Lots of people have been asking me to weigh in on Krugman’s discussion of the JPMorgan post on the iPhone5. (Fun fact: Michael Feroli, the author of the JPMorgan piece, was in my cohort at NYU. I’ve emailed him to see what he thinks of Krugman’s interpretation.) I’m seeing if it makes sense for me to write up my reaction for an outside source…
For now, look at this from Krugman:
In other words, if you believe that the iPhone really might give the economy a big boost, you have — whether you realize it or not — bought into a version of the “broken windows” theory, in which destroying some capital can actually be a good thing under depression conditions.
So right there, Krugman is being quite clear that it is hypothetically possible that it “can actually be a good thing” to destroy wealth. I bring this up, because Daniel Kuehn (and perhaps Karl Smith, don’t remember) were arguing within the last two years or so that Austro-libertarians were putting words into Krugman’s mouth. Kuehn et al. were arguing, “No no no, Krugman isn’t saying it would actually be good if there were a minor natural disaster that wrecked some buildings, he’s just saying the gross harm wouldn’t be as bad if it occurred during a period of involuntary unemployment.” (Obviously I’m paraphrasing; that’s not an exact quote from Kuehn.)
I’m pretty swamped with day job stuff right now, but if people want to put in links in the comments to our past discussions on this, that would be awesome. I know there was one post that I did that walked through something like 4 different possible views on what someone might think in the event of employment/wealth destruction, and whether to call it “good” for the economy.