Streetwise Professor

February 21, 2011

Thanks, Krugman!

Filed under: Economics,Politics — The Professor @ 10:42 am

In his most recent screed, er, column, Paul Krugman inadvertently validates my two previous posts.  First, he flogs the new meme (that I discussed yesterday)  that collective bargaining has nothing to do with the fiscal Armageddon facing states:

For what’s happening in Wisconsin isn’t about the state budget, despite Mr. Walker’s pretense that he’s just trying to be fiscally responsible.

Indeed, Paulie Nuts feels so strongly about this, he is compelled to repeat it:

Why bust the unions? As I said, it has nothing to do with helping Wisconsin deal with its current fiscal crisis. Nor is it likely to help the state’s budget prospects even in the long run: contrary to what you may have heard, public-sector workers in Wisconsin and elsewhere are paid somewhat less than private-sector workers with comparable qualifications, so there’s not much room for further pay squeezes.

As for the last line:  Ha!

Yesterday I wrote that only the clueless and the disingenuous could push this meme.  Given his record of serial recidivism, I must put Krugman in the latter category.

But in his haste to hurl himself in the defense of public sector unions, Krugman neatly impales himself on the second horn of the progressive dilemma that I wrote about in my Friday post.  Specifically, most of Krugman’s column is a jeremiad against the capture of government by “oligarchic” interests, which he claims that unions are necessary to counter.

But you can’t be a little bit pregnant, Paul.  (Sorry: very frightening mental image.)  Once you have bought into the public choice premise that government is suborned by the pressure of private interests, the entire case for a powerful, active and minimally limited state collapses.  That case you have trumpeted for years, Dr. Conscious Conscientious Liberal, without paying the slightest attention to the public choice problems that you hyperventilate about in this column.  Your strident defense of unions undermines completely your other progressive sermons on the virtues of big government.

Thanks for that, giving such a lurid demonstration of the progressive paradox that I wrote about Friday.  You can get dressed now.

Krugman sets out a Galbraithian vision in which the influence of countervailing powers, organized labor and organized capital, are offsetting, and an activist government wisely directs the polity and the economy.  As if.  In practice, what occurs instead is corporatism of a sort described by Mancur Olson, in which concentrated and organized interests exploit the power of the state to extract rents from diffuse consumers, investors, entrepreneurs and taxpayers.

Thus, Krugman’s unwitting endorsement of the public choice perspective torpedoes his own defense of public sector unions.  Because they are just organized groups that exploit the power of the state for their own benefit and impose costs on those lacking such privileged influence.  Once it is admitted that that’s the way the game is played–and Krugman jumps into that puddle with both feet–the immediate conclusion is that it is imperative to constrain the power of such bodies, and the power of the state that they exploit for their gain and to our detriment.

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  1. This may be a vary simplistic and very naive question, but: could the anti-trust/ant-monopoly law be applied to the unions? If we rightfully are trying to protect the society from the predations of private monopolies why aren’t we able just as well to protect the society from the predations of union monopolies?

    To me. it is not the unions themselves that are the problem (I see nothing wrong in the desire of a group of people to join their efforts n negotiating better deals), the problem is total monopoly of a single given union in the single given business area.

    Comment by LL — February 21, 2011 @ 12:29 pm

  2. [...] This post was mentioned on Twitter by Cecil Williams, R. R said: Professor Pirrong points out Krugman's continued insanity & stupidity. #WIunion @streetwiseprof [...]

    Pingback by Tweets that mention Streetwise Professor » Thanks, Krugman! -- — February 21, 2011 @ 2:23 pm

  3. LL–The Clayton Act of 1914 exempted labor unions from the anti-trust laws. The NLRA (Wagner Act) broadened this exemption.

    The ProfessorComment by The Professor — February 21, 2011 @ 3:44 pm

  4. Krugman is like the clown in the dunk booth at a carnival. He sits on a bench perched above a vat of water and makes his ludicrous Keynesian blathers and people, mostly Austrian Schoolers, hurl objects of facts refuting his theories that trigger the dunking. As a result, Krugman and his statist theories are all wet and sink to the bottom. Undaunted his rises to be dunked again. In the end, he is thoroughly water logged and moves on to spew on ABC’s “This Week” on sundays hoping Geo. Will doesn’t make him look too foolish.

    Comment by Bob — February 21, 2011 @ 4:46 pm

  5. You haven’t answered Krugman’s two main points.

    1. Why did Walker push through tax cuts while screeching about the deficit?

    2. Why did Walker exempt right-leaning public workers such as the police and State Patrol Troopers from the bill?

    Comment by Sublime Oblivion — February 21, 2011 @ 6:43 pm

  6. I’ve got a mate in Wisconsin and he tells me that the axe is falling on people who are both needed and badly paid to start with. As is typical when cost cuts are required, those doing the cutting make sure of two things: 1. that their own positions, i.e. middle-management ripe for being cut, are not touched and 2. the cuts are made in places which will cause the maximum amount of pain in the hope they are reversed or fail to be implemented.

    The aim of a bureaucracy is the survival of the bureaucracy, which is why the bureaucracy should never be given the job of trimming itself: they are physically incapable of doing so. So whereas I sympathise with the badly paid folk at the sharp end who are now facing cuts, it is limited by the fact that, via the unions, they have jumped into bed with others who have feathered their own nests at their expense.

    Comment by Tim Newman — February 22, 2011 @ 5:33 am

  7. @S/O. Typical Krugman bait and switch/three card monte game. First of all, the short term budget deficit, on the order of $135 million, is not the real issue. The issue that Walker is addressing is the long term structural problem with unfunded benefit obligations that run into the billions. Second, the creation of health savings accounts is a reasonable public policy intended to address defects in the market for health insurance.

    In a sense, this is a parallel to the disconnect in DC, where there is a hue and cry over $60-$100 billion in “cuts” to current expenditures, but entitlements are being ignored altogether. The difference is that whereas in DC they are focusing on the short term issues and ignoring the looming medium-to-long term disaster, governors like Walker are tackling the more fundamental structural problems.

    WRT to “right-leaning public workers”, it is incorrect to assume that police, etc., are “right-leaning” in any meaningful sense. To give you an idea, on an issue that you and I actually agree on, police unions are violently anti-right to carry.

    That said, I think it was incorrect on principle to exempt them. It was, however, likely a pragmatic political move. Pick your battles. If he prevails in the face-off with the other unions, it is possible, and perhaps likely that he will move to address the inconsistency.

    The ProfessorComment by The Professor — February 22, 2011 @ 9:58 am

  8. I have no partisan sides here, but I found your point very hard to understand. All of the “ha!”s and strikethroughs were pretty distracting. I am new to this blog, but it seems the vitriol will get in the way of my following it. I am taking the time to let you know because it’s obvious that you know a lot, and I wish I could learn from it.

    Comment by looking to learn — February 22, 2011 @ 11:00 am

  9. @LTL–1. Thanks for stopping by. 2. The strikethrough was to be transparent: I’d used a word mistakenly, and was effectively owning up to that. 3. Yes, I’m often told that sarcasm is the lowest form of wit, but I figure you have to aim at where your target is. The sarcasm/vitriol quotient is quite high whenever Krugman is involved because, well, he deserves it. More than I have time to give, actually. 4. Glad that you think I know a lot. There’s no accounting for taste for style–that’s not a knock on you, just saying that some people read for the sarcasm, some people run away because of it. 5. The quantity of vitriol varies. Don’t overgeneralize from one post–especially anything involving Krugman.

    I really appreciate your taking the time to read and write. Like Popeye says, I yam what I yam, and SWP is an outlet where I can indulge my, uhm, passion/intensity in ways not possible in dry, dull, academic writing.

    The ProfessorComment by The Professor — February 22, 2011 @ 6:08 pm

  10. The issue isn’t so much the actual wages of the public sector employees, its their benefits and pensions which impose very long term liabilities to the state governments. The pensions in particular are bad. They are defined benefit, not contribution. Very often the public employees do not need to be on the payroll very long to get them. And very often they can double dip and collect multiple pensions. Since politicians play chicanery with the pension funds just like everyone else, it ends up affecting the public revenue since the pension funds aren’t able to meet their liabilities. The tax base simply cannot support such generosity. The longer the reform is delayed, the more painful it will be. It’s unrealistic to expect the taxpayers to simply allow themselves to be taxed more so that public sector employees can be rewarded more than people in the private sector who actually create the wealth that pays for them.

    Comment by Chris Durnell — February 23, 2011 @ 2:25 pm

  11. Oh what fun to see banging on Mr. Kite of Trampoline fame- I mean Prof K; his folderol of the last few years has cost me a friendship!

    Comment by Theo — February 24, 2011 @ 12:16 am

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