Showing posts with label Krugman. Show all posts
Showing posts with label Krugman. Show all posts
2010-06-26
Krugman on macroeconomics and its miss of the GFC
Paul Krugman's article on macroeconomics: "How Did Economists Get It So Wrong?", 2/09/2009, http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=1&_r=1&ref=paulkrugman
2010-06-18
Krugman's right economics at the wrong time
Comments on Paul Krugman “That ’30s Feeling”, 17/06/2010, http://www.nytimes.com/2010/06/18/opinion/18krugman.html
What Krugman argues is probably the right economics but at the wrong time.
Maybe the relationship between the cost and benefit (or perceived or expected ones) of government spending and the government debt level is non-linear.
When government debt gets too big, the costs of a further increase are likely to be greater.
That is certainly how it works for the private sector.
Government is a little different and a government has more room to move, but it is likely to have some limits.
PS: This is what Krugman argues:
"Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.
Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.
But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.
What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. Arguing with German deficit hawks feels more than a bit like arguing with U.S. Iraq hawks back in 2002: They know what they want to do, and every time you refute one argument, they just come up with another.
..."
What Krugman argues is probably the right economics but at the wrong time.
Maybe the relationship between the cost and benefit (or perceived or expected ones) of government spending and the government debt level is non-linear.
When government debt gets too big, the costs of a further increase are likely to be greater.
That is certainly how it works for the private sector.
Government is a little different and a government has more room to move, but it is likely to have some limits.
PS: This is what Krugman argues:
"Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.
Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.
But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.
What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. Arguing with German deficit hawks feels more than a bit like arguing with U.S. Iraq hawks back in 2002: They know what they want to do, and every time you refute one argument, they just come up with another.
..."
2010-05-21
Paul Krugman on euro union is wrong
Comments on Bronwen Maddox “Enmeshed in legal maze of the euro”, 21/05/2010, http://www.theaustralian.com.au/news/opinion/enmeshed-in-legal-maze-of-the-euro/story-e6frg6zo-1225869340719
It seems that there is an easy way to solve the problem associated with the euro monetary union and independent fiscal sovereign.
Any country in the eurozone does not have the freedom to devalue its currency to increase its international competitiveness.
However, it can use temporary trade policy to achieve what currency devaluation can achieve, that is, to temporarily tax on imports from the zone countries and subsidise its exports to those countries.
That is not quite completely equivalent to devaluation, but only relative to the zone members.
This practice is not in accordance with WTO rules. But monetary union is different too and has some characteristics of a "country".
As long as that temporary "trade policy" is internal to the eurozone and does not apply to other countries outside the eurozone, it should be regarded as acceptable.
Monetary union has its own advantages and limitations, as a result, some special public policies are also necessary.
It seems that there is an easy way to solve the problem associated with the euro monetary union and independent fiscal sovereign.
Any country in the eurozone does not have the freedom to devalue its currency to increase its international competitiveness.
However, it can use temporary trade policy to achieve what currency devaluation can achieve, that is, to temporarily tax on imports from the zone countries and subsidise its exports to those countries.
That is not quite completely equivalent to devaluation, but only relative to the zone members.
This practice is not in accordance with WTO rules. But monetary union is different too and has some characteristics of a "country".
As long as that temporary "trade policy" is internal to the eurozone and does not apply to other countries outside the eurozone, it should be regarded as acceptable.
Monetary union has its own advantages and limitations, as a result, some special public policies are also necessary.
2010-04-30
The Euro Trap by Krugman
"The Euro Trap", Paul Krugman, 29/04/2010, http://www.nytimes.com/2010/04/30/opinion/30krugman.html?hp
A short but interesting article on issues of monetary union without fiscal union.
A short but interesting article on issues of monetary union without fiscal union.
2010-03-22
Paul Krugman no saint
Comments on Rowan Callick “Spat over the yuan will shake global finance”, 22/03/2010, http://www.theaustralian.com.au/business/opinion/spat-over-the-yuan-will-shake-global-finance/story-e6frg9if-1225843472041
Although Paul Krugman is a Nobel Prize winning American economist, but that does not mean whatever he says or does is right.
He is not a saint by any means, is he?
There have been so many economists, mostly Americans, of Nobel Prize winners. But we still have had the GFC that originated from America that nearly brought down the whole world banking industry and pulled the world into a great recession.
So, what is the use of Paul Krugman in this debate?
Maybe it has some traction in Australia, but if one really understands economics and its limitations and the limitations of most economists in terms of their partial and stubborn viewpoints, one would not simply do nodding to them without critically evaluate them and compare with the views of others to form one's own view.
His views are opposed by many economists Americans included.
He is showing that he is an American political economist working not for economics but for America.
He is very much biased on the issues of yuan and international imbalance.
Although Paul Krugman is a Nobel Prize winning American economist, but that does not mean whatever he says or does is right.
He is not a saint by any means, is he?
There have been so many economists, mostly Americans, of Nobel Prize winners. But we still have had the GFC that originated from America that nearly brought down the whole world banking industry and pulled the world into a great recession.
So, what is the use of Paul Krugman in this debate?
Maybe it has some traction in Australia, but if one really understands economics and its limitations and the limitations of most economists in terms of their partial and stubborn viewpoints, one would not simply do nodding to them without critically evaluate them and compare with the views of others to form one's own view.
His views are opposed by many economists Americans included.
He is showing that he is an American political economist working not for economics but for America.
He is very much biased on the issues of yuan and international imbalance.
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