30 Dec 2014

Using FRED Graphs to Evaluate Keynesian Model

Krugman, Shameless Self-Promotion 11 Comments

My latest Mises CA post accuses Krugman of changing his narrative on the economy:

For years, Paul Krugman has been warning that the inadequate fiscal stimulus package of early 2009, coupled with the disastrous spending cuts of the “sequester” package, were leading to a “postmodern recovery” and “jobless trap” for the millions of Americans locked out of employment due to coldhearted Republicans. Even though GDP growth had officially returned by the summer of 2009, Krugman told us, we could expect a terrible plight for America’s workers, all because the people in charge were more concerned with fiscal prudence than American families.

Well, now that we’ve had a few quarters of decent GDP growth and private sector job creation–at least according to the official statistics–Krugman has had to alter his narrative. Now, you see, Obama’s recovery has actually been impressive–much better than the recovery under George W. Bush from the dot-com recession. Does this prove that Krugman was wrong about the need for big deficits? Of course not. No, it just shows that the right-wing critics of ObamaCare and other regulations were wrong for thinking these regulations would hurt hiring.

Then I use the very same FRED data that Krugman had deployed, in order to reach the opposite conclusion. Imagine that.

11 Responses to “Using FRED Graphs to Evaluate Keynesian Model”

  1. Keshav Srinivasan says:

    Bob, I don’t really have an opinion on the substance of your post, but you missed an opportunity to accuse Krugman of “derp”. You said “If you have a strongly held economic theory, you can always concoct a story ex post to “explain” the data.” I think that’s almost exactly Noah Smith’s definition of derp: the preservation of a strong Bayesian prior in the face of evidence.

    • Bob Murphy says:

      It would cause me physical pain to use the word “derp” non-ironically.

      • Keshav Srinivasan says:

        Yeah, I meant use it as a joke, to mock Krugman’s use of the term.

      • Z says:

        This is called psychosomatic pain, if you were interested.

    • Ag Economist says:

      That’s Smith’s biggest flaw, IMHO. He’s just has no class whatsoever.

  2. Tel says:

    Ahhh, comparing Krugman from one year with Krugman from a few years later.

    That joke never gets old.

  3. Andrew_FL says:

    I’ve said it before: what you’ve identified is the mark of a partisan hack. His job is to make Democrats look good and Republicans look bad.

    He’s actually good at what he does, when you correctly identify his profession.

  4. LK says:

    You say:

    “Rather, what I’m saying is that on the very terms Krugman himself chose to show the virtues of government spending, I can make a much more compelling argument that cutting government spending won’t hurt private sector hiring, and if anything will stimulate it. “

    Yes, I am sure Ireland, Greece, the Baltic states prove that. Typical. Take some highly limited US data, pretend the big stimulus in 2008-2009 had no great affect. Ignore the many counterinstances that show government fiscal contraction causes private sector falls in production and employment.

    • Richard Moss says:


      Ireland, Greece and the Baltic states prove that the US data Krugman used to show Keynesian policies worked also show that the same policies don’t work?

      Seriously, I think you should take issue with what Bob did write about ( Krugman’s inconsistent use of data), rather than with what he did not (that the US data proves Keynesian policies don’t work).

    • Major.Freedom says:


      Yes, I am sure the US state proves that. Typical. Take some highly limited European data, pretend the big stimulus in 2008-2009 had a great affect. Ignore the many counterinstances that show government fiscal contraction causes private sector increases in production and employment.

      Or, you know, you can start considering not just any employment and any output, but the RIGHT employment and the RIGHT output.

      After all, you don’t equate activity in the private sector that uses up resources and precious labor hours building weapons for war and imperialism, with activity in the private sector that builds everything else with those same resources and same workers.

      Why make a blanket argument about the virtues of “employment” as such and “output” as such as if you did?

      I am not taking about the specifics of any of the country level economies that you mention, but rather the universal character of your argument that is clearly meant to promote Keynesian theory regardless of the content of employment and content of output.

      You Keynesians keep asserting the employment for its own sake and output for its own sake, and you never give serious consideration to individual needs and wants. To you it is crude aggregates that are presented in such a way that makes it a fakse dichotomy: either non-Keynesians have to choose more output and more employment regardless of what is being done and regardless of what is made, or we must be anti-employment or anti-growth spoil sports.

      If all that Keynesian theory says is that with more government spending, there will be a rise in private sector activity directed towards producing for the ends of non-private actors as caused by their spending, then news for you, those of us who care about individual ends of everyone, and not just the ends of government agents, are the real humanitarians. You are a class warfare advocate who wants to make labor and resources directed, in the end towards the ends of non-private actors, if there is ANY temporary labor surplus or idle resources which will eventually be used for activity towards private individual ends. If for whatever reason (including, incredibly, past government meddling and spending), private individuals in large numbers find it better to take time thinking and planning for new projects and new uses for labor, such that “aggregate” employment and output that used to be taken up in large part by non-private actor ends like weapons of war, or bridges to nowhere, declines, then non-private actors thirsty for power and more meddling are highly encouraged to take more economic control of any resources and labor that are currently “idle” in the process of replanning.

      It is a sick and twisted ideology. If someone were to take control of resources on one side of the country by borrowing and stealing to pay back the interest, or pointing guns at people so as to monopolize medium of exchange and then printing said currency to buy whatever, after which the money is then spent and respent leading to an increase in your nominal income at some point, after which you then increase “private” spending, then has there been a gain to everyone EVEN IF there an increase in “stuff” in general like weapons and bridges to nowhere, and even “schools for blind children”?

      Why in the world should I or anyone else who values individual ends, and not just non-private actor ends in the end, consider this as an improvement? Yes, non-private actors are having their ends met with the spending they engage in, but what about those who were forced to be the means to it? They do not matter of course! Well, they matter to me, even if I loathe their ideology like I do yours

      • Zack says:

        I’m still waiting for LK to explain his claim that the 1953-54 recession is an example of successful Keynesian stimulus. As I said before, federal spending actually declined in fiscal year 1954 and again in ’55.

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