In the comments on my post on Paul Krugman’s Hooverite view of wages, we had an interesting discussion of Krugman’s work over the years. I’m a big fan of much of his work in the 1990s and one of the commenters asked for more leads. While Bryan likes The Accidental Theorist, my favorite Krugman book is Pop Internationalism. Here are some choice quotes from a chapter titled, “What do Undergrads Need to Know About Trade?”
To put in perspective the extent to which the U.S. economy is globalized, Krugman writes:
the United States is not now and may never be as open to trade as the United Kingdom has been since the reign of Queen Victoria.
In criticizing the idea that whole countries need to be competitive, Krugman writes:
An international economics course should drive home to students the point that international trade is not about competition, it is about mutually beneficial exchange. Even more fundamentally, we should be able to teach students that imports, not exports, are the purpose of trade. That is, what a country gains from trade is the ability to import what it wants. Exports are not an objective in and of themselves: the need to export is a burden that the country must bear because its import suppliers are crass enough to demand payment.
Does that sound to you like the point the heroic Don Boudreaux has made in many letters as part of his one-man crusade to get the newspapers to be more literate about trade? Me too.
I could quote many more nuggets from the same essay. But I want you to read it.
READER COMMENTS
TA
May 9 2009 at 8:38pm
Well, Megan McCardle made the comment, sometime back during the Bush younger administration, to the effect that “Krugman use to write about economics before he gave that up to focus full time on his hatred of George W. Bush.”
Gary Rogers
May 10 2009 at 1:42am
I think the second quote may give a clue to the deficiencies in Paul Krugman’s philosophy. Yes, imports are the purpose of trade but exports are the necessary part. Exports pay for the imports. I believe it was Jean Baptist Say that said something like “Products are bought with products.” In other words if we do not produce something to export we will eventually find that our imports were paid for by debt and somebody is going to want to exchange that debt for products. If we are no longer producing anything, the debt holders will come in and strip us of anything we have left. Or we will find ourselves exporting to pay debts without makinng enough to purchase the imports that Mr. Krugman likes so much.
In short, trade is good and imports are the enjoyable part of trade but exports are the necessary part. I don’t like to go to work every day either, but if I keep buying stuff without going to work we all know what will happen.
Andrew Maier
May 10 2009 at 12:20pm
Gary:
I think that was Krugman’s point. What he was saying is that imports are the reason we participate in international trade, because importing is what we benefit from. We only export because we need to do it in order to pay for imports.
“the need to export is a burden that the country must bear because its import suppliers are crass enough to demand payment.”
That seems to me to be exactly what you’re saying.
Billy
May 11 2009 at 6:06pm
On your recommendation, I’ve been reading Pop Internationalism and “Ricardo’s Difficult Idea,” and have thoroughly enjoyed them both. I remember a few months ago when Bill Easterly started blogging about aid and development and how excited Don Boudreaux was about it. After reading some of Krugman’s writings from the 90’s I couldn’t help but think how great it would be if Krugman had a blog devoted to defending the case for free trade instead of the writings we get from Conscious of a Liberal.
I do have one question from “Ricardo’s Difficult Idea.” Krugman writes:
It is not easy to convince a non-economist that when gangsters hoard $100 bills in Vladivostock, this is a capital outflow from Russia’s point of view — and that it has the same effects on the US economy as if that money was put in a New York bank.
In my introductory macro class, I learned that the money supply increases when money is deposited in a bank and that is decreases when people hoard cash. So if Russian gangsters are hoarding $100 bills, how is this the same as if the money was deposited in a bank?
Joel
May 18 2009 at 3:30pm
Could you create a category “Krugman” or “Paul Krugman”? You seem like one of the few economists offering a thoughtful and ongoing critique of his work and it would be nice to be able to link to it.
It is possible to link to all your columns that mention Krugman, but there are a lot of false positives here.
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