Friday, January 26, 2007

Krugman on Friedman

Paul Krugman writes about Milton Friedman here. On the whole, it's not a bad piece. But there are a couple outrageous statements that undermined it a bit.

Right at the outset, Krugman says:
Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics—at least in the English-speaking world—was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed.

It's hard to know what to make of this. Does Krugman really believe it? Does he mean something other than what he appears to say? In one of the most important fields of economic policy-making, regulation of imports, the free market was non-existent up to 1936. Tariffs in the U.S. generally ranged from between 2o to 50% from 1800 to 1936, in contrast to the less than 5% on average today. So how can Krugman possibly say that free market orthodoxy dominated? Now, it is true that there was a general absence of the kind of social policy regulation we see today (e.g. minimum wage, workplace conditions, etc.) But this wasn't the result of free market economists running things. Rather, this was due to the general dominance of business interests over others in politics, and a view of the law that held freedom of contract as more important than most everything else. So, it's just not right to say that Keynes offered a response to classical economics. He didn't. He just offered more government intervention than we already had.

Second, near the end of the piece, Krugman says:
As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role.

Wow. How did Krugman write that with a straight face? Is there any pundit out there right now who is more purely political than Krugman? I can't tell you how many times I read a Krugman op-ed and think, but he's an economist, how can he believe that? The answer, in my view, is that he is a Democrat first, and an economist second.

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