08 Jan 2018

Krugman Claims “No Evidence” That Regulation Deters Investment

Economics, Krugman 10 Comments

I beg to differ. My latest at IER.

10 Responses to “Krugman Claims “No Evidence” That Regulation Deters Investment”

  1. Andrew_FL says:

    My assumption had been that Krugman’s argument was that regulation had no *net* effect on *aggregate* investment. He’s still arguing against a lot of evidence with that claim, but it allows him to acknowledge that specific regulations deter specific kinds of investment while arguing the same regulations actually boost investment elsewhere.

    • Andrew Keen says:

      That’s what I was just about to say. Could Krugman reasonably argue, “Sure, regulation will drive investment away from certain sectors, but those investment dollars will just flow into another sector of the economy leaving total aggregate investment unchanged?”

      • Andrew_FL says:

        Right, which still seems to be refuted by a lot of evidence, but doesn’t contradict himself.

    • Bob Murphy says:

      Andrew_FL, sure, and that’s why I kept widening the net. If I had just had my point about the Clean Power Plan, that would’ve been weak. The stuff with the states and zoning is more problematic, though.

      I mean, suppose we showed a regression with R^2 of 0.99 that increases in regulation lead to decreases in aggregate US investment. Could Krugman rescue his claim by saying investors went to countries with lower regulations? (I.e. total investment on planet Earth was unchanged, and the US regulations simply moved the investment to non-US sectors.) Because that’s how you’d have to reconcile his tweet with his earlier claim about zoning.

  2. Tel says:

    The Regulation of Entry, 2002
    Simeon Djankov Rafael La Porta Florencio Lopez-de-Silanes Andrei Shleifer


    We present new data on the regulation of entry of start-up firms in 85 countries. The data cover the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry. The evidence is inconsistent with public interest theories of regulation, but supports the public choice view that entry regulation benefits politicians and bureaucrats.

    It’s a fairly famous paper, I’m surprised Krugman has never heard of it.

    The same guy went on to create the World Bank “Doing Business” report.


    These things are not proof of course, but to say “no evidence” is a rather big stretch, even for the Krugster.

    • Bob Murphy says:

      Crap, I had come across that too, Tel. I loved it because it ultimately got published in the Quarterly Journal of Economics (another big hit to supplement the AER hit I included in my post) and it was from more than a decade ago, so Krugman couldn’t say he didn’t have time to stumble across it.

      I must have forgotten to review something when I wrote the article. Not sure what happened, but I wish I had remembered to put this reference in. Thanks.

  3. Anonymous says:

    Bob Murphy the cannibal continues promoting murder. Regulating the coal industry, say, prohibiting them from spewing toxic mountain innards all over their neighbors with their mountaintop removal mining, would simply be a prohibition against murder. True, it would be hypocritical, coming from an organization that murders as many people as the US government does, but the fact that the US government is wrong to murder so many people doesn’t make it morally acceptable for coal companies to follow suit. But Bob Murphy continues to promote the idea that murdering makes “Americans” richer, even when some of the murder victims are Americans.

    The devastating environmental impacts of mountaintop removal mining in Appalachia have long been well documented. But over the last decade, Indiana University researcher Michael Hendryx has been examining another consequence of this form of coal surface mining that had previously been overlooked: the health impacts on the people in the surrounding communities.

    What he has found, Hendryx says, is a public health disaster, with more than a thousand extra deaths each year in areas of Appalachia where mountaintop removal (MTR) operations take place. The air and water pollution caused by this mining practice, which involves deforesting and tearing off mountaintops to get at the coal, is leading to increases in cardiovascular disease, lung cancer, pulmonary disease, and birth defects, his research shows.

    – Richard Schiffman, A Troubling Look at the Human Toll of Mountaintop Removal Mining

    And coal really does deter investment from other companies. What decent company wants to move into a crime-ridden area where murder-by-poison is treated as legal by local law enforcement?

    Bob Murphy the vampire enjoys drinking the blood of his fellow Americans, and many others throughout the world, every time he pays his electric bill.

    Welcome to capitalism, the murder economy.

    • Tel says:

      And coal really does deter investment from other companies. What decent company wants to move into a crime-ridden area where murder-by-poison is treated as legal by local law enforcement?

      I live in Western Sydney and when I occasionally go for a holiday I visit the Hunter Valley which is a region containing horse studs, wineries, hotels and of course open cut coal mining, in addition to Liddell and Bayswater — the big steam turbine plants that power the majority of NSW (might as well burn coal in the same area that you dig it up, because electricity is faster and easier to transport).

      What I have noticed is that the air is cleaner in the Hunter Valley than it is in Sydney, and also the landscape is nicer, and this might interest you… the land prices are surprisingly high, even by Sydney standards. If I was to sell my house I could not afford to move in next door to a coal mine.

      What do you make of it though? I was hoping other investors would give up and leave some cheap land for me, but annoyingly they just keep buying. Perhaps you could have a chat with them, I’d appreciate that.

      I’m a little bit skeptical of Richard Schiffman’s work from a number of angles. He writes for the Guardian and Huffington Post, also he is a great supporter of Michael Mann and he is giving us the tired Malthusian predictions of worldwide starvation that have not only been consistently wrong for many centuries but also these predictions fly in the face of the evidence that in real terms food prices keep going down, quality goes up, variety goes up, and by a whole bunch of different metrics worldwide human lives have been improving (read Matt Ridley or many of the others who keep trying to point this out). Even if you are upset by synthetic food you must admit that a modern cheap multivitamin gives you something that would have been inconceivable in the time of Thomas Malthus but today they sell for a few cents each.


      That’s called “Blackwater” it comes from tannin as the water runs through decaying leaves and bark. You can read a book by Ed Krug called “Environment Betrayed”. He attempted to do science for the EPA but they didn’t like the answers because Krug refused to fit in with the environmental narrative. Krug tried to explain to them that acidity in the Adirondack lakes had nothing to do with acid rain and everything to do with soil chemistry and the trees and leaves that collect. I checked many years later to see if Krug was right… after they “solved” the problem of acid rain by regulating the coal fired power stations, did those lakes lose their acidity? Turns out the authorities ended up tossing lime in the lake to neutralize the acidity (they could have done that to begin with), so yes in fact Krug was exactly right. Acidity in the lakes never had anything to do with the power stations.

      That really happens, the power of government can be used to manipulate belief. It’s a scam. You are being played.

      I’m testing another of Krug’s water theories which is that oxygen is an easy way to purify water, and that low-oxygen water will tend to discolour. A friend had a swimming pool that got a lot of leaves in the water and discoloured, the pool shop says, “use chlorine” but I’m trying oxygen because it’s cheaper than chlorine and smells nicer. I’ll tell you how it goes. Whitewater vs Blackwater. Read Ed Krug’s book. I’m happy to buy a copy if you can find a public library that is willing to carry such a radical book.

    • Tel says:

      Welcome to capitalism, the murder economy.

      North Korea is better, trust Dear Leader?

      Perhaps Venezuela, where they eat zoo animals?

      Libya, where they capture refugees and sell them back to their family for ransom?

      Cuba, land of free healthcare?

      Cotton pickin in Uzbekistan, perhaps?

      Oh now I remember… these are all the fault of capitalism… just like everything else is always the fault of capitalism. Gottcha!

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