"Paul Krugman Is a AAA Rated Security Gone Bad"

[Jaco Strauss]

Garth, I searched around a little to see if I could find the original $100 Battery story and I found this interesting review of Krugman's book by Kyle Smith.

I am not sure if Kyle Smith could be seen as a "fellow liberal", but at least he doesn't seem to be in the "Mises crowd", making him a little more difficult to dismiss out of hand...

Jaco

Paul Krugman Is a AAA Rated Security Gone Bad

Kyle Smith

Forbes Op/Ed

24 May 2012

Paul Krugman is a AAA-rated security. He has all the prizes and the job titles and the speaking gigs that indicate a true investment-grade pundit. But then again, a lot of those mortgage-backed securities that went bad were triple-A. They were palmed off on unsuspecting teachers’ pension funds and the like, and when they turned into toxic waste nice little ladies in cardigans said: “But Standard & Poor’s said they were triple-A!”

Like one of those securities, Krugman’s writing has much to commend it in his new book, “End This Depression Now!” Economics is, as we never seem to stop re-discovering, somewhat tangled stuff. Explaining it in a simple and lucid way is of huge value. Here is, for instance, a neat way to put the case for devaluing currency to pep up competitiveness: “The argument for flexible exchange rates is, strange to say, very nearly identical with the argument for daylight saving time. Isn’t it absurd to change the clock in summer when…all that is required is that everyone decide to come to his office an hour earlier?…It is much simpler to change the clock that guides all than to have each individual separately change his pattern….The situation is exactly the same in the exchange market. It is far simpler to allow one price to change, namely, the price of foreign exchange.”

That quotation is from Milton Friedman, in “The Case for Flexible Exchange Rates,” but Krugman is generous enough to quote it, and he has many other elegant ways (many of them borrowed) of making one argument or another in this book-length essay calling for a Keynesian free-spending solution to our alleged “depression.”

But just as those AAA mortgage-backed securities bundled together loans of greater and lesser quality, Krugman is not always spot-on. Here he is, for instance, on the ease with which he could get the U.S. economy roaring again, if only he were granted king-like powers: Keynes declared that the economy was suffering from ‘magneto trouble,’ an old-fashioned term for problems with a car’s electrical system….We all know that sometimes a $100 battery replacement is all it takes to get a stalled $30,000 car back on the road…as a purely economic matter, however, this crisis isn’t hard to solve; we could have a quick, powerful recovery if only we could find the intellectual clarity and political will to act.”

So for $100 battery, read, “many trillions of dollars of stimulus,” because that’s what Krugman is (still) calling for. Simple! Yet we saw how flawed President Obama’s $800 billion stimulus turned out to be; at, say, four times the forcet, would it somehow turn into a vitamin injection for our economy? More likely, it would be similar to a dose of that illegal drug the President referred to so casually as “blow” when he was partaking of it. We all know that people can do crazy things under the influence; now just imagine those geniuses in Washington, D.C. allocating multiple trillions of dollars of largesse just because a professor told him that we are in a “depression,” and in a depression all the ordinary rules apparently don’t count: Just keep spending.

Krugman is on equally shaky ground when he contends that he just knows income inequality had something to do with this crisis, though he admits he can’t prove it. Readers with acute senses of smell may start to notice that all roads in Krugman lead to a social-welfare state financed by massively more taxes than Americans have ever paid (elsewhere, though not in this book, Krugman has casually suggested implementing a European-style VAT, as though piling a federal sales tax on top of everything else wouldn’t be a massive drag on economic vitality). “The growing influence of the wealthy led to many policy choices that liberals like me don’t like–the reduced progressivity of taxes, the shortchanging of aid to the poor, the decline of public education, and so on,” he says, telling three consecutive howlers. In fact, US taxes are far more progressive than they are in the socialist wonderlands of Europe, aid to the poor is now, as it usually is, shooting up, and public education spending has increased massively over the last few decades, due to the influence of those lovely labor unions Krugman adores.

Krugman adds, “So while rising inequality probably wasn’t the main direct cause of the crisis, it created a political environment in which it was impossible to notice or act on the warning signs.” Not main or direct, but definitely right up there! Krugman massages the numbers to show that the middle class has been left behind, including a chart measuring median (and mean) family income over the last 75 years. This is a meaningless way to consider American income, and Krugman knows it: Family size has decreased, meaning there are a lot more families. Moreover, America has been busy importing, by the tens of millions, families from poor countries who drag the average down. Similarly, when it comes to assessing the role of the federal government and GSEs like Fannie and Freddie in the financial crisis, Krugman dismisses reasonble attempts to get a handle on the matter by the likes of AEI’s Peter Wallison (whom he doesn’t mention) by essentially saying, “Take my word for it, they’re kooks.” Here is the actual quotation: “The attempt to blame government for the financial crisis falls apart in the face of even a cursory look at the facts, and the attempts to get around those facts smack of deliberate deception.”

Krugman’s Krugman is, of course, John Maynard Keynes, and it is when the living economist is bowing and scraping at the altar of the dead one that he is at his least credible. For instance, noting that conservatives disagree with Keynes (why shouldn’t they? He was a liberal), Krugman asserts that Keynes was “moderately conservative.” Krugman’s main evidence for this? Keynes described himself in those words. Case closed.

Yet when Krugman defends the Keynesians among today’s economists, he says that “at a truly basic level” this debate “is about pragmatism versus quasi-religious certainty that has only grown stronger as the evidence has challenged the One True Faith.” As Jonah Goldberg points out in his scintillating book, “The Tyranny of Clichées,” there isn’t anyone who propounds a political philosophy who doesn’t think his idea works — isn’t “pragmatic.” And Krugman is not the man to make the case that others are (in another of the cliches Goldberg names and shames) “ideologues.”

Kyle Smith

http://en.wikipedia.org/wiki/Kyle_Smith

The original Review

http://www.forbes.com/sites/kylesmith/2012/05/24/paul-krugman-is-a-aaa-rated-security-gone-bad/

[Garth Zietsman]

On the face of it - a very good takedown of Krugman.  I have however learned from past experience to check such seemingly convincing accounts.  So again give me some time to absorb and check it out.

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[Frances Kendall]

I have recently had a hip replaced so am recuperating without a lot to keep me busy which is why I have been more active than usual in this forum.

Having time on my hands and in light of the recent heated debates I feel inclined to share the way in which my thoughts and values have changed over the years for anyone who might be interested (Sasha?).

When I met Leon 36 years ago he gave me Linda and Morris Tannehill's book "The Market for Liberty" to read and I was an instant convert to anarcho-capitalism. All of a sudden everything made sense to me, I could see very clearly all that was right with the world and all that was wrong. For many years a remained firmly & happily in that camp (logic bubble).

However, as the years passed I realized that I and my fellow travelers belonged to a very small group. The great majority of people out there didn't share our views or values not because they were wrong but because they were different!

Now I no longer can say that Freedom is my no 1 value. Maybe I would never have said it if I had thought more carefully. I value my family more highly than freedom, and my health, and at this age, my security.

I still value freedom highly and like to run my own life and take responsibility for my own actions, but I realize many if not most people do not. It seems humans are not evolved to be particularly freedom loving, after all of how much value is freedom when it comes to passing on our genes? Competing with other groups for resources, getting rid of our enemies (competitors), attracting a mate and for a woman hanging onto one, feeding our families, all of these behaviors and values clearly trump freedom when it comes to survival of our genes.

I no longer consider my values the best values, I see that there are many competing options and it is easy to espouse freedom when you are well fed and secure.

I no longer find it so easy to subscribe to "taxation is theft" and "every individual for himself provided he doesn't hurt others".

It seems to me that the vast majority of people prefer some government to no government and support taxation even if they pay taxes grudgingly, (the Swiss vote in favour of taxes that they consider add to general value). That being so then they have as much right to live according to their preferences as I. If I really hate government so much I must go and live somewhere beyond it's reach since my preference is shared by so few.

Given human nature (as the result of evolution) I think some type of libertarian paternalism as espoused by Kahneman would be my preferred way to go now. I would like taxes to be low and unbiased, and help delivered more efficaciously to those in need. I would like to see a bunch of opt out regulations in place that guided people toward sensible decisions, sensible for the group as well as the individual, but with which they were not forced to comply.

But I realize this is all very idealistic and in the real world out there governments play a powerful role in which they can be forces not only for evil, but also for good. So I am interested if someone presents an idea for something government can do that is helpful.

I still consider myself a libertarian, but for those who would label me a socialist that is also fine. Labels are not terribly useful.

[Julian le Roux]

I support anarcho-capitalism because I value general human happiness, logical consistency, reality and general human freedom.  If tomorrow I lost all interest in freedom (we're talking about other people's freedom here), I would still fully support anarcho-capitalism.  The first three values would be enough.

As for my own self-interest (which of course includes my family), I admit I put that above all else.  If someone offered me Swiss citizenship and a couple million Francs to shut up about liberty forever, I would probably take the money and run (although I would insert a contractual clause to allow me to be involved in seasteading or market-anarchist-inspired business ventures - there will probably be mad money to be made in those areas in the coming decades)

(My sympathies regarding your hip. I thought you had both hips replaced over a year ago?)

[Frances Kendall]

I had my left hip replaced November 2011 and my right hip now. Mark I think I did it early enough to regain full function, my left is is perfect so holding thumbs I will be like new!

Sent from Frances iPhone

[Frances Kendall]

http://www.futurepundit.com/archives/001761.html

Some of you might find this interesting re evolution of loss of desire for freedom.

Sent from my iPad

[Erik Peers]

Krugman sends his regards and thanks you for stimulating the economy by buying a new hip.

Seriously we look forward to seeing you as hip as ever on the dance floor.

[Stephen vJ]

As much as a year ago, your words would have upset me. I must have grown up since then, because I now find much to agree with. Central to the change of mind was the realization that I can go live in a properly capitalist country like Sweden, yet I am here, which says something about my real valuation of freedom. I think I am now no longer a Libertarian and am properly an Anarchist, whatever that label may imply. Now I understand that others have an evolved and inherited propensity (what lefties might call a right) to want things I may or may not agree with, like dagga, alcohol, guns, rhino horn, public education, national health insurance, minimum wages, sea steading, gold standards... And that that is the way it should be. I now trust the market to perform its magic despite intervention like Adam Smith said it would and I trust evolution to sort out the rest eventually like Darwin said it would. Being an anarchist makes the world look a lot more interesting and a lot less threatening. It is much more satisfying to marvel at how the natural processes ebb and flow towards slow improvement than to lament about what could have been.

S.

Sent from an electronic device located somewhere on earth...

[Frances Kendall]

So you regard Sweden as properly capitalist despite the high taxes? I would have thought Switzerland a better example.

You're not concerned that with bright kids having fewer and fewer children and welfare becoming more widespread the gene pool might be headed down hill?

Sent from Frances iPhone

[Stephen vJ]

Sweden has only recently dropped out of the top 20 of most economically free countries on both major economic freedom indexes for the first time in two decades. Their taxes are a bit higher than the rest of the OECD countries, but still much lower than anywhere in Africa or Asia or South America. Tax is not the only measure of economic freedom either - for example Sweden has practically no import or export restrictions and generates more than two thirds of its GDP through international trade. Sweden is not 100% capitalist, but neither is anyone else, and they sure come as close as you probably can.

Regarding the gene pool, I am not worried because the world will approach 12 billion people by 2050 and then taper off population growth, back down to 7 billion before 2100. That's a lot of people coming and going... or phrased otherwise, a rather deep gene pool for the foreseeable future.

S.

Sent from an electronic device located somewhere on earth...

[Gareth Brickman]

And it's exactly why we'll need the robots to take over. Think of how much potential human productivity will rise and then diminish at the same time as the broader population will be much more aged, and survive longer into old age.

[Stephen vJ]

Robots suck. Long live the robots.

Let me explain. There are some things which robots are really bad at and will suck at for a loooong time to come. Voice recognition for one. Anyone with an Apple device can be witness to that. Windows abandoned their voice recognition venture around the time of Vista, and Dragon (considered by many the leader in this field) is mediocre at best. And that is just the recognition part. Having a conversation with a robot is not going to happen any time soon. Since conversation is what humans are all about, robots suck.

There are other things robots are really good at. Regulating traffic, building cars, carrying messages ties to their legs, cooling or nuking our food, mowing our lawns and much more. Robots can augment human function by replacing limbs and can feed us information via optical implants. As I sit here, I am practically one with my iPod. We will continue to merge with electronics until we are hybrids... robots, but with the human bits still doing that which the robots suck at, like making conversation. When we talk about robots, they are us. Long live the robots.

S.

Sent from an electronic device located somewhere on earth...

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[Frances Kendall]

Yes very useful. But many other things we do unconsciously as social animals which depend on chemicals will keep robots as tools.

 
Sent from Frances iPhone

[Garth Zietsman]

I had been led to believe that voice recognition was making really great strides - to the point where you no longer have to train it.  Also I saw a talk - maybe TED - demonstration real time translation via voice from English to Chinese and the reverse.  Also note what Watson is up to these days - both smarter and much smaller than when it won Jeopardy.  

Robots wipe the floor with the best chess players, they can compose music in any particular musician's style (good enough to fool experts), they can also compose good original stuff, they can create new (and good) food dishes, the can mark essays as least as accurately as humans (and give live feedback as to your likely mark as you write the essay), they are capable of providing proofs of maths theorems, they are proving awesome at medical diagnosis and collecting and organising anything relevant to legal cases, etc etc.  

They can play table tennis.  I saw a film of two quadrocopters tossing a stick to each other during flight in such a way that it always balanced on one end. The problem with robots is getting them to move as easily as we do.  Apparently it isn't easy to get the power to weight ratio right (especially with a portable power source) along with the agility we would like to see.  There are robot house cleaners on the market and no doubt they will improve a lot.  

In a sense the Singularity is already here.  The fastest super-computers have passed the performance standards a while ago (and are about 20 times as powerful as human brains now) but they are still too big, power intensive and expensive.  Watson is now ordinary server sized - not to far away from putting into an R2D2 type robot.

I believe Google is obsessed with making a Star Trek computer.

And so on.  

[Gareth Brickman]

Don't forget vehicles of all stripes that can drive themselves...

[Stephen vJ]

Ah, but cars have been able to fly and drive themselves since the 1970's... the reason we don't see them around is because government couldn't deal with the bureaucratic change needed to let inanimate objects obtain drivers licenses and summarily outlawed them.

No doubt, if cars were invented now, we would not be allowed to drive them. That would be way to dangerous to allow. Luckily they were invented before big government could stop widespread use. How much else is available now but outlawed ?

S.

Sent from an electronic device located somewhere on earth...

[Paul AH Hjul]

When cars started to be produced they were largely subjected to prejudicial government regulations and stupidity. I think various factors changed this including the First World War, Henry Ford (and Fordism) and the association of the motor car with individual liberty over railways. Above all automobile-ism benefited heavily from Woodrow Wilson and later the New Deal as well as the peculiar support of  the Teamsters to secure fuel taxing and building roads. Automobile manufacturing has also been able to wangle in government support in countless incidents on the basis of being a large employer and in other instances is seen as building a middle class society. So all and all I think cars have largely gotten a good run from big government as opposed to most of technology.

As far as I recall when cars were first brought to South Africa the Cape Colony passed a bizarre set of safety ordinances which among other things could not drive faster than a native could run ahead of the vehicle (in the Cape natives could not only vote on acquiring sufficient property but they could also run ahead of motor vehicles ...) - my guess is it had something to do with fears about disruptions to postal services - the colonial kitty had taken a knock when carriage services to Kimberly were allowed to be used for imperial mail. The Republic of the Orange Free State was slightly more sensible on the whole affair and simply required that the town clerk for Bloemfontein issue a vehicle licence and that drivers adhere to the regulations set down for carriages - evidently speeding horses had been a problem in Bloemfontein - and omitted any notion concerning who could drive or run ahead of a vehicle. 

Also Saudi Arabia still has effective restrictions preventing women from driving cars. On the native subject though, South Africa's war effort rather bizarrely had no concern about the suitability of natives to drive trucks and in fact did a great deal of training. In the true spirit of the day though instead of including literacy or numeracy in the driving lessons gears were named according to animals.

[Frances Kendall]

@stephen have you tried your iPhone on the Australian voice setting? My Siri didn't recognize anything on the English or US setting but began to get it right on the Aussie setting. Since then it seems to be gradually learning my accent and improving.

I am hoping to see self driving electric cars in my life time. Imagine how many lives & how much productive time that will save! I'm sure it's just a matter of time and if I live another 20 years I might see them.

Sent from my iPad

[Stephen vJ]

That's a great story. Let me put it straight into elephant gear and suggest that you look up corduroy roads to add even more depth to it.

I don't know what the situation was on the East Rand, but I suspect my ancestors came roaring into town in a Ford ox wagon (from whence the town of Escort got its name), wheels spinning, tent flaps tinted, accordion blaring and pink fur on the yokes. I'm pretty sure they got harassed by and ultimately shot at by the fuzz within minutes of arrival - a proud tradition maintained by East Randers to this day.

S.

Sent from an electronic device located somewhere on earth...

[Stephen vJ]

I'm going to try that immediately. I find Australian accents supremely irritating, so it would be weird to find it working better than others.

I think reading Pinker's "Language Instinct" better explains what I meant. Recognizing individual words where the speaker a) pre-selected an accent b) deliberately speaks slowly with artificial gaps between words and c) warns the machine that a phrase is coming or just ended, is hardly natural speech recognition. And then, how accurate is accurate ? Getting every 5th word wrong ? Humans are many magnitudes better and faster at it. Inferring meaning and tone from context is also a very long way beyond that.

Self driving cars have been economically viable and ready for production since the mid 1990's, but the California state government outlawed them. Their reason was that, in the case of an accident, there would be nobody to prosecute or hold accountable... And they did not feel that the manufacturers of the cars would accept that liability. I think that problem is much harder to solve than any technological issues.

S.

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[Trevor Watkins]

On 18 April 2013 20:39, Stephen vJ <sjaar...@gmail.com> wrote:

Their reason was that, in the case of an accident, there would be nobody to prosecute or hold accountable... And they did not feel that the manufacturers of the cars would accept that liability. I think that problem is much harder to solve than any technological issues.

On that basis I am surprised they have not outlawed earthquakes, meteor strikes, tsunamis, .....

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363
PO Box 3302, Jeffreys Bay, 6330

[Paul AH Hjul]

On that basis I am surprised they have not outlawed earthquakes, meteor strikes, tsunamis, .....

Unfortunately the arrest warrant they put out for God ended up lost in the system - God is sufficiently well connected to make puny little things like warrants go missing

[Jaco Strauss]

I often think about how boring this planet would have been if some human committee had to come up with the design.... no open rivers, no accessible mountains, no freezing snowflakes, no combustible forests, no man eating predators, etc etc 

J

2013/4/19 Trevor Watkins <bas...@gmail.com>

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Jaco Strauss
Kaapstad

[dougla...@gmail.com]

Ok

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From: Jaco Strauss <jacos...@gmail.com>

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Date: Fri, 19 Apr 2013 09:30:17 +0200

To: Libertarian SA<li...@googlegroups.com>

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Subject: Re: [Libsa] Confessions of an ex-anarcho-capitalist