Insights on Krugman
By David Henderson
The New Yorker carries a long puff piece on Paul Krugman that gives you some insight into the man and his work, especially his New York Times column. One thing I hadn’t known was to what extent his wife ratchets up the attacks when she edits his work. I’m glad my wife, a professional editor, doesn’t do that with my work.
Here’s the most striking part of the piece:
He thought of himself as a liberal, but he was a liberal economist, which wasn’t quite the same thing as a regular liberal. Until the late nineties, when he became absorbed by what was going wrong with Japan, he believed that monetary policy, rather than government spending, was all that was needed to avoid recessions: he agreed with Milton Friedman that if only the Fed had done its job better the Great Depression would never have happened. He thought that people who wanted to boycott Nike and other companies that ran sweatshops abroad were sentimental and stupid. Yes, of course, those foreign workers weren’t earning American wages and didn’t have American protections, but working in a sweatshop was still much better than their alternatives–that’s why they chose to work there. Moreover, sweatshops really weren’t the threat to American workers that the left claimed they were. “A back-of-the-envelope calculation . . . suggests that capital flows to the Third World since 1990 . . . have reduced real wages in the advanced world by about 0.15%,” he wrote in 1994. That was not nothing, but it certainly wasn’t anything to get paranoid about. The world needed more sweatshops, not fewer. Free trade was good for everyone. He felt that there was a market hatred on the left that was as dogmatic and irrational as government hatred on the right.
This reminds me of what I liked about Krugman. I say “liked” because he rarely writes this clearly or numerately or passionately in criticizing government intervention. The author of the piece, Larissa MacFarquhar, seems to think so too. Notice her use of the past tense. “The world needed more sweatshops, not fewer.” And it doesn’t now? “Free trade was good for everyone.” And it’s not now? Of course, Krugman would still say free trade is good. It’s just that he hardly ever does. And he virtually never talks about sweatshops any more.
As I said in a piece after Krugman won the Nobel prize:
Another strong point in that popular article and in his others on free trade is Krugman’s noting the simple arithmetic fact that if labor’s share of national income is relatively constant (as it has been for about the last 80 years), then increases in productivity must cause real wages to increase. Wages, he notes, also include benefits. Indeed, in that respect, Krugman’s reasoning about real wages and standards of living is far superior to what he writes on those topics in the New York Times. In 1990, Krugman wrote:
Old-line leftists, if there are any left, would like to make it a single story — the rich becoming richer by exploiting the poor. But that’s just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don’t work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor.
I may have missed it, but I haven’t seen that kind of reasoning in his New York Times columns. Indeed, he has even gone the opposite way, blaming the top one percent of the income distribution for how badly (in his estimation) the bottom 90 percent are doing. Only twelve years ago, he thought that pretty much everyone was doing pretty well. In a 1996 Slate column, “The CPI and the Rat Race,” Krugman wrote, “[M]ost families in 1950 had a material standard of living no better than that of today’s poor and near-poor.” He confirmed this with direct measures of how people’s living standards had improved: indoor plumbing, telephones, cars, and TVs. If we were to use the Krugman methodology today, as economist Michael Cox and economic journalist Richard Alm have done, we would point to wide-screen televisions and cell phones.