The funny thing about data-hound Paul Krugman is that I’ve often caught him presenting cold, hard facts that contradict what he is saying. Take the recent controversy over whether Rick Perry has presided (governed?) over an economic “miracle” in Texas.
The first chart shows the unemployment rate of Texas against Massachusetts since Rick Perry took over. Krugman says, “Funny how Deval Patrick isn’t running for President on the strength of the Massachusetts economic miracle.”
No Dr. Krugman, what would be funny is if Deval Patrick did say that–at least vis-a-vis Texas–because that would be a stupid thing to say. What would the chart have to look like to show that Texas did do better than Massachusetts since Perry took over? In the beginning, when Perry first showed up, Texas unemployment was more than a full percentage point higher than it was in Massachusetts. During the boom, Texas unemployment dropped faster than in Massachusetts, and then during the bust, it rose more slowly. The net result was that by 2010, Massachusetts unemployment was about .75 percentage points higher than in Texas (just eyeballing the chart). So that’s almost a 2-percentage point swing since Perry took over. You’re telling me if unemployment dropped two percentage points after a new stimulus package kicked in, Krugman would scoff at the bogus “miracle” of deficit spending?
(Note, the trend flipped again after 2010, where Texas lost some of its relative gains back to Massachusetts. But it’s not close to being back where it started.)
It’s the same story with the second graph. This one is less comprehensible from the FRED-generated legend, but it shows (Krugman’s words) “the ratio of nonfarm employment to total population. The red line is the nation as a whole, the blue line Texas.”
So why is this chart allegedly so damning to claims that Perry’s Texas has outperformed the nation? Krugman tells us: “[T]his graph should put paid to the notion that Texas somehow escaped the recession, or that there was something miraculous about its job creation. Once you take account of population growth, nothing special happened.”
Really? I look at that same chart and see that the gap in % of employed people has been cut in half under Perry. If anything, that accomplishment is especially impressive, once we learn that Texan population grows higher on average than in the rest of the country.
So what the heck is going on here? It’s simple: Krugman is setting up an absurd strawman. Now maybe fools calling into Sean Hannity said, “Rick Perry is our guy! The Lone Star State has escaped the recession unscathed!”
But in terms of an actual economist trying to evaluate whether a certain state has had better policies fostering job creation than other states, for what evidence would we look? Since there are no formal immigration barriers to speak of, you would expect workers to flee states with government constraints on job creation, and flock to states with the ability to create jobs more quickly. This would take pressure off the bad states (thus reducing their official unemployment number at any time) and put pressure on the good state (thus bumping up its number).
Therefore, you wouldn’t see the good states with constant unemployment throughout an awful recession. Rather, you would see the state get hit less severely, compared to the other states. Or, if you were trying to evaluate a change in policies, you would check to see if the state in question improved on its comparisons during the period in question.
In short, you would see charts just like the above.
Now don’t get me wrong: I am not saying the above charts prove that Bush III should get credit for his free-market wizardy. I have no idea what policies he implemented, and I don’t know whether the above charts show that Texan policies are more conducive to job growth. There are other hypotheses, and Matt Yglesias (HT MR) at least attempts to sort out the various explanations.
My point in this post is that Krugman is being completely absurd (at least in these two posts). He is pointing at data that is prima facie going against him, and acting like it demonstrates his view. At best, he should say, “This isn’t a strong enough result to rule out noise,” or the like. Yet he seems to think that a truly good state wouldn’t see rising unemployment during an awful worldwide recession.
Incidentally, Krugman should understand the mechanism, since he talked about displaced workers moving into different states when discussing optimal currency areas. Yet another Krugman Kontradiction. When worker mobility across states is useful for making the argument to print more fiat money, Krugman is all about it. When it apparently will justify “conservative” economic policies, Krugman forgets all about it.