Streetwise Professor

August 16, 2011

Krugman Proves Orwell Right

Filed under: Economics,Politics — The Professor @ 10:32 am

Orwell said “there are some things so absurd only an intellectual could believe them.”

Exhibit One: Krugman on CNN.  Uhm, if we built a lot of stuff to destroy space aliens in the end we’d have a lot of useless stuff to destroy space aliens not stuff that we really like or need.  And using a Twilight Zone episode as the source of economic policy ideas?  What’s next?  Star Trek: The Keynesian Kronicles?  Battlestar Econometrica?

Rogoff’s I-can’t-believe-what-I’m-hearing retort is priceless: “So we need Orson Welles is what you’re saying?”  Yes, Ken, that’s what he’s saying.  Really.  Somewhere Orwell is chuckling and saying “told you so.”

The best worst part is that Krugman (perhaps tacitly acknowledging the primarily libertarian/classical liberal criticism of his what-we-really-need-is-WWIII-to-save-our-economy-like-WWII-did argument) explicitly recognizes that WWII was “negative social product spending”–but he wants to do it again anyways.  It doesn’t get much more Orwellian than that: “War is peace. [Well, prosperity anyways, according to Krugman.] Freedom is slavery. [Krugman probably believes that one.]  Ignorance is Strength. [Then K would be industrial strength.] ”  Krugman’s corollary: “Waste is wealth.”

But Krugman’s week was only getting started.  He also penned a screed attempting to discredit Texas.  (We are so in his head.  I love it.)  His argument, in a nutshell (again, emphasis on the nut): Texas is creating more jobs than other states because people are moving to Texas.

Uhm, this isn’t a natural experiment where people are randomly assigned to states, and told that if they try to leave they’ll be shot.  In that case one would predict that (a) employment would increase in states that have an above average number of people assigned, and fall in states that have a below average number assigned, and (b) the real standard of living would fall in the former states and rise in the latter.

Note that Krugman makes no effort to see whether, in fact, the standard of living has fallen in Texas relative to other places.  Not surprising, really.

No, population movement is endogenous.  And (pace Kevin Williamson at NRO), people don’t move to Texas for the weather for the most part (it was 106 in Houston last Thursday), or the scenery, or (again pace Williamson) because they are “middle class Mexicans” (really!  Krugman said that).

No, those at the margin move to Texas because it offers a higher standard of living, all things considered, than other places.  Why this is true is complicated, and would be a complete mystery to Krugman who apparently believes that Texas is a Dickensian wasteland with horrible schools and horrific health care.  (Memo to Krugman: visit the Houston Medical Center someday, dipstick.  If you ever get cancer–and no, I am not wishing it on you–you will be damn glad it exists.)  “Standard of living” encompasses the entire bundle of attributes associated with a place–after tax income, housing prices, social amenities, employment opportunities, and yes things like schools and health care and weather.  Revealed preference suggests that Texas offers a bundle that is superior to other places.

Just how much of that is attributable to this policy or that (zero income tax, tort reform) or this exogenous factor or that (e.g., resource endowments like energy) is difficult to determine.  But the fact remains: people are choosing to leave places like California and New York, and move to Texas.  Krugman’s “argument” assiduously avoids any discussion of choice, and makes Texas’s relative performance seem like the outcome of some natural experiment.

This shouldn’t be surprising, actually, because real economics is about the determinants of individual choice, and Krugman is becoming less of a real economist with each passing day.

Maybe his body has been taken over by space aliens . . .

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1 Comment »

  1. After Krugman and Obama it is certain those in any way associated with the Nobel Institute will have no seat in Valhalla.

    Comment by pahoben — August 17, 2011 @ 10:10 pm

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