I am still trying to contain my disbelief that Paul Krugman has doubled down on his claim that Casey Mulligan must have gotten his views about New Keynesianism at a bar. Specifically, Noah Smith pointed out (and I paraphrase), “Gosh, well, I hate to disagree with the mighty Krugman here, but you know there are a whole class of New Keynesian models that focus on sticky prices… So maybe that’s what Casey Mulligan had in mind?”
But nope, Krugman will have none of it. Don’t show any sympathy for those Chicago School morons–they hate us for our predictions. You need to be tough with these guys. No mercy! They only respect strength.
Anyway, when I was looking into something unrelated, I came across the Wikipedia entry on “New Keynesian economics.” Apparently a bunch of drunks from Chicago got a hold of it and changed everything, because look at how it reads:
New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics.
Two main assumptions define the New Keynesian approach to macroeconomics. Like the New Classical approach, New Keynesian macroeconomic analysis usually assumes that households and firms have rational expectations. But the two schools differ in that New Keynesian analysis usually assumes a variety of market failures. In particular, New Keynesians assume prices and wages are “sticky”, which means they do not adjust instantaneously to changes in economic conditions.
Wage and price stickiness, and the other market failures present in New Keynesian models, imply that the economy may fail to attain full employment. Therefore, New Keynesians argue that macroeconomic stabilization by the government (using fiscal policy) or by the central bank (using monetary policy) can lead to a more efficient macroeconomic outcome than a laissez faire policy would.
Yes yes, we can all make jokes about the validity of Wikipedia, but give me a break. When Krugman says that Mulligan is getting his views on New Keynesian economics from hanging out at the bar, he is completely full of crap. If he weren’t such a bully, I think more of his colleagues would be standing up to him and pointing this out.
To clarify: Krugman of course can claim that Mulligan’s critique is wrongheaded, because we are in a liquidity trap blah blah blah. But to just keep ripping Mulligan as totally ignorant of New Keynesian economics is absurd.