24 Aug 2011

Krugman Punk’d, Yet I Don’t See the Problem

Economics, Krugman 41 Comments

[UPDATE below.]

So Krugman doesn’t have a Google+ account, and therefore did NOT post this: “People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.”

Krugman (naturally) is outraged that gullible right-wing pundits could have believed he’d say something so outrageous:

[T]he hoaxer was trying to make my (correct) assertions in the past that even useless spending can be expansionary sound as if I revel in disaster. Those who can’t argue rationally, resort to fakery.

Also, the gullibility on display was impressive. All these right-wing hacks knew it must be a genuine quote, because they all knew that I’m a terrible person — based on past distortions!

But hold on a second. The reason I thought the quote was legitimate, was that it didn’t “revel in disaster.” The fake quotation doesn’t say, “It’s too bad the earthquake didn’t do more damage.” No, the fake quotation gave neutral economic analysis–and didn’t conflate wealth with employment–in a manner entirely consistent with Matt Yglesias saying that breaking windows creates jobs/economic growth:

The fact that breaking windows would make a society poorer (fewer windows) is precisely why nobody ever proposes stimulating the economy by deliberately smashing windows. But the way the dialogue works is that first a Keynesian observes that fiscal stimulus can increase growth in a depressed economy. Second, as an attempted reductio, a conservative says “if that was true, then you could increase growth by breaking a bunch of windows.” Third, the Keynesian accurately points out that you could, in fact, increase growth by breaking windows. Fourth, the conservative accuses Keynesians of wanting to break windows or believing that window-breaking increases wealth.

Krugman endorses the above; notice that my link goes to Krugman, not Yglesias’ original post.

So yes, it’s bad that someone put up a fake Krugman quotation, but I don’t see what’s “wrong” with it from Krugman’s. perspective. That is an entirely accurate summary of his worldview. Just as he’s not calling for an alien invasion (though he arguably is calling for a hoax of an alien invasion), the fake-Krugman in the Google+ account wasn’t calling for a worse earthquake. He was just spitting out standard macro. (And hence, demonstrating that standard macro is nuts.)

UPDATE: Some commenters on this topic over at EPJ gave me the courage to voice my cynicism. When I read the original Google+ post (it’s now down), some of Krugman’s fans were defending him. And one of them said something like, “Good to know you actually post here, Dr. Krugman! I’ve been following you for weeks and thought a Times administrator handled this. I thought this was just an outlet for your columns and blog posts.”

Now maybe my memory is off, or maybe the person merely meant he was following Krugman on Twitter or something, but… is it true that this allegedly fake Google+ account was up for weeks, before this one-time “crazy” Krugman quote (which is actually totally consistent with everything else he’s said)?

41 Responses to “Krugman Punk’d, Yet I Don’t See the Problem”

  1. Major_Freedom says:

    This reminds me of the story of a Charlie Chaplin look-a-like contest, where Charlie Chaplin himself secretly took part in the contest, but came in third.

    It seems like Krugman’s imitators are better at being Krugman than Krugman is good at being Krugman.

  2. Daniel Kuehn says:

    I agree the fake line is reasonably Krugman’s position.

    I still think you’re vastly overestimating the quality of this whole discussion.

    Thoughts here: http://factsandotherstubbornthings.blogspot.com/2011/08/fake-krugman-on-keynesian-economics.html

    • bobmurphy says:

      DK wrote:

      I agree the fake line is reasonably Krugman’s position.

      You should work for a hedge fund Daniel, since you’re so good at it.

      • Daniel Kuehn says:

        I don’t mean to hedge – I meant it was reasonable. I’m agreeing.

        • bobmurphy says:

          Okaaaaay… But if your wife asks, “Does this dress make me look fat?” don’t say, “You look reasonably fit in it.”

          • Daniel Kuehn says:

            I don’t have to live with Krugman – I have to live with my wife. I don’t have to worry about tact or strategy when it comes to expressing my thoughts on Krugman.

            Wait, did I say “have to live”? I meant “get the privelege of living with” 🙂

    • Major_Freedom says:

      You’re creating a straw man.

      “The fact is, people think we don’t realize wealth has been destroyed.”

      That is not the essence of the criticism. The criticism is not that you are so blind as to not see real wealth has been destroyed in the disaster in question. The criticism is that you claim that growth results from it.

      The fallacy is putting consumption before production. The criticism is that you take the need to replace destroyed wealth, or, more generally, the absence of wealth, as a source of growth, instead of the truth, which is that growth comes out of existing real wealth in the form of factories, materials, tools, and machinery.

      Keynesians are philosophical consumptionists. Please note that before you try to argue in response that “there is more to Keynesianism than consumption spending”, realize that by “philosophical consumptionist”, I mean the way Keynesians view the problem of economic life. Keynesianism is not based on how to produce the most using scarce resources. It is based on how to find ways to consume more resources so that producers have an “excuse” to produce more.

      Keynesians hold humans to be nothing but “trousered apes”, who otherwise don’t need or want to consume more than minimum subsistence, who are subject to “manufactured demand” through advertising, and who must be poked and prodded into spending and consuming, lest producers have no reason to invest and produce, and unemployment will result. Keynesianism is, in a word, based on the desire to achieve non-existence.

      This philosophy is why Krugman and other Keynesians feel giddy at the prospect of massive spending sprees on account of natural disasters that destroy real wealth. Even if real wealth, the foundation of economic growth, is destroyed, the resulting absence of real wealth is perceived as an engine for economic growth.

      The critics keep bringing up Bastiat’s broken window fallacy because Krugman keeps ignoring, in his actual arguments and actual conclusions, the possibilities of growth that have been foregone on account of real wealth being destroyed. He always assumes them to be less than what would otherwise would have been produced, and pretends that the wealth produced on the basis of the lower capital accumulation, is greater than what would have been produced had the real wealth not been destroyed and production took place on the basis of the higher capital accumulation.

      Since it is an economic principle that growth is higher with more capital accumulation than less capital accumulation, it follows that it is wrong to claim that producing using less capital (real wealth destroyed) can generate more growth relative to using more capital (real wealth not destroyed).

      Keynesians seem to almost fear real wealth and capital accumulation, because it conveys the impression that humans will not want enough additional wealth to sustain full employment, if there is too much existing wealth satisfying consumer preferences. In other words, if people have a house, a car, clothes, food, a pool, a boat, a cottage, etc, i.e. the more wealth they have, then the less need they will allegedly have in acquiring more. So, when houses and cars and boats are destroyed, then the Keynesian is relieved, because now people have an excuse to work and produce to replace them.

      To the Keynesian, an economy that has 100% employment, and full utilization of resources, but is constantly and repeatedly destroying capital, then rebuilding it, then destroying it again, never growing in the long run, remaining stagnant, and where people are not on average improving their standard of living, this economy is superior to one where there is less than full employment, less than full utilization of resources, but is constantly and repeatedly growing in real terms such that people are on average experiencing a rise in their standard of living.

      Why? Because with constant absence of wealth, there is a constant need to work to produce and replace what has been destroyed, lost or consumed. People and money and physical matter are all “moving,” and that’s all that matters.

      • Martin says:

        So why do Keynesians advocate balancing the budget over the business cycle? Deficits in bad times, surpluses in good times.

        Simple question, if there is a monetary disequilibrium and the central bank won’t or can’t fix it, what should be done and who should do it?

        • Major_Freedom says:

          So why do Keynesians advocate balancing the budget over the business cycle? Deficits in bad times, surpluses in good times.

          Because there are always SOME “idle resources” and there is always SOME unemployment, so government surpluses are out of the question in the practical sense.

          Keynesians will say that Keynes held that surpluses should be run during “boom times,” when they respond to critics who say “Keynesianism = Perpetual deficits,” but they themselves never ever call for budget surpluses, and only ever go on the record as calling for deficits. I have never once seen Krugman explicitly advocate for a budget surplus. I have never once seen any Keynesian explicitly advocate for a budget surplus. Why? Because they always have the excuse that there are idle resources and unemployed workers! Even during booms, there are idle resources and unemployment, so they never say “now’s the time to run a surplus.”

          Simple question, if there is a monetary disequilibrium and the central bank won’t or can’t fix it, what should be done and who should do it?

          The central bank should be abolished, and the restraints and limitations released, so that individuals can decide for themselves what money they will use. Yes, of course this means that the government will be constrained. Expansion of more freedom necessarily constrains government more as well. The statist intellectuals will have a conniption and complain that THEY are constrained, because now THEY cannot inflate and spend the way they want, and they will be forced to earn their money through the market. Since the market for intellectuals is very very thin in a free society, most statist intellectuals will realize that they would be out of a job, and thus vehemently attack whoever or whatever it is that is constraining them, people or ideas.

          What they need to understand is that the kind of expansion they want is exploitative. The more the government inflates and spends, the more others are producing for nothing. When spending unbacked by prior earnings in the market takes place, the gains made buy the spenders necessarily comes at the expense of those who produce without real goods reward. It would be just like me printing off dollars in my basement, and then going out and spending it on myself and my friends. Real wealth is being taken out of the economy, but real wealth is not going into the economy, only dollars with lesser purchasing power.

          Social parasites like Keynesians know that they are advocating for social parasitism, so they desperately try to find excuses against the criticisms. They pretend that inflation spending that puts an idle resource back into operation doesn’t raise prices, and so doesn’t exploit people through inflation. They totally ignore the fact that idle resources are idle because the owners are holding out for a higher price than exists in the market. Inflation exacerbates idle resources because instead of quickly selling the idle resources for lower prices as would exist in a free market, the owners instead anticipate higher prices on account of inflation, and thus wait for the central bank to inflate. Of course the parasite advocate Keynesians will chime in and say “See? There’s idle resources! Inflation and spending are thus justified!” They pretend that people are morons and that the state is totally separate from the economy in their own “macro” world.

          After being refuted economically, the Keynesian then try the morality game. They plead and yammer on about “unemployment”, and how the evil Austrians WANT unemployment to take place. They try to make themselves have the moral high ground. But even there they fail too, as Rothbard and Hoppe have shown. Keynesianism simply is not a full employment policy. It is a system of parasitism, where they call unproductive employees of the state, and workers in the market who desperately need to find other lines of work, “employment” simply because they are “doing stuff.” Building weapons of war? Who cares. The people are “working.” Digging holes? Who cares, people are “working.” Building pyramids? Who cares, if “our elder statesmen stand in the way of anything better”, then pyramid builders are “working.”

          Keynesianism is just a low class, low standard, apologia for consumption, using all sorts of fallacies exploded ages ago.

        • Tel says:

          Keynesians advocate balanced budgets over a business cycle, but they don’t practice what they preach. The Keynesians motto can be stated simply: Saving yesterday, saving tomorrow, but always spending today.

          Beyond that, what actually is a business cycle? Who get’s to decide? If a private investor knew when inflation and deflation was going to occur, they could easily make a fortune… so we already have massive incentive for counter-cyclic investment. However, neither government, nor private citizens really know what will happen in the future, and for the most part governments are worse at prediction than most. Thus, the whole concept of Keynesians counter-cyclic investment looks great on paper but never works in practice, there just isn’t enough information available to the government.

          Simple question, if there is a monetary disequilibrium and the central bank won’t or can’t fix it, what should be done and who should do it?

          You presume that the central bank can’t or won’t fix a “monetary disequilibrium” and yet the central bank is an artificial construct of government with the explicit purpose of fixing such disequilibrium. In effect you are saying that the central bank is useless and therefore should be thrown away.

          Governments have had plenty of chances to fix this problem and they have consistently failed. On what basis should we trust them to have yet another go at it? I go as far as to say, that every failure has been a worse failure than last time, and the present situation is shaping up to be the worst of all.

  3. Mike says:


    Can you explain why you think it is nuts?

  4. Blackadder says:

    The fake Krugman account was set up a month ago by Carlos R. Graterol. You can read his account of it here.

    • bobmurphy says:


      • Blackadder says:


        Granted, we only have the guy’s word that he was behind the account. Can we trust him? Bin Laden claimed responsibility for the 9/11 attacks, after all.

        • Daniel Kuehn says:

          Both cases were the lizard people again.

          • Blackadder says:

            Obviously the lizards were upset Krugman had revealed their invasion plans, and so set about discrediting him.

          • Joseph Fetz says:

            There’s nothing like bringing up lizard people (a la David Icke) to bring the intellectual bar down a few notches.

            BA, I was under the impression that OBL denied involvement in the 9/11 attacks, there are literally hundreds of news stories from ABCBSFOXCNN making this claim. However, I do remember a video from Dec. 2001 showing a man taking responsibility, but it was clearly not OBL in the tape.

            As for Krugman, we can be somewhat confident that the statement in question was not made by our favorite contemporary Keynesian, but that does not negate the fact that he has made similar statements in the past. IOW, I still look to the statement as representative of Krugman’s worldview.

            One thing that I have learned in my short time on this Earth is that reality and perception are entirely different things and that perception typically takes precedence in the minds of man. Luckily, with the increased speed by which information is disseminated in today’s world, perceptions can be destroyed just as quickly as they are created. Hopefully this dynamic will allow reality to show its pretty face more readily… But, I doubt it.

  5. Major_Freedom says:

    I don’t know whether the imposter intended this, but the imposter’s joke has a stroke of brilliance.

    By making the outrageous comment, he indirectly compels Krugman to respond to it, and go on the record whether or not he accepts it. The beauty is that no matter what Krugman says or does, it won’t look good for him.

    If he says he does not accept it, then he contradicts his own worldview, because the comment is exactly in line with Krugman’s orthodoxy. It wasn’t an advocacy, it was simply an argument of economics.

    If he says he does accept it, then he will just reconfirm what everyone already knows. That he’s crazy, and he will have admitted through this denial that he holds something “really stupid [and] outrageous.”

    If he fails to say he rejects or accepts it, then that will insinuate that he has something to hide, which would most likely convey the impression that he secretly accepts it but is too embarrassed to explicitly admit it.

    Since Krugman seems to imply in the NYT blog that the fake comment is “really stupid [and] outrageous,” (although we can’t be sure, and I bet Krugman carefully worded his column so that he doesn’t explicitly say the comment is really stupid and outrageous, but at the same time denying he said it), then the imposter has succeeded in getting Krugman to contradict himself, one way or the other.

    Murphy is right. This fake quote is in line with Keynesian orthodoxy.

    Maybe Krugman is more upset that someone beat him to the punch, than he is with being punk’d.

  6. kavram says:

    The only reason disaster and destruction lead to increases in GDP is because GDP includes production (needed to replace what was lost) but excludes destruction, i.e. if a $10,000 car is totalled in an accident, GDP stays constant, rather than decreasing by $10,000. But if the driver buys a new $10,000 car to replace his old one, GDP will rise by $10,000.

    I feel like this says more about the validity of GDP than anything else. It’s kindof like arguing that if you binge eat now and then return to your regular diet next week, you will lose weight throughout the next week (when in reality you will simply return to your normal ‘equilibrium’ rate from an ‘inflated’ weight).

    Whether or not mainstream PhD economists actually misunderstand this is a mystery to me; I’ve always thought there was some “conspiracy of silence” to simply accept GDP figures at their face value.

  7. Scott H. says:

    Amazing. I get on Krugman’s blog and attack him and get on here and defend him.

    Anyway, the broken window fallacy is not necessarily a fallacy — at least not as far as liberals with a socialist instinct are concerned. The question is whose wealth is destroyed and who will end up getting employment in order to fix the devastation. If those two groups are affected separately — and, of course, they are — then Krugman’s position is still potentially valid. The wealthy take most of the hit. The workers get most of the benefit.

    Is it efficient? Heck, no. But, its not illogical given a liberal’s value system.

    • Daniel Kuehn says:

      That’s defending him?

      I’m a little scared to see what your “attack” consists of now.

      • Scott H. says:

        Cut me some slack here. I think its a defense. Murphy is saying that Krugman is committing some kind of elementary error in economic logic, and I’m saying he’s not. Now, Krugman will probably send an email asking me not to do him any more favors, but at least this shows how fair I am!

  8. Bob Roddis says:

    It seems almost in bad taste to talk about dollars and cents after an act of mass murder. Nonetheless, we must ask about the economic aftershocks from Tuesday’s horror. These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.

    Kroogie 9/14/01


    From a legal fees standpoint in litigation, there’s no basis for expending any more precious time determining if our side is right and the bad guys are wrong.

  9. Tel says:

    Just to complete the picture…

    And yes, this does mean that the nuclear catastrophe could end up being expansionary, if not for Japan then at least for the world as a whole. If this sounds crazy, well, liquidity-trap economics is like that — remember, World War II ended the Great Depression.


    • Bob Roddis says:

      There ya go, eh? A whole decade of “intellectual” consistency.

  10. Bob Roddis says:

    “Lord Keynes” has finally figured out what is wrong with us. We don’t have a sense of “humour”!

    It is fairly amusing to see assorted libertarians and Austrians reduced to blathering idiocy as they distort Krugman’s remarks, and falsely say that he really and seriously urged government military spending to fend off an alien invasion. I guess cultist, loser ideologues also tend to have no sense of humour either.


    • Tel says:

      I once used to have a sense of humor. Really I did.

      Then a strange letter turned up in the mail, claiming to be from the Tax Office. A neatly printed form stated, “This year we will also be requiring you to give up your sense of humor, along with your regular obligations.”

      Naturally, my first thought was that this must be some sort of joke, but soon I stopped laughing.


      • Bob Roddis says:

        This is funny, right?


        And we all know that LK is always a barrel of laughs:

        Note that he did not seriously advocate any such military spending. Krugman’s point, illustrated in a rather silly way, is the same as that of Keynes: merely that effective demand drives output and employment in modern capitalist economies, and that spending and employment programs on the scale of World War Two would eliminate the sluggish growth and high unemployment the US is currently experiencing.

        • Tel says:

          People who disagree with Paul Krugman are always Very Serious People, you can ask him if you don’t believe me.

  11. Adrian Gabriel says:

    Bob, you’re pathetic man. You are actually subscribing to the cult of hte state in thinking that Keynesianism is correct and valid. Did you not read Murphy’s full blogpost? He explains how Krugman overlooks Bastiat’s Broken Window Fallacy and thinks destruction is productive for an economy. Watch this you novice statist:


    Let me remind you Bob, that Keynesianism is not only a cult, it is much worse. It is a religion that is pushed and forced onto every student in the world….by the state itself. From Harvard to Oxford, take your pick. Every professor upholds those idiotic models that have consistently rendered us in “merde.” If you don’t understand Austrian Economics, perhaps you should read about it first. From the looks of it, you are the cult follower. Your God is the state, and you praise him every day with the rites of national anthems and pledges of allegiance. Pathetic. Do you understand praxeology, subjective theory of value or time preference? Most likely not, otherwise you’d remove your loyalty to your God (the state), and understand human action as not only true, but a vital axiom. Good day you coercive puppet….

    • Bob Roddis says:

      I’m old. Is this directed to me? If not, to whom? Is it supposed to be funny? LK says we aren’t funny. Maybe we aren’t.

      • Joseph Fetz says:

        Don’t worry, Bob. I am not old and I am a little confused by his statement, as well. Mistaken identity, maybe?

      • bobmurphy says:

        Bob, I could be wrong, but I think Adrian misunderstood you sarcasm.

        • Bob Roddis says:

          I’m shocked. Just check the expression on my face when I write stuff.

      • MamMoTh says:

        Don’t believe LK.

        You are as funny as money.

  12. A says:

    Hi Robert,

    Could you please comment on this article?


  13. Cody S says:

    A few questions for the Austrian and the Keynesian perspectives:

    Is it “normal” either to assume that the owner of the broken window has the money to pay for its replacement, or to assume that the owner does not have that money?

    Is the broken window only a matter for examination after the specific conditions of window repair and continued business have been met?

    What about the cases where the shopkeeper decides to close rather than repair the window and risk the further increase in costs associated with keeping shop in a neighborhood dangerous to shop windows?

    What of the cases in which the shopkeeper hires the glazier to repair the window and simultaneously fires his staff and puts the shop up for sale?

    In an economy filled with debt default, lagging profits and shy investors, it seems to me that such alternatives become even more prominent to a serious analysis of the broken window as an economic event.

    I guess what I am curious about is the concept that we can extrapolate what a broken window means to the economy in general when we have no resolved idea what that window means in a more specific sense.

    Extrapolating further to what a natural disaster or a war means to an economy (as an aggregation of broken windows) in this light seems foolish to a higher degree.

    • postlibertarian says:

      This. I’ve had similar thoughts. They seem to think one broken window increases growth, and two increase growth even more, and a thousand would be even better than that… but the greater the destruction the greater chance that someone can’t repair it at all, right? So when a window breaks how do we know if we are in a scenario where it will increase growth or not? To declare that disasters can be expansionary seems to contradict all the evidence we have out there of disasters reducing growth.

  14. TGGP says:

    The link to your Yglesias post is broken. And as a more meta-libertarian fan of exit I think your sarcastic argument about freedom of speech was legitimately pretty good.

    Why haven’t you posted here about your upcoming debate with Karl Smith?