05 Sep 2011

Krugman Has Been Onto Us For Years

Economics, Krugman 25 Comments

Here is a Slate article from way back in 1996. I didn’t think he could find Austria on a map back then. In an article trying to explain the persistence of supply-side economics, Krugman wrote:

The appeal to the intellectually insecure is also more important than it might seem. Because economics touches so much of life, everyone wants to have an opinion. Yet the kind of economics covered in the textbooks is a technical subject that many people find hard to follow. How reassuring, then, to be told that it is all irrelevant–that all you really need to know are a few simple ideas! Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them.

25 Responses to “Krugman Has Been Onto Us For Years”

  1. David S. says:

    As usual, Krugman is on target. He gives Austrians too much attention, but just the right amount of credibility.

    • Bob Roddis says:

      If Austrian economics is so easy to understand, why you don’t understand it? Why doesn’t Krugman understand it?

      • Bob Roddis says:


        In fact, I’ve been waiting almost 39 years now for the great refutation of the basic Austrian axioms. Where is that refutation?

        • MamMoTh says:

          Axioms are not refuted. You take them for granted or not.
          You’ve wasted 39 years of your life. Probably more.

          • David B. says:

            MMT guy,

            If you could simply point to one trail that MMT economists have performed that meet the qualifications of a scientific study using the scientific method, I will be happy to renounce Austrian School theory for its unscientific use of axioms and logical deduction.

            Thanks. I eagerly await your evidence.

            • David B. says:

              trail = trial

            • MamMoTh says:

              MMT describes how modern monetary systems based on floating sovereign state currencies works. Much of it goes against what mainstream or Austrians believe, which is based on the deceased gold standard.

              In order to scientifically give empirical evidence, they usually consider a non linear system called Japan.

              • David B. says:

                ROFL, do you even know what the scientific method is?

                You are such an intellectual fraud! This is too easy!

  2. David S. says:

    Austrians are just another small band of nutcase cultists who think only they have the absolute truth. They may as well merge their conferences with those of the Flat Earth Society. They are idiotic kooks and nothing more.

    • Dan says:

      Now if you also told us how rich you are then you would’ve included everything you contribute on a typical post.

    • David B. says:

      Oh no he didn’t!

      LOL, your comment made me totally consider the Austrian School. Thanks!

    • Mattheus von Guttenberg says:

      They are idiotic kooks and nothing more.


      • Captain Anarchy says:

        Because he makes a lot of money, so he’s right about everything economic.

  3. Jerry says:

    Someone get David S. a newpaper column or book deal – his arguments are irrefutable!

  4. Martin says:

    “Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them”

    Well it’s hard to argue against this statement. ‘Austrians’, mostly Rothbardians, have argued as much. I actually read the article a couple of days back, I can’t recall why though. How did you find it Bob? Funny how reading similar blogs will result in similar search results.

    On another Krugman note, there is an interview with Krugman and Koo, where Krugman – according to Koo (2008) – tells him that Japan needs a 300 percent inflation rate, this was in 1999.

  5. Daniel Kuehn says:

    That “line from Adam Smith to a few Austrians” does sound a lot like what Peter Boettke himself says about mainline vs. mainstream economics, where somehow magically Keynes, Samuelson, and others Boettke doesn’t like are not in the tradition of Smith.

    • Martin says:

      Haha, yes, that’s true: I quickly googled from when that was, but the earliest reference was in 1999.

      Historically, Boettke does have a point, the mainline is pretty much liberty over power. It’s a surprising result as the mainline consists of the classicals and marginalists who both had a different theory of value. Considering that both classical liberalism and classical economics arrived on the scene at about the same time, it’s questionable as to what is cause and what is effect. The theory of contract reflects its origins, perhaps economics as well? On the other hand, perhaps it survived until now, because it is so successful, this seems to be Hayek’s argument. Nonetheless it’s a difficult task to discern what’s economics and what’s ideology.

      • Daniel Kuehn says:

        I’m fine with liberty over power. That hasn’t just been running through economics since Smith – it considerably predates him. I’m just dubious of how Boettke interprets “liberty over power”.

  6. Prateek Sanjay says:


    Given the actual friction between supply siders and Austrian School, it is pretty incredible to conflate the two. Paul Craig Roberts wrote his rebuttal to Austrians that was published in Mises.Org, condemning them for not criticising a supposedly elitist free trade system because of their “libertarian ideology”. Rothbard, on the other hand, mocked supply siders by saying they were ridiculous to think that tax revenues automatically go up on reduction of tax rates.

    That’s why, I think, Professor Murphy posted this piece – to point out that Krugman knew only of the Austrian School through the lens of an entirely different supply-sider group.

    • Daniel Kuehn says:

      I think Bob was just surprised Krugman knew about the Austrians back in 1996.

      Supply siders certainly aren’t “Austrians” in the school of thought sense, but many do like Hayek.

      Remember, though, Bob used to work for Laffer. Rothbard gets bitchy about everyone at some point, but Bob seemed to like him well enough.

      • Daniel Kuehn says:

        Granted – I like Hayek too but that doesn’t slot me into Krugman’s description here.

  7. bobmurphy says:

    I mostly posted this because I thought it was funny. I had vaguely thought Krugman didn’t start bashing right-wingers until the George W. Bush administration, but I stand corrected. Also, I was impressed that he knew about Austrians back then.

  8. Bob Roddis says:

    Unless you’re a Keynesian or MMTer, we’re all familiar with the concept of Cantillon Effects. But in dealing with Keynesians and MMTer commenters on blogs, we all face the problem of Fetz Effects where, as described by Joe Fetz, the statist basically ignores your argument or challenge and instead deflects it and focuses upon a trivial aspect of your argument, often upon single word. This always happens when you challenge the statist by pointing out that he doesn’t understand the first thing about Austrian ideas. We see that here all the time from David S. and Mammouth.

    I’m going to run a monthly contest for the best [worst] Fetz Effects of the Month. The first winner is our hero, His Lordship Lord Keynes. On his blog, I wrote:

    I certainly do not claim that Austrian economics is devoid of empirical evidence. The evidence supports the stripped down concepts of action and economic ignorance. The theory develops from that. There is never anything offered in your historical anecdotes that refutes that basic analysis. In a chicken/egg analysis, the axioms come first. In an alternative universe where the axioms didn’t exist or were different, things might be different. What historical events do you claim refute the basic action and ignorance axioms? Further, do you agree or disagree with the basic Austrian insistence that people do not respond to stimuli like projectiles or molecules?

    The Keynesians ALWAYS ignore the universal truth of the axioms which are matter-of-fact, self evident and based, for lack of a better term, upon common sense.

    The award winning Fetz Efffects response:

    Lord Keynes said…

    “There is never anything offered in your historical anecdotes that refutes that basic analysis.”


    noun, used from Late 17 century

    (1)secret or hitherto unpublished details of history
    (2) A narrative of an amusing of striking incident (originally an item of gossip)
    (3) (Art) the portrayal of a small narrative incident; a painting protraying a small narrtaive incident

    The New Shorter Oxford English Dictionary, Volume 1, A-M, Oxford, 1993.
    p. 76.

    Buy a dictionary, read the definition of “anecdote”. Read it again, again and again, until the definition penetrates whatever it is you call your mind.”

    September 1, 2011 6:01 AM


    • MamMoTh says:

      Human beings do respond to stimuli like projectiles:


    • Lord Keynes says:

      (1) most of the basic Austrian axioms, like the human action axiom, require no “refutation “. They are trivial truths that could be held as true even by Marxists without contradiction.

      (2) You are also laughably ignorant even of the defintion of the word “anecdote”, as I point out.