01 Aug 2012

Should We Label Paul Krugman as a “Free-Market Economist”?

Health Legislation, Humor, Krugman, Shameless Self-Promotion 122 Comments

Yes kids, once again we return to a familiar theme here at Free Advice: trying to use evidence to get Daniel Kuehn to change his opinion on something involving Paul Krugman. Now many of you will say, “Bob, what’s up? You’ve written a book that has often been (erroneously) described as a NYT bestseller, you have a promising career as a stand-up comedian, and you can stand-in for John Lennon if push comes to shove. Why waste time with this punk Keynesian grad student?”

Well, when you see the quote I have to produce for you, you will know why. Recall that Daniel Kuehn has been saying it is perfectly reasonable for him to describe Paul Krugman as a free-market economist; it all depends on how we define the term. I mean, was Milton Friedman one? What about Hayek? What about Mises (who believed in government militaries and courts, after all)? Surely it’s silly just to reserve the term for anarcho-capitalists in the Rothbardian tradition.

Well, after the below quote, one of two things will happen:

(A) Daniel will offer unconditional surrender on this minor point.

(B) Daniel will have to explain to us why it makes sense to describe as a “free-market economist” someone who just wrote this on his NYT blog:

Romney’s remarks here [on Israel’s health care system] fit the classic…definition of a gaffe: it’s when a politician accidentally tells the truth. The truth in this case is that America’s uniquely privatized system is also uniquely expensive and inefficient; health care is one area in which the public sector does it better than the private sector, and in which free-market doctrine is just a dangerous fantasy.

Either way, I win.

122 Responses to “Should We Label Paul Krugman as a “Free-Market Economist”?”

  1. Daniel Kuehn says:

    Hey, I’ve long said I hate the way Stiglitz (all the time) and Krugman (less often) concede the term to you guys, and just concede the point that “government” and “markets” are opposites.

    Based on the way you define “free market economist”, Krugman is obviously not one. I’m not one either.

    But I value the institutions of a free society too much to just give up on the point that free markets and free government are not antagonistic things.

    This quote specifically concerns the health care market. I don’t agree with all that Krugman has to say on “market failure” in that market (another term I HATE because it perpetuates this false dichotomy between free markets and free government), although I agree with some of it.

    This is really a Xeno’s paradox. Lots of libertarians are fine with public military and police force. They supply the same fundamental argument that Krugman uses with health care. Where do we draw the line?

    Well does Krugman still like the same things about markets that Hayek did?

    Yes.

    So he’s a market economist.

    But I’m happy to admit this has a lot more to do with my frustrations about the way people (including Krugman) try to introduce false dichotomies around free government and free markets than it does iwth any fundamental disagreement between you and me about what Krugman thinks.

    • RPLong says:

      You don’t mean Zeno’s Paradox. You mean the Paradox of the Heap.

      You’re correct that it’s a definition problem. How far must you venture from pure anarchy and still retain the label “free market economist?”

      But as I see it, the burden of proof is on those who call for more regulation and a wider scope of government to explain why they are free market economists.

      For example, people like myself, who are in favor of a state-run judiciary can say, “A healthy free market can only exist if there is an unimpeachable mechanism by which private property disputes can be resolved.”

      Now, it is possible for the anarcho-capitalists to disagree with me as to whether a state-run judiciary is unimpeachable, and we can have that debate. But it is a debate about why my suggestion is good for a free market.

      No such debate can be had about socialized medicine. You cannot say that the existence of a free market is dependent on a state-run health care system. If you try, you will have to dillute your opinion so far down that it no longer resembles a credible claim. (I.e. “People have to live in order to trade, and the healthcare system keeps them alive, so we need a state-run healthcare system…”)

      Do you see how there is a difference between those two examples and their resulting debates?

      • Daniel Kuehn says:

        Yes… I thought that was one of his for some reason (he has a bunch, right?). Now I feel like I’ve said that other places… drat. I am not a classicist or a logician to be sure.

        • RPLong says:

          It’s hard to keep them all straight. The only reason I know so many of them is because I have a morbid interest in paradoxes. 😉

      • Daniel Kuehn says:

        re: “But as I see it, the burden of proof is on those who call for more regulation and a wider scope of government to explain why they are free market economists. “

        I agree with this up to a point. I am a presumption of liberty guy. But as I mention below (and alluded to in the comment above), “liberty” is a slippery term that often tells you a lot more about the person using it than what liberty really is. So when we’re talking about a judicial system that maintains property rights, who bears the burden of proof? As you say, there’s really an argument here.

        But yes, government is going to be coercive and you ought to be able to articulate the way in which it is appropriately dealing with another coercion or injustice.

        • RPLong says:

          Then let me ask you this: At what point does the presumption of liberty expire? In other words, what specifically would Krugman have to say in order to convince you that he is not a free market economist?

          If memory serves, he did call for a temporary nationalization of banks. Is that sufficient to call his free market leanings into question? If not that, then what?

          It’s easy for the Rothbardians to explain what their definition of liberty is. You obviously have a definition in your mind. I guess it would be easier to discuss if you just stated it.

          • Daniel Kuehn says:

            So Rothbardians will talk to you about not engaging in coercion or some variant of the NAP.

            I’ve said in the past that liberty is about the minimization of coercion, because you can’t act without being coercive.

            That’s what I’ve defined it as in the past: the minimization of coercion. I don’t know if there is a global minimum here or if its anything that would be easy to find. So I think I’d have a considerably harder time satisfying a cut and dry question like that than you would hope for.

            That’s not because I wouldn’t like to draw a line. That would be great. But I think people who try to do that are probably fooling themselves.

            • RPLong says:

              Then you’re not arguing that Krugman is a free market economist, you’re arguing that the distinction itself is impossible.

              According to what you’re saying, there is basically nothing Krugman could say to convince you that he isn’t a free market economist. If you think he’s minimizing coersion, then he is. If you don’t think so, then he isn’t.

              For what it’s worth, I don’t believe in a firm answer, either – but I believe there is a high value in defining for *oneself* what liberty and freedom are. It informs one’s perspective and strengthens one’s convictions.

              • Daniel Kuehn says:

                Well do you want what he “would have to say” or do you just want something he could say?

                It’s not impossible to determine. It’s relatively easy. “The chaos of markets can’t feed Paris” wouldn’t be a very free market thing to say. That would convince me.

                As far as defining it, I’m quite happy with the minimization of coercion. That emerged out of a lot of extended comment threads, and I think it works well to express my definition.

              • Bob Murphy says:

                Daniel wrote:

                “The chaos of markets can’t feed Paris” wouldn’t be a very free market thing to say. That would convince me.

                Careful, Daniel, you might paint yourself into a corner. Krugman isn’t for a “free market” in food, by any stretch. He’s for all sorts of regulations.

                Moreover, he has written about food in the UK being awful for a generation because of market failure. (Do you remember that one?)

                So it sounds like to salvage your position, you mean that Krugman would have to say, “Markets just don’t work.”

                As Blackadder pointed out, what kind of economist would say this?

                Let me put it this way Daniel: Name for us prominent economists who are not free-market in your sense.

            • Dan (DD5) says:

              “… because you can’t act without being coercive.”

              If you can’t act without coercion, it follows that every action is coercive, and yet you still maintain the goal of minimizing coercion. Very interesting!

            • Dan (DD5) says:

              “… because you can’t act without being coercive.”
              If you can’t act without coercion, it follows that every action is coercive, and yet you still maintain the goal of minimizing coercion. Very interesting!

              • Major_Freedom says:

                Looks like Dan picked up on it too. I guess I was typing my lengthy response as you posted yours, because I didn’t see your response until after I submitted mine.

              • Major_Freedom says:

                I think he meant minimizing purposeful coercion, i.e. one person initiating violence against another. Coercion as such is being presented as something that cannot be eliminated, because of the reality of human existence as it stands against a particular standard or understanding of reality.

            • Major_Freedom says:

              I’ve said in the past that liberty is about the minimization of coercion, because you can’t act without being coercive.

              DK, this is a truly significant and revealing core philosophical belief that you have. It’s very important. This area of thought is essentially a main pillar in one’s entire set of surface-level convictions about the real world.

              That statement you made explains a lot of what I have read over these past months.

              Have you really thought deeply and self-reflectively on the circumstances in which you could have acquired such a belief? How did that belief arise?

              The general framework of the belief that one cannot act without being coercive dates back to the soteriology of the neoPlatonist Plotinus, which was influenced by thinking of the age old problem Plato also recognized, which is the contingency of human existence.

              For Plotinus, as well as Plato, and St. Augustine, it derives from the perception of deficiency inherent in the temporal character of man’s existence. Every moment that passes, man loses himself and finds himself again, only to lose himself once more. He can only conceive of a fixed thought by referring to his former self or his future self. Never his actual self. Thus man acting is man “coercing” against rigid conceptual thoughts and rigid conceptions of physical things.

              Plotinus viewed the manifold of physical reality as a degradation from the pure, free singularity, “the one.” He viewed the body in physical reality as thrown into an inherently coercive existence, in which the only escape, or reconciliation, is to retreat into one’s thoughts and morally rejoin with the one, through meditation, revelation, etc.

              In short, that which truly is, cannot be subject to time. Humans cannot truly be, because humans are finite and temporal.

              Over the centuries, this dualist view of man took on many other forms, but all the while, there was the same fundamental feeling of antagonism, of discomfort, of agitation, with human life. It just doesn’t feel perfect and free no matter what anyone thought or did, because we’re always “trapped” in a world of time and, (what I think follows from time): scarcity. From scarcity and time there is limitation.

              So it seems like no matter what any one person did, it is coercive because they are exclusively monopolizing some material means, and some physical space. You act, and you necessarily act in a coercive like fashion because there will always be some other human would have liked to use those means and space, but could not because of your actions. Your actions are therefore their limitations, and vice versa.

              For Plato and Plotinus, and St. Augustine, and then later Hegel and Marx, the only way to reconcile this cosmic antagonism, to truly liberate the soul, or man, or whatever, is to transcend and abolish the artificial dichotomy between subject and object. For whatever is perceived by you as external to you, is a cause of your own limitation, insufficiency, and imperfection. The mind and the universe have to become one in the same. For that is when true being for humans becomes possible. Only that which is absolute and non-contingent, is truly existent.

              The true nature of man’s life therefore resides outside himself. It differs from his empirical life. A return to non-contingency is a return to unity with the absolute.

              ——————————–

              It is dangerous to use the word “coercion” to describe your beliefs of the implications and attributes of human action. For if the fabric of reality was such that all human action is coercive, then how can we distinguish between purposeful coercion from some humans against other humans, and the coercion in the fabric of reality? If we could only ever “minimize” coercion, but never eliminate it due to reality itself being coercive, then what is the point of ever reducing purposeful coercion from the status quo? It’s not like humans will ever gain freedom, because while they might be able to reduce purposeful coercion to zero, they will never fully eliminate coercion because they will always be temporal beings in a world of scarcity.

              I think this is why you seem to be so “meh” towards libertarianism relative to my approach to it. Whereas it is more a question of pragmatism and efficiency and so on to you, it is the very foundation of human life itself to me.

              I can and do think of a reality of zero coercion even for temporal man in a world of scarcity, whereas you do not. It is like we’re both blind but I can smell baked cookies and your nose is broke so you can’t, and I say “We have to run! We have to move this way now, or else we’ll miss it!”, and you say “What’s the big deal? I don’t smell anything. Stop being so hysterical.”

              I think that is why view libertarians of the Rothbardian type as more dogmatic and “absolutist”, and why they seem to get hysterical and be unwilling to “calm down”. You view libertarianism as fundamentally a futile movement in the sense of the fabric of reality, because you suspect that the finish line will have a wall there, barring us from having true freedom. Libertarians on the other hand think that wall isn’t there, or at least hold the finish line prior to the wall, because the wall is the edge of reality itself.

              Maybe this makes no sense, but I think the above is close to the fundamental set of ideas of why absolute libertarianism isn’t something everyone buys into.

              • Daniel Kuehn says:

                OK – just going off that first sentence – you’re taking it more strongly than I meant it and that’s my fault.

                But a whole hell of a lot of human social relations have some element of coercion in them.

                And, I’d add, coercion isn’t a light switch. There are obviously coercions we care about more and les.

              • Major_Freedom says:

                Are you still saying that you think ALL human actions have some element of coercion?

              • Gene Callahan says:

                “The mind and the universe have to become one in the same.”

                Can you show me any evidence that the thinkers you cite thought this?

              • Gene Callahan says:

                And Major Freedom punts!

              • Major_Freedom says:

                I didn’t see your question until just now, Callahan. It’s not like I go through every single past comment of mine to check for responses. I usually start by going to the side bar on the left and clicking on the comments that way. If too many people comment after you, especially in a relatively older post like this one, then chances are I’ll miss it.

                I think you are being a little unfair.

                To answer your question would take an essay in itself. It cannot be explained by me cherry picking quotes and saying “See? Right there.”

                It’s more subtle and implicit, and can only be grasped by understanding the entire tradition of thought and how these philosophers (and others I did not mention) influenced each other.

                But to give you something, anything, to show that I am not just making this up, I refer you to John Eriugena, Joachim Fiore, and Meister Eckhart, who were more explicit in the same tradition of thought.

                It’s not something I can show by quote mining.

              • Major_Freedom says:

                The “tradition of thought” I am referring to is often called dialectical theology.

            • Bob Murphy says:

              Daniel Kuehn wrote:

              That’s what I’ve defined it as in the past: the minimization of coercion.

              Then you’re not a free-market economist by your own definition. You are for taxation to prevent an asteroid from blowing up earth. Is the asteroid “coercing” against us?

              If you go that route, then we are utterly lost. You can have socialized health care in order to minimize the coercion of parasites killing a guy w/o health insurance, etc. You can have nationalized agriculture to minimize the coercion of someone not getting as much food as he wants in the market, etc.

              • Daniel Kuehn says:

                These are contested ideas at this point, yes.

                I’d argue that our side – who thinks that socialized health care and agriculture would introduce more coercions than it would remove – would likely win. It certainly should win.

              • Major_Freedom says:

                I like how you retreat to saying that your arguments “are contesteda this point” when Murphy points out the reductio ad absurdum in them.

                Contested by who? Every idea, even the ones most universally accepted, are “contested at this point” by someone.

                You have an interesting way of saying “Yeah, what I said can be used as justifications for totalitarianism.”

            • Tel says:

              I agree, you can’t act without being coercive but some actions are significantly more coercive than others. Thus, it is necessary to draw the line somewhere.

              But there’s a bigger problem which is that if an opportunity exists for an individual to get good returns by being coercive, then sooner or later someone will exploit that opportunity… so you might as well always presume there’s someone doing it.

              • Major_Freedom says:

                I agree, you can’t act without being coercive but some actions are significantly more coercive than others.

                Explain. How is my typing to you this response right now, “coercive”?

                Thus, it is necessary to draw the line somewhere.

                Why? If all actions are coercive, which line is the correct line, what is the basis for agreement, and why should everyone be forced to obey that line, rather than some line less coercive?

    • Wonks Anonymous says:

      I don’t think healthcare is analogous to the military. Healthcare is a private good which can be provided on an individual basis (there are externalities involving vaccines, but that’s not Krugman’s point). Krugman argues for government provision not because it is a public good but because of asymmetric information, adverse selection, and possibly because single-payer’s monopsony power will transfer rents from producers to consumers. Markets, however unfree or dysfunctional, actually do exist for healthcare. There is not an analogous market for national defense.

      • Daniel Kuehn says:

        re: “I don’t think healthcare is analogous to the military.”

        I don’t either. But there are a lot of reasons to justify public action besides it being a public good vs. a private good.

        While I think there are some things we can do, I really can’t emphasize enough that I am not on board with much of what Krugman says about health reform.

      • Tel says:

        Healthcare is not a good. It is many things to many people.

        For example, immunization against contagious disease protects the community as a whole, because it prevents the disease spreading. However, fixing a broken bone is just useful to the person who happens to have a broken bone.

        • Leto says:

          Wrong. Fixing a broken bone is still conducive to economic productivity. This goes for nearly all health care, and once we admit that, it becomes a question of when a persons leg is worth fixing for the economy as a whole (i.e. if a persons remaining expected life product exceeds the cost of fixing the bone or not). At this point, again, it becomes a question of principles and ideology, rather than economics.

  2. Richie says:

    So really the argument is over how one would define “free”.

    • Daniel Kuehn says:

      That’s what I think the argument is over at least. I’m not even sure there’s a single answer. Presumably the word covers a number of positions well enough.

      I wouldn’t, for example, accuse my Rothbardian friends of being against the free market even though they accept the coercions of negative externalities in a property rights regime that not everyone has agreed to (that’s always their argument against government… funny how they consider your acquiescence to the property rights regime an unimportant question).

      These things bug me and I disagree with them, but I’d never say that Bob wasn’t a free market economist because of it.

      • Mattheus von Guttenberg says:

        In the first place, there can’t BE any externalities in a purely private property society because the costs can always be internalized.

        In the second place, it’s not even relevant if everyone agrees to it. Clearly, lots of politically connected people “agree to” to present state society. But that doesn’t legitimize the state. I’m arguing I have a right to not be coerced; you’re arguing you – and other people – do have a right to coerce me.

        • Gene Callahan says:

          “In the first place, there can’t BE any externalities in a purely private property society because the costs can always be internalized.”

          Ah, yes, in a perfect world, everything is perfect!

          • Major_Freedom says:

            Not a perfect world, just a world where property rights are respected and enforced. It is difficult, it is not possible one minute from now, but it is in principle possible, and it is something that humans can do, so Mattheus’ response to DK was justified.

            It was out of line for DK to claim that the free market in the Rothbardian conception, sanctions negative externalities. Negative externalities are after all violations of private property rights in the Rothbardian system.

            • Gene Callahan says:

              No, sorry, for their to be no externalities, property rights would have to be perfect.

      • RPLong says:

        But there is also no ambiguity in the Rothbardian position. That position is “no rules at all.” As soon as you introduce even one rule, you have entered the Paradox of the Heap.

        No one disputes that the absence of sand is not a heap. The dispute only occurs between 1 and [infinity] grains of sand.

        • Daniel Kuehn says:

          No ambiguity? No sand grains? I’m not sure I’d agree with that one.

          “In the free society, no man may be saddled with the legal obligation to do anything for another, since that would invade the former’s rights; the only legal obligation one man has to another is to respect the other man’s rights.

          Applying our theory to parents and children, this means that a parent does not have the right to aggress against his children, but also that the parent should not have a legal obligation to feed, clothe, or educate his children, since such obligations would entail positive acts coerced upon the parent and depriving the parent of his rights. The parent therefore may not murder or mutilate his child, and the law properly outlaws a parent from doing so. But the parent should also have the legal right not to feed the child, i.e., to allow it to die.”

          – Rothbard, Murray N. (1998) The Ethics of Liberty, intro. Hans-Hermann Hoppe, New York and London: New York University Press.

          That’s what I would call a sand grain, RPLong.

          • J Oxman says:

            It may be extreme, but I fail to see the ambiguity is Rothbard’s position.

            • Daniel Kuehn says:

              I thought he was referring to whether it was ambiguous that Rothbard was taking a pro-liberty position. Certainly Rothbard was non-confusing. But so what?

              • Major_Freedom says:

                Serious question: How is that passage you cited anti-liberty?

                Can you identify an individual who initiated force against another individual’s person or material property? I can’t see it. It may look coercive, but abstaining from action, without a corresponding contract agreed to by the abstainer that would make abstaining a contract violation, is not a violation of liberty. It may be morally egregious to one’s sensibilities, but it is not criminal in the private property ethic.

                I see no ambiguity there.

          • RPLong says:

            I would never venture to defend Rothbard’s specific views, because I’m just not a fan. But there is no ambiguity in the passage you quoted. Rothbard states exactly what he means, and leaves no wiggle room.

            • Daniel Kuehn says:

              Oh if you just meant that he’s sure of what he thinks, that’s definitely true.

              I thought you mean ambiguity about whether or not it’s “liberty”.

              • RPLong says:

                No, it’s still unambiguous on that point, too. Rothbard went out of his way to explain his concept of “liberty.” The passage you quoted is merely an application of his previously stated principles.

                Now, you can disagree with his definition of liberty. I do, too. But that doesn’t make his sense of liberty ambiguous, it just makes it different from your own.

              • Daniel Kuehn says:

                Well sure, I don’t doubt Rothbard’s ability to put together an internally consistent thought.

                When I say “liberty” needless to say I’m not taking Rothbard’s word on what that means.

        • Gene Callahan says:

          “That position is “no rules at all.”

          Nonsense. The Ethics of Liberty is a book that is filled with rules, cover to cover.

          • RPLong says:

            Sorry Gene, I thought it would be understood that by “no rules,” I meant “anarchy.” I think Bob and Daniel discussed the meaning of the word “rule” yesterday, and Steve Horowitz put it nicely on Coordination Problem. In Horowitz’s language, clearly what I mean by “no rules” is no formalized, state-determined rules. Obviously, no sane person would argue for a world in which morality did not exist.

            • Gene Callahan says:

              There would be formalized, defense agency generated rules. And these would have to universally disallow some very specific things, such as fractional reserve banking.

              • Joseph Fetz says:

                That’s quite a leap, don’t you think, Gene?

              • Gene Callahan says:

                What is quite a leap?

              • RPLong says:

                Serious question: Then what is the difference between that and non-anarchy?

              • Major_Freedom says:

                And these would have to universally disallow some very specific things, such as fractional reserve banking.

                That does not follow. As long as everyone is free to use whatever money they want, e.g. no taxation in toilet paper, which coerces everyone to accept toilet paper in the market.

                If you want to accept toilet paper as money, then if “formalized, defense agency rules” were adopted in a state of anarchy, then I know I wouldn’t consider it a violation of my property rights if your toilet paper bank engaged in fractional reserve lending.

                ——————

                Those who argue, correctly, that FRB can in principle be non-fraudulent, are ignoring empirical history where FRB has always contained instances of fraud. These instances concern those demand depositors who satisfy the following criteria:

                They don’t know what is happening with their deposits, and they were mislead by the individual banker they did business with, when it comes to what happens to their money.

                Even in 2012, there is a significant portion of the population who believe they are the legal owner of the money they deposit, and a significant portion who don’t consent to the bank lending the deposit.

      • Major_Freedom says:

        It’s interesting how you view coercion as anything that one or more people do that “not everyone has agreed to.”

        If A and B agree to a contract whereby A pollutes B’s land, but not anyone else’s land, then is this a coercive action? Or is it coercive by virtue of B owning land exclusive from everyone else, whereby not everyone will “agree” that the land claimed by B should be polluted by A?

        • Gene Callahan says:

          What requires coercion is the ownership claims themselves. It may be good coercion or may be bad coercion, but if you aren’t willing to defend your property claim, it will mean nothing.

          • Major_Freedom says:

            What requires coercion is the ownership claims themselves.

            This belief is based on a fallacious understand of coercion entails. By your usage, reality itself is coercive, because humans require exclusive scarce means and exclusive airspace in order to even exist.

            Extending the logic even further, coercion is ubiquitous as long as you are not the entire universe and you perceive that which is external to you, since everything not you, limits you, and thus coerces you.

            It means that if anyone identified exclusive means, such as their own bodies, and the airspace they take up, that would be “coercive” to all the would be rapists and robbers.

            It may be good coercion or may be bad coercion, but if you aren’t willing to defend your property claim, it will mean nothing.

            Property does not arise when an individual threatens another with violence should that other person attempt to take possession of the scarce thing in question without the consent of the first individual. Property is not a posteriori to communicating one’s ownership to another.

            ——————

            Your philosophy is internally inconsistent. That is why you view property as inherently coercive, when it really isn’t.

            If on an island two people agree to respect each other’s property, because they recognize that mutual gains can be made, then property claims would still be taking place, despite the fact that neither threatens the other with violence against their person or property, despite the fact that neither intends to steal from the other.

            It is an empirical question whether or not coercion actually takes place. Your a priori claim that all property claims are coercive, is based on a flawed metaphysical view of man.

  3. John Becker says:

    Here’s the biggest reason I don’t think it’s fair to call Krugman a free-market economist: even if he believes that markets are typically the best way of organizing society, he spends the vast majority of his writing arguing for more government. He never takes the time to explain to his readers how market systems work or how they can lead to positive outcomes. The prime example of this is the way he blames oil speculators for driving up gas prices even though he should know better. You’d be hard pressed to find examples of him praising the way markets operate and calling for their expansion into more areas of our lives. He’s always on the other side and that makes it difficult to say he’s a free-market economist even though there is no clear dividing line.

    • Bob Murphy says:

      John Becker wins the thread. John I was literally going to make a follow-up post saying just this. So I’m not stealing your idea, if I end up doing that.

  4. J Oxman says:

    If I may, I would suggest that no one should be a free market economist. Nor should anyone be a Marxist economist, or a ‘moderate’ economist (which most neoclassicals would be, in my view). The economist, qua economist, should be a positive social scientist.

    Oh, and btw, when PK says the U.S. has a ‘uniquely privatized system’ the only way this can be true is if one replaces ‘uniquely privatized’ with ‘uniquely f-ed up combination of privatization and state interference.’

    • Major_Freedom says:

      The economist, qua economist, should be a positive social scientist.

      What does a “positive social scientist” mean?

      • J Oxman says:

        Positive v. Normative. The economist’s job is to analyze without making moral judgments. Like saying “taxes of XYZ type will have ABC effect” without regard to the desirability of the effect. Whether or not the effect is desirable is another case. The effect might be to raise government tax revenue. Some might think that’s good, others (like me) bad. So any policy that purports to raise more tax revenue, I’m against as a matter of values. But as an economist, I would be able to say, purely analytically, whether or not the policy itself would do what it’s supposed to do.

  5. Blackadder says:

    To qualify as a free market economist, I would think that you would, at the very least, have to be more free-market than the average economist. Otherwise it’s not clear why you would add the modifier “free-market” instead of just saying economist.

    Is Paul Krugman more free market than the average economist? That’s doubtful.

    • Bob Murphy says:

      Is Paul Krugman more free market than the average economist?

      In North Korea.

      • Major_Freedom says:

        “Ouch, baby. Very ouch.” – Austin Powers.

      • JFF says:

        Oh, snap.

  6. Lord Keynes says:

    The argument used above is nothing but legerdemain.

    Just because Krugman sees limits to private production in certain markets, it does not mean that overall he is to be characterised as a free market economist. He thinks that the vast majority of production should be done privately, and that the vast majority of all capital goods owned privately. He is in favour of qualified private property rights and against government planning of production or ownership of capital goods generally.

    Your trick is to be define “free market economist” by one arbitrary criterion. But such sloppy logic I can prove that neither Mises nor Hayek was a free market economist.

    We could define free market economist arbitrarily as someone who supports free fractional reserve banking. By that criterion, not even Rothbard would be a free market economist, but would be an evil collectivist, anti-capitalist, hater of freedom.

    If Murphy opposes free fractional reserve banking, by such a trick we can show that not even he is not even a free market economist.

    • Andrew Keen says:

      The problem with your argument about Rothbard and fractional reserve banking is this: Rothbard did not want a centralized authority to run around shutting down fractional reserve banks. His point was that, in a free society, arbitration and enforcement companies would recognize fractional reserve banking as a form of fraud because the bankers tell the depositors that they may withdraw their money whenever they like even though the bankers know the money would not be available if a large number of withdrawals came in at the same time.

      Deposit insurance could alleviate this issue, except that it too is fraudulent under our current system. The FDIC doesn’t actually have enough funds to cover even a small fraction of its liabilities. Meaning taxpayers and dollar holders are the actual insurers of the banks and the FDIC is an illusion.

      • Lord Keynes says:

        Rothbard was just utterly ignorant in seeing FRB as fraud.

        Anyway you have missed the point of my comment, which to expose the unsound nature of an arbitrary use one criterion to determine whether someone is a free market economist.

        • Andrew Keen says:

          No, I got your point and I don’t disagree with it. I think trying to draw a line between the free and anti-free market economists is a wasted exercise.

          I was just picking a nit with the Rothbard part of your argument. He didn’t call for coercion against the practice of fractional reserve banking. He merely claimed that to tell one man you’ll hold his money for safe keeping and then give it to another man is fraudulent. Especially when you told the first man he can withdraw his deposit on demand. I fail to see how this observation is ignorant.

          • Lord Keynes says:

            “He merely claimed that to tell one man you’ll hold his money for safe keeping and then give it to another man is fraudulent”

            And FR banking does not do that.

            The FR account is nothing but a mutuum, a debt owed to you, not a depositum:

            http://socialdemocracy21stcentury.blogspot.com/2011/10/if-fractional-reserve-banking-is.html

            http://socialdemocracy21stcentury.blogspot.com/2011/10/rothbard-mangles-legal-history-of.html

            http://socialdemocracy21stcentury.blogspot.com/2011/09/mutuum-contract-in-american-law.html

            • Andrew Keen says:

              Call it what you like, but banks do in fact claim that you may withdraw all of your funds whenever you like, even though they do not have enough money to cover even half of their deposits and their deposit insurance (they should probably call it mutuum insurance, don’t you think?) has no money either.

              If that wasn’t the case insolvency and bank runs would not be a possibility.

              You Keynesians are always refusing with all your might to call a spade a spade. If you had written Atlas Shrugged, the third part would have been called, “A is nothing but a mutuum, not A.”

            • Major_Freedom says:

              Fractional reserve banking can in principle not be fraud, as long as all parties are aware.

              Historically however, this has never been the case. There is a difference between the principles of FRB, and the practise of FRB. So empirically speaking, we can say that fraud has always taken place with FRB. Sometimes with more people, sometimes with fewer people.

              Even we imagine the utopian world envisioned by pro-FRB advocates that everyone is aware, then the practice of FRB would actually eliminate money as an absolute and unconditional property right on its owner, and would replace it with a lottery ticket money with conditional property rights on the owners.

              So what I am justified in doing is identifying the empirical instances of FRB fraud (as well as other forms of fraud), and for those who are aware and thus for non-fraud cases, recommend that if they want to avoid living with shakier financial systems, if they want to avoid the boom and bust credit cycle, then they should cease engaging in FRB.

              If they don’t care, if they’d rather earn the 0.05% interest on their demand deposit accounts, then that’s another story. They’ll have to trade off 0.05% interest rate gain, for a greater risk of unemployment and lower standard of living in the future.

              ———————

              If Keynesians are so willing to have the state use SWAT teams to enforce various “progressive” programs for the banking system, like Dodd-Frank and so on, then why not add the small caveat that banks be required to be more explicit in communicating that the demand deposit is in fact a loan?

              Or do Keynesian cultists all of a sudden turn into free market ideologues when it comes to this one issue?

    • Major_Freedom says:

      Speaking of rhetorical games and tricks…

      Define “vast majority” and “generally”, oh fuzzy logic Keynesian cultist, given that:

      A. Capital is heterogeneous, and therefore incommensurate for the purposes of addition and division; and

      B. Any answer you give will necessarily be arbitrary.

      ————————-

      Your trick is to deny the referent to reality, so you attempt to deny any and all definitions except your own arbitrary definition that we’re all supposed to accept. By your arbitrary criterion that to be against FRB means one cannot be a free market economist, you have arbitrarily defined a free market economist as one who has to at least support FRB.

      But that is the very “sloppy logic” that you accuse Murphy of using.

    • Bob Murphy says:

      And once again, Lord Keynes manages to ignore my entire post. Bravo!

      The point wasn’t that Krugman favors this or that regulation, LK, it was that he openly mocked free-market doctrine.

      Look, I disagree with Mises on a lot of stuff. But I don’t remember ever having ridiculed “Austrian fantasy” on some point. People who are Austrians don’t rip the crap out of Austrian economics, and people who are free-market economists don’t rip the crap out of free-market economics.

      • Lord Keynes says:

        “The point wasn’t that Krugman favors this or that regulation, LK, it was that he openly mocked free-market doctrine.”

        That is utter rubbish.
        Krugman does not mock the “free market” doctrine: he mocks the idea that it should be applied to one market. Mises would have mocked that the idea that there should be a free market in law enforcement, but this does not mean Mises was not a free market economist.

        Your argument is, as I said, pure legerdemain.

  7. Lord Keynes says:

    “To return, however, to the specific problem of preventing what I have called the secondary depression caused by the deflation which a crisis is likely to induce. Although it is clear that such a deflation, which does no good and only harm, ought to be prevented, it is not easy to see how this can be done without producing further misdirections of labour. In general it is probably true to say that an equilibrium position will be most effectively approached if consumers’ demand is prevented from falling substantially by providing employment through public works at relatively low wages so that workers will wish to move as soon as they can to other and better paid occupations, and not by directly stimulating particular kinds of investment or similar kinds of public expenditure which will draw labour into jobs they will expect to be permanent but which must cease as the source of the expenditure dries up.” – Friedrich August von Hayek, 1978. New Studies in Philosophy, Politics, Economics, and the History of Ideas, Routledge & Kegan Paul, London. 210–212).

    Using Murphy’s logic, therefore Hayek was not a free market economist, but should be regarded fundamentally at heart as just another Keynesian.

    • Major_Freedom says:

      Actually, just another social democrat.

  8. Andrew Keen says:

    Bob and Daniel will never settle this dispute because they speak different languages. Bob defines a free society as one without a government. Daniel has no concrete definition for a free society, but he knows it can have a government so long as it enhances his undefined notion of freedom. There is no way to catch Daniel contradicting his own standard because he has none.

    In this instance, I have to say, Paul seems like the smart one for disregarding the argument entirely and simply stating his opinion. Freedom is out of style, why waste time arguing that his suggestion is consistent with free market economics?

    P.S.: Daniel, I realize that you do not believe that Paul’s comment is inherently anti-free market. Do you deny that it is statist?

    • Daniel Kuehn says:

      So, sorry to be blunt, but that’s stupid.

      Of course I have a standard. I discussed it above with RPLong. What I won’t do is pretend that clarity and accuracy are interchangeable. If you think “no coercion” is a standard “minimization of coercion” shouldn’t be all that hard to swallow. It’s not like the liberal tradition is a free for all for me.

      • Andrew Keen says:

        Sorry to be blunt, but you haven’t articulated a standard.

        Freedom = Minimization of coercion

        Okay fine. Then what’s your definition of coercion?

        • Daniel Kuehn says:

          Ummm – imposing something on someone involuntarily?

          I don’t know – you make up a definition. I’ll probably be alright with whatever you come up with. I think you’re just being truculent now. You act like the difference here is that Bob’s committing to something and I’m not being concrete. That’s just wrong. I’ve been very clear about what makes someone’s views free market.

          The whole problem I’ve always had with (for lack of a better word) Rothbardianism is that it doesn’t sufficiently appreciate the fact that it’s practically impossible to act socially without coercing.

          • Andrew Keen says:

            Okay, I’ll back off. I didn’t mean to be “truculent” (honestly, I had to google that one).

            My point is that your lack of clarity (your word) on what freedom means to you makes it impossible to catch you in a contradiction (why Bob calls them Kontradictions).

            I wanted you to provide a concrete definition of coercion so that you could explain to us how coercing people into an involuntary healthcare system could possibly minimize coercion. That’s all.

            P.S.: If you don’t want to get in a fight don’t call your opponent stupid.

            • Daniel Kuehn says:

              I doubt you’re stupid. I just think suggesting my point wasn’t concrete was stupid.

              So the way government action minimizes coercion is going to be if it addresses a coercion fundamental to the market or a harm that a person suffers through sheer luck. These are your standard “market failure” arguments, the whole point of which is to justify state coercion by citing an instance of coercion that is being corrected.

              There are lots of these for health reform – some better than others. Ultimately one has to drill down to exactly which “health reform” they’re talking about.

              • Andrew Keen says:

                Thanks for clearing things up Dan. /s

              • Major_Freedom says:

                a coercion fundamental to the market

                Like what? Please don’t say negative externalities, because those are violations of property rights and hence a violation of the market.

                or a harm that a person suffers through sheer luck. These are your standard “market failure” arguments

                That sounds more like failures of being omnipotent and omniscient, not failures of the market process. Since when did the free market process contain a promise that you’ll never get hit by lightning?

                Do you know what a free market is? It isn’t a place where people never have bad luck. That’s a part of reality, not the market. Bad luck is inherent in the lack of omniscience, no matter what the politics happens to be.

                —————-

                Do free market economists argue like this? Do they say that because the state is unable to eliminate bad luck, that the state cannot interfere with human choices? Do free market economists set up straw men “Pure and perfect government”, and then make a list of what pure and perfect government should look like, and then say that because the state can never satisfy them, the state as it is should be abolished in favor of a state run by the market?

              • James says:

                How is harm via luck coercion? If a meteor crushes my house and the government forces you to pay for repairs, or I develop idiopathic renal failure and the government makes you fund my dialysis, the government is increasing coercion in a scenario where no coercion existed previously.

                Seriously, if you favor the minimization of coercion, you should just be a libertarian until the government gets a whole lot smaller and less intrusive. Defending fiscal stimulus or similar should be pretty low on your list of priorities given that as implemented it’s so hard to tell if any government program really reduces coercion on net. How much of what the governement does now do you think has the effect of reducing coercionon balance?

    • Gene Callahan says:

      Daniel is correct: the remark was rubbish. It is a vice, not a virtue, of Rothbard that he thinks one can proceed in politics as if one were engaged in geometry, and it is a virtue, not a vice, that Daniel understands that freedom is an amorphous entity with many dimensions, and conflicts between them, so that advancing freedom requires judgments of trade-offs and not geometrical reasoning.

      • Andrew Keen says:

        LOL. Gene, you crack me up. First you call my comment rubbish, and then you agree with it. I said, “Daniel has no concrete definition for a free society,” and you attempted to refute with, “Daniel understands that freedom is an amorphous entity.”

        Touche?

        I was not vilifying or making virtue of either position. I was explaining that you cant refute someone who hasn’t taken an actual position. Saying “freedom is an amorphous entity” is as much a philosophical stance as “God works in mysterious ways.” No one can refute it because nothing real has been said!

        • Bob Murphy says:

          Andrew Keen wrote:

          LOL. Gene, you crack me up. First you call my comment rubbish, and then you agree with it.

          That’s how Gene would pick up girls, when he was single.

      • Major_Freedom says:

        It is a vice, not a virtue, of Rothbard that he thinks one can proceed in politics as if one were engaged in geometry

        Why? You’re doing it (poorly I might add).

        it is a virtue, not a vice, that Daniel understands that freedom is an amorphous entity with many dimensions, and conflicts between them, so that advancing freedom requires judgments of trade-offs and not geometrical reasoning.

        You can’t even make that comment unless you were using geometric-like logic. Is, and, conflict, advancing, trade-offs, etc. These are all geometric reasoning concepts.

  9. Blackadder says:

    Krugman apparently believes that taxes should be set at rates that maximize government revenue. In other words, he thinks government should be as big as economic reality allow it to be. I do not think that qualifies one as a free market economist.

    Now as I understand it, the counter-argument is that since by a strict enough standard no one is a free market economist, therefore anyone who isn’t an out and out socialist qualifies as a free market economist. By that logic, one might as well say that because today’s self-described conservatives don’t support the divine right of kings, therefore there is no basis for saying that Obama isn’t also a conservative. Needless to say this is not very persuasive.

    • Dan says:

      You’ve made a couple good points here and above. Based on what LK and DK are saying it seems free market economist to them just means not a complete socialist. I have no problem saying that Paul Krugman supports some free market policies, even though he spends almost no time on discussing them, but to call him a free market economist seems to me to make the term completely useless.

      • Daniel Kuehn says:

        See I have just the opposite view. If you want to talk about “free market economists” I’d think you’d be talking about their views on markets and the way they work.

        The definitions you guys have seems like when you say “free market” you just mean “libertarian”.

        If you’re just using another term for “libertarian” that seems to me to make the term completely useless (or at least completely unnecessary).

        • Blackadder says:

          Dan,

          I don’t think “free market” is just another term for libertarian (Krugman supports gun controls, for example, but I wouldn’t consider that evidence that he’s not a free market economist). Free market is closer to being a synonym for laissez-faire, though perhaps you could come up with cases where the two terms don’t overlap. The main difference would be that the phrase ‘free market’ more readily admits of degrees.

          This, I think, is the popular understanding of the term.

          By contrast, I’m not sure I understand what you mean by the phrase “free market economist.” Presumably you mean something more than “not a socialist.” But what? On what issues would you say that Krugman stands out as being a free market economist, as opposed to being just an economist full stop?

          • Daniel Kuehn says:

            Most people you meet aren’t market friendly, just because that’s the message you get in this society. My brother – a guy that reads dusty old philosophy and theology – is a good example. He’s definitely not a socialist, but he has this idea there’s something suspicious about markets. He second-guesses them a lot. Usually in harmless, hokey ways. I don’t know if I’d go as far as saying he’s “anti-market”, but he does not have what I would call a “free market perspective”, AND he’s also “not a socialist”.

            Sure, I think the majority of economists are proponents of the free market. It would be kind of sad if they weren’t! But I think it’s more narrowly circumscribed than you suggest.

            As I said, I’m afraid the way that Bob uses it reduces the word to a synonym for libertarian.

            Laissez-faire seems a little different to me. It actually describes a position about free government as well: namely, hands off.

            In that sense I probably wouldn’t describe myself as “laissez faire” but I would describe myself as “free market”.

            But now we’re getting into areas where its the shades and intonations that I read into these words, and it’s less important to argue over (not that the initial argument was all that important either).

            • Joseph Fetz says:

              To be fair, most people (your brother included) aren’t exactly steeped in the economic literature enough to know the difference.

      • Major_Freedom says:

        Based on what LK and DK are saying it seems free market economist to them just means not a complete socialist.

        BINGO.

  10. Joe says:

    Medical services should be managed by the state and not the market.
    Education should be managed by the state and not the market.
    Food production should be managed by the state and not the market.
    Auto production should be managed by the state and not the market.
    Finance should be managed by the state and not the market.
    Transportation should be managed by the state and not the market.
    Energy production and delivery should be managed by the state and not the market.

    I am a free market economist.

  11. Gene Callahan says:

    Is it really useful to a terminological debate like this? Krugman is an economist who appreciates markets but also thinks that at times they don’t work well and public solutions work better. That’s only one sentence, and I don’t think anyone here is likely to disagree with it.

    • Major_Freedom says:

      I’ll believe that as soon as you or anyone else shows me ONE instance of Krugman saying that government is too big, or that they should cease regulating something, or that they should cut spending.

      I think what you said is a wolf in sheep’s clothing argument. Pay lip service to the market, but then spend every waking hour of your life arguing against shrinking government and arguing for growing government, “because now is not the time to cut government spending nor cut the size of government.”

      • Blackadder says:

        I’ll believe that as soon as you or anyone else shows me ONE instance of Krugman saying that government is too big, or that they should cease regulating something, or that they should cut spending.

        I can give you nineteen. From Dan Klein and Harika Bartlett’s review of Krugman’s NYT columns (through 2005):

        A comprehensive analysis of the 654 columns shows, however, that Krugman has really sided with liberalization only on the following issues: rent control (6/7/00); US agricultural subsidies (5/7/02); international trade (e.g., 3/8/02; 3/24/02; 6/11/02; 11/28/03); mildly on high-tech anti-trust enforcement including the Microsoft case (often arguing that the government just cannot do anythingto improve matters, e.g., 7/12/00; 10/22/00; 6/24/01; 7/1/01; 11/4/01); ethanol mandates and subsidies/tax breaks (6/25/00); NASA manned-space flight (it is only the manning of ships that he opposes; 2/4/03); [and] European labor-market restrictions (3/29/00; 5/3/00)

        Granted, given the large number of columns he has written, nineteen is not a huge number. And my guess is extending the review to the present would not produce many extra examples. But it’s not like it’s never happened.

    • MamMoTh says:

      This site is about Krugman bashing and God worshipping, don’t spoil it

      • Tel says:

        Which you must admit is significantly better than God bashing and Krugman worship.

        • Bob Murphy says:

          Good one, Tel. I enjoy your coercive behavior more than MamMoTh’s. (Since we all are coercive, that is.)

        • MamMoTh says:

          Only if you ignore that Krugman is God. Otherwise it’s just the same

    • Tel says:

      It is intellectually self-consistent to believe that free markets work well in some situations, and work badly in others… ONLY if you can also explain exactly what makes the difference between the type of market that is well serviced by individual freedom, and the type of market that requires government intervention.

      For example, large central governments have been proven to be effective at making war. So far, there have only been a few situations in all of history where a fighting force with strong central leadership was defeated by loosely knit groups of individuals. The American Revolution was one of the few. Thus, we have fairly direct evidence for this particular special case.

      What makes the medical industry so special I’m really not sure. If Steve Jobs has a massively expensive operation that gives him an extra 6 months to live, but this is the same money that could pay for 1000 basic eye operations in the third world giving people better vision for many years… how do you make a fair comparison?

      First world governments argue that they deliver better quality control, but they have done this by making it very, very difficult to become a doctor, and thus driving up costs. You only have to study the Jayant Patel case to see that the government employers loved his efficiency and are just as susceptible as anyone to cutting corners when it suits them. Governments don’t actually solve the principle/agent trust problem, they just move it around to a different place. Yes the free market has the same problem, but unless government is noticeably better, that doesn’t represent any real argument.

  12. Dan (DD5) says:

    I suppose Krugman, the free marketeer, wouldn’t know (or dare to mention) about the means by which Israel caps its costs on health care. For example, as the Israeli newspaper Yediot Acharanot recently reported: There are only 6 MRI machines in the entire State (7 million people) because the government refuses to grant more operating licenses to medical facilities that are interested in acquiring them . Why? by the government’s own admission – because more MRI machines means more MRI tests, and more tests means more bills to pay, which the government is obligated to pay under its own plan.

    Of course, this gave rise to a black market in MRI machines and tests. That’s right! Israel has a thriving black market in MRI tests. Now I think it’s also safe to say that Israel does not count the “costs” associated with its black markets.

    • Major_Freedom says:

      Throw the evil subversive and treasonous capitalists in jail for daring to offer a desired service to willing participants! How dare they go against the democratically elected state! The people have spoken! They want fewer MRI machines!

  13. Dan (DD5) says:

    I think it’s obvious that Daniel K is confusing freedom with abundance. He doesn’t have a clue to what’s the difference. And coercion for him basically means acting under scarcity. He is not capable or willing to define freedom and coercion in any other way.
    So obviously, yes, the Asteroid from outer space is coercing him, so you need government tax money to save him from it. And yes, parasites and viruses are coercing him into sickness so he needs government healthcare.

  14. Robert Fellner says:

    Bob,

    You need to read The Righteous Mind to understand the evolutionary forces at work preventing Daniel from ever conceding your point, regardless of how logically sound your argument is. That’s just now how our brains work! This blog could serve as quite the voluminous exhibit of anecdotal evidence supporting Dr. Haidt’s thesis in that regard 🙂

    • Blackadder says:

      You need to read The Righteous Mind to understand the evolutionary forces at work preventing Daniel from ever conceding your point, regardless of how logically sound your argument is.

      The Righteous Mind is a great book.

  15. Keshav Srinivasan says:

    Bob, why can’t you be a free-market economist, someone who believes that capitalism (with safety nets) has produced “the most decent societies on earth”, and yet acknowledge that there are such a thing as market failures, which can and should be corrected by government action? In particular, the reason that Krugman believes in intervention in the healthcare market is because of a half-century old paper by Kenneth Arrow:
    http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/

    But as it happens, I actually AGREE with you that Krugman is not a free-market economist. Not because he believes in the existence and the need to correct market failures, but because he feels that market failures are so common that the basic free-market worldview is untentable. See here:
    http://krugman.blogs.nytimes.com/2011/08/25/irregular-economics/
    “I mean, it’s a lovely model, and one I, like everyone else in economics, use a lot. But I would not have said that it’s a model backed by lots of evidence. We do know that demand curves generally slope down; it’s a lot harder to give good examples of supply curves that slope up (as a textbook author, believe me, I’ve looked); and it’s a very long way from there to the vision of Pareto efficiency and all that which Barro wants us to take as the true economics. Realistically, imperfect competition, market failure, and more are everywhere.”

    • Bob Murphy says:

      Keshav wrote: Bob, why can’t you be a free-market economist, someone who believes that capitalism (with safety nets) has produced “the most decent societies on earth”, and yet acknowledge that there are such a thing as market failures, which can and should be corrected by government action?

      Keshav, where did I say otherwise? If someone wants to call Hayek a “free-market economist,” I have no problem with that. I’m not going to call the SWAT team if Walter Block objects, either.

      But when someone calls Krugman a free-market economist, that strikes me as absurd. I well remember the quote you provided, and that is one of 10 reasons I have for thinking it is absurd.

  16. UnlearningEcon says:

    Why, it’s almost as if the term free market is meaningless!

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