–1961 to which it applies. But what reason do we have to think that it has anything to do with the business cycles we actually see in market economies?<ref name="Krugman_Leaps">Paul Krugman. [http://krugman.blogs.nytimes.com/2011/01/19/great-leaps-backward/ "Great Leaps Backward"], ''The New York Times'', January 19, 2011. Referenced 2011-01-25.</ref></blockquote>


==References==
==References==

Revision as of 14:47, 25 January 2011

Paul Krugman is an American economist and Nobel laureate. He is also an op-ed columnist and blogger for the New York Times. Krugman is well known for believing in the theories of John Maynard Keynes and continually advocates for more inflation and government intervention in the economy. Krugman's blog posts repeatedly display his opinion that inflation is a measurement of prices and not the quantity of money.[1][2][3] For these and other views is Krugman frequently criticized by Austrian economists.[citation needed] A blog created by William L. Anderson is devoted to "Analysis and criticism of America's most prominent public intellectual and champion of Keynesian economics."[4]

In October 2010, Krugman was challenged to a debate over Austrian vs. Keynesian business cycle theory by economist Robert Murphy. As of mid-November 2010 Krugman has not responded.

Quotes

The broken-window fallacy was seen in a column by Princeton University professor Paul Krugman after the terrorist attack on the World Trade Center:[5] "Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good."[6]

In 1998, Krugman said: "During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?" To the question "...because that would only promote inflation instead of growth?" he responded "There is no danger of that!"[7]

Krugman on Austrian Economics

In 1998, Krugman wrote that he regarded the "Austrian theory" of the business cycle "about as worthy of serious study as the phlogiston theory of fire".[8] In 2011, he conceded that (in his understanding of) the Austrian explanation both is theoretically possible and actually happens in the real world:[9]

So what is the essence of this Austrian story? Basically, it says that what we call an economic boom is actually something like China's disastrous Great Leap Forward, which led to a temporary surge in consumption but only at the expense of degradation of the country's underlying productive capacity. And the unemployment that follows is a result of that degradation: there's simply nothing useful for the unemployed workers to do. I like this story, and there are probably other cases besides China 1958–1961 to which it applies. But what reason do we have to think that it has anything to do with the business cycles we actually see in market economies?[10]

References

  1. ↑ [1] "Inflation delusions"
  2. ↑ [2] "Are rising commodity prices an inflationary signal?"
  3. ↑ [3] "Generating inflation expectations"
  4. ↑ William L. Anderson. "Krugman-in-Wonderland", referenced 2010-11-16.
  5. ↑ Walter. E. Williams. "Economic lunacy", November 22, 2004, Washington Times. Referenced 2011-01-05.
  6. ↑ Paul Krugman. "Reckonings; After The Horror", September 14, 2001, The New York Times. Referenced 2011-01-05.
  7. ↑ Thomas Hanke. "Runter mit den Zinsen!" (in German, "Down with the rates!"), Die Zeit, 51/1998. Translation by Peter Bartl. Referenced 2011-01-05.
  8. ↑ Paul Krugman. "The Hangover Theory", Slate, December 4, 1998. Referenced 2011-01-25.
  9. ↑ Robert P. Murphy. "My Reply to Krugman on Austrian Business-Cycle Theory", Mises Daily, January 24, 2011. Referenced 2011-01-25.
  10. ↑ Paul Krugman. "Great Leaps Backward", The New York Times, January 19, 2011. Referenced 2011-01-25.

Links

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