Even Nobel laureates forget their economic fundamentals sometimes. Paul Krugman, who knows better, recently fell for the broken window fallacy in a post at his New York Times blog. He argues that the tsunami that hit Japan last year has boosted the economy. An error that basic demands correction; my attempt ran today in The American Spectator:
Imagine for a minute that the tsunami never happened. Japan’s GDP growth would probably be slower; Krugman is almost certainly correct on that. And yet, a tsunami-less Japan would be better off. For one, the survivors wouldn’t have 15,000 holes in their hearts where their families, friends, and neighbors used to be.
As far as the economy goes, all that reconstruction spending would instead go to creating brand new wealth, as opposed to merely replacing what people already had to begin with. It is better to build than to rebuild.
Read the whole thing here.
If hostile aliens invade the planet, “this slump would be over in 18 months,” according to New York Times columnist Paul Krugman. It’s a bizarre way to express a bizarre idea: that war is good for the economy.
He draws an analogy with World War II, where the massive military buildup – conscription is left unmentioned – reduced unemployment and caused GDP to skyrocket.
The Independent Institute’s Mary Theroux points out:
The World War II years were a time of shared privation, with virtually every item that we take for granted today either rationed: e.g., meat, gasoline, sugar, clothing; or not available at any cost: e.g., new cars, appliances, etc. The American standard of living throughout World War II remained at an excruciatingly low level that no 21st century American would accept.
War does not create. It can only destroy. True, aggregate numbers like GDP can thrive during such troubled times. Workers were cranking out munitions like nobody’s business. But those workers’ actual standard of living was not high; everyday essentials were being rationed.
That’s the peril of relying on GDP as an economic barometer. It certainly has its uses. But over-reliance on it has made Krugman ignore other, harsher aspects of war. The fighting. The dying. The separated families, in some cases made smaller by the economic stimulus. The privation at home. The lost opportunities, economic and otherwise.
Krugman’s claim that an alien invasion would stimulate the economy is as alien to the economic way of thinking as our new overlords are to us.
Fortunately, not everyone is taking him seriously. A satirical Twitter account, @KrugmanAliens, is poking devastating fun.
Some readers might also be interested in this working paper I wrote a few years ago about the economics of war.
This letter of mine ran in today’s New York Times in response to Paul Krugman’s July 4 column.
To the Editor:
Paul Krugman is at a loss to explain why some people oppose extending unemployment benefits. One reason people hold such an opinion is that when government subsidizes something, there tends to be more of it.
The more government subsidizes unemployment, the more people will indulge in it for longer periods of time.
Washington, July 6, 2010
The writer is a journalism fellow at the Competitive Enterprise Institute.
Posted in Correspondence, Economics, Price and Wage Controls, Publications, Spending
Tagged new york times, ny times, paul krugman, subsidies, unemployment, unemployment benefits, unintended consequences
Ever hear the old canard that war is good for the economy? Or that natural disasters create jobs? Those arguments illustrate one of the oldest fallacies in economics: Bastiat’s broken window fallacy. The video below, by Tom Palmer and his colleagues at the Atlas Economic Research Foundation, explains why in two minutes and change. Worth watching.
When Republicans are in the White House, Paul Krugman thinks budget deficits are bad. When a Democrat is in the White House, deficits are no problem at all.
Correctly noting in 2005 that the Bush deficits were “comparable to the worst we’ve ever seen in this country,” Krugman worried that investor confidence would wilt under the difficulty of paying back such massive obligations.
Now that President Obama has tripled the Bush deficits, he has a column poo-pooing deficit worriers as “being terrorized by a phantom menace — a threat that exists only in their minds.” Investor confidence will be just fine.
Would he be so sanguine if a Republican president ran up a $1,400,000,000,000 budget deficit in his first year in office? The party in power has nothing to do with whether deficits are good or bad. Deficits are either a problem or they aren’t.
Krugman’s partisanship is regrettable. What’s more regrettable is that it is taken seriously. Such is the tragedy of the partisan mind.
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Much as I enjoy conservative-bashing, I was disappointed in Paul Krugman’s October 5 column, “Conservatives Are Such Jokers.” He almost reflexively assumes that people who disagree with him have checkered motives. He comes off as reluctant to argue policies on their merits, in this case the SCHIP children’s health insurance program.
Why so quick to question his opponents’ motives? SCHIP opponents have put forward arguments that are either right or wrong. Motives have nothing to do with whether those arguments are right or wrong.
SCHIP opponents don’t like the program because they don’t think it will improve childrens’ health outcomes. The disagreement is a question of means, not ends. Does anyone actually favor having sicker children?
While Mr. Krugman clearly favors expanding the SCHIP program, he doesn’t really say why. I invite him to make his case – on the merits.
Posted in Argumentation, Correspondence, Economics, Health Care, Philosophy, The Partisan Mind
Tagged children, childrens health insurance, Health Care, health insurance, insurance, paul krugman, schip