I realize some of you think I spend too much time detailing every little inconsistency in The Compleat Works of Paul Krugman, but with great power comes great responsibility. I happen to have a large amount of Krugman’s writings in my mind, and it causes me physical pain when I read his blog and see his almost daily transgressions against both property rights and human decency. It would be selfish to keep these matters to myself, don’t you think?
Anyway, let’s review a particularly sordid episode, to understand why Krugman’s post today is so scandalous.
==> Back in May 2011, U of Chicago economist Casey Mulligan wrote a critique of New Keynesians that contained the following:
Our labor market has long-term problems that are not addressed by Keynesian economic theory. New Keynesian economics is built on the assumption that employers charge too much for the products that their employees make and are too slow to cut their prices when demand falls. With prices too high, customers are discouraged from buying, especially during recessions, and there is not enough demand to maintain employment.
When the financial crisis hit in 2008, the New Keynesian “sticky price” story had some plausibility…
…but then Mulligan goes on to argue why this plausibility faded away, the longer the crisis dragged on and new data came in. My point isn’t to say whether Mulligan’s critique was good or bad. I am just pointing out that he said the New Keynesians had a “sticky price” story to explain long-term unemployment equilibrium.
==> Enter Paul Krugman. In a blog post titled, “Why Casey Can’t Read,” Krugman wrote that Mulligan…
…should try reading a bit of Keynesian economics — old or new, it doesn’t matter — before “explaining” what’s wrong with it. For the doctrine he’s attacking bears no resemblance to anything Keynesians are saying.
This is fairly typical of freshwater economists. They know that what the other side is saying is obviously stupid, so there’s no need to read it; they picked up enough about it talking to some guy in a bar, or whatever, to criticize it.
That last line–about “[t]hey know that what the other side is saying is obviously stupid, so there’s no need to read it”–is pretty rich coming from the same Nobel laureate who wrote this. But I digress. The important point is, Krugman is here biting off Mulligan’s head for claiming that New Keynesians hang their hat on a “sticky price” assumption. I flipped out at the time, explaining that I had been taught (by New Keynesians) at NYU that New Keynesianism was an attempt to reconcile old skool Keynesian policy recommendations with the rational expectations revolution, and the way it worked was by assuming sticky prices.
==> Today, in December 2012, while admonishing Noah Smith for showing mercy to the fools on the other side, Krugman writes:
I’m not saying that the NK [New Keynesian] approach is necessarily right; but it’s a serious intellectual effort, undertaken by people who thought they were part of an open professional dialogue. Oh, and there’s a lot of evidence for the price stickiness that is central to NK models; again, maybe it doesn’t mean what the theorists think, but surely that evidence ought to be part of any discussion. [Bold added.]