Yves here. Pilkington examines Krugman’s latest dig at heterodox economists.
Pilkington is far from the only one to react. The normally deferential Dean Baker was clearly less than happy. And the post-Keynesian website, A Case for Concerted Action, gave a particularly pointed rejoinder (emphasis original):
Rather than giving many examples of why Krugman is the part of the problem, let me illustrate one example where he pushed very hard on the issue of free trade. It is a lecture paper for Manchester conference on free trade, March 1996 titled Ricardo’s Difficult Idea.
The following quote is clearly a strategy for propaganda:
5. What can be done?
I cannot offer any grand strategy for dealing with the aversion of intellectuals to Ricardo’s difficult idea. No matter what economists do, we can be sure that ten years from now the talk shows and the op-ed pages will still be full of men and women who regard themselves as experts on the global economy, but do not know or want to know about comparative advantage. Still, the diagnosis I have offered here provides some tactical hints:
(i) Take ignorance seriously: I am convinced that many economists, when they try to argue in favor of free trade, make the mistake of overestimating both their opponents and their audience. They cannot believe that famous intellectuals who write and speak often about world trade could be entirely ignorant of the most basic ideas. But they are — and so are their readers. This makes the task of explaining the benefits of trade harder — but it also means that it is remarkably easy to make fools of your opponents, catching them in elementary errors of logic and fact. This is playing dirty, and I advocate it strongly.
(ii) Adopt the stance of rebel: There is nothing that plays worse in our culture than seeming to be the stodgy defender of old ideas, no matter how true those ideas may be. Luckily, at this point the orthodoxy of the academic economists is very much a minority position among intellectuals in general; one can seem to be a courageous maverick, boldly challenging the powers that be, by reciting the contents of a standard textbook. It has worked for me!
(iii) Don’t take simple things for granted: It is crucial, when trying to communicate Ricardo’s idea to a broader audience, to stop and try to put yourself in the position of someone who does not know economics. Arguments must be built from the ground up — don’t assume that people understand why it is reasonable to assume constant employment, or a self-correcting trade balance, or even that similar workers tend to be paid similar wages in different industries.
(iv) Justify modeling: Do not presume, as I did, that people accept and understand the idea that models facilitate understanding. Most intellectuals don’t accept that idea, and must be persuaded or at least put on notice that it is an issue. It is particularly useful to have some clear examples of how “common sense” can be misleading, and a simple model can clarify matters immensely. (My recent favorite involves the “dollarization” of Russia. It is not easy to convince a non-economist that when gangsters hoard $100 bills in Vladivostock, this is a capital outflow from Russia’s point of view — and that it has the same effects on the US economy as if that money was put in a New York bank. But if you can get the point across, you have also taught an object lesson in why economists who think in terms of models have an advantage over people who do economics by catch-phrase). None of this is going to be easy. Ricardo’s idea is truly, madly, deeply difficult. But it is also utterly true, immensely sophisticated — and extremely relevant to the modern world.
Yves again. Philip Pilkington asked me, upon reading that extract, “How the hell DID Krugman become some sort of voice for the left!?” You can see the answer above. “Adopt the stance of the rebel.” Krugman’s credibility as a leftist resides in his position at the New York Times (the organ of the left end of respectable opinion in the US), his early and forceful opposition to the Iraq War, and his continuing attacks on All Things Republican (which if you look closely, as most Naked Capitalism readers do, is merely acting as a loyal bag-carrier for Team Dem, but a lot of people don’t think very hard about the information they consume). And perhaps most important, Krugman has repeatedly called himself a liberal, so he must be a liberal, right?
It’s also instructive to read this section of Krugman’s 2007 obituary of Milton Friedman. Even though Krugman took issue with what he depicted as Friedman’s extremism in his popular works (which Krugman argued contrasted with his more nuanced Serious Economist oeuvre), it was not hard to discern that Krugman nevertheless admired Friedman’s skills as a polemicist. From Krugman’s article in the New York Review of Books:
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. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.
I’ll leave it to readers to chew over that passage.
By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil. Originally published at Fixing the Economists
Krugman is out with a kind-of-sort-of attack on critics of economics. It’s not surprising because Krugman is a very kind-of-sort-of type of guy in many of his opinions.
The language of his latest piece, however, is somewhat bizarre. He labels heterodox economists ‘Gentiles’, presumably making orthodox economists, what? God’s chosen people? It’s a metaphor made in light-hearted jest — but it speaks volumes.
Krugman knows that he is dealing with a group that has been marginalised for years. Indeed, there is much documentary evidence that Krugman has been on the front lines marginalising those very people. You can see this, for example, in his exchanges with James Galbraith in the mid-1990s.
But recently it seems as if the heterodox crowd have been getting a lot right: themes such as income inequality and stagnation are those that the heterodox literature deals with in detail. And the students are waking up to this.
Let’s be clear about to what extent Krugman is misleading his readers in his latest piece. First of all, he thinks that the heterodox have hoisted themselves onto a pedestal because of their greater ability to predict financial crises. This is not the case. I doubt that many heterodox economists would use this as the criterion as to what is and what is not good economics. A broken clock is, after all, right twice a day.
But Krugman goes a little far when he says that they have simply not made these predictions. We know well that heterodox economists have made extremely salient predictions over the past few decades — from the MMT proclamations on the Eurozone to Steve Keen and Ann Pettifor’s (among others) warnings of build-ups of private sector debt.
I think, however, that all this distracts from the key issue; which is that, silently, behind the scenes, the heterodox have been winning the debate. Krugman would never admit this, of course — indeed, he seems to live in a bit of an echo chamber over at the NYT with all his fanboys and fangirls and he may not even be fully cognizant of it — but if you move in economics circles you’ll know this to be generally recognised.
Take, for example, the Bank of England’s recent statement regarding how money is created. Krugman lost this debate to Steve Keen and Scott Fulwiller back in 2012 but he never conceded. Indeed, he selectively quoted the former to try to make his case (to whom he was making this case, I’m not sure, as most people interested in economics accept endogenous money theory these days). But when the Bank of England weighed in earlier this year the coffin was truly sealed. Of course, we heard not a peep from Krugman but we all know that he read the report which got extensive coverage on a blogosphere that we all know that he’s tapped into.
More and more heterodox ideas are getting play. In central banks, in newspapers among students. Anyone who surrounds themselves with the debate see that the orthodox — even the “lefty” orthodox like Krugman — come across as drab, stale and boring in the debates. It is heterodox economists that are providing good ideas, new interpretations and new policy innovations. People like Krugman are rehashing the ISLM and misunderstanding what a liquidity trap is and what it isn’t. The phrase “one trick pony” comes to mind.
Others, like Simon Wren-Lewis, are assuring themselves that mainstream economics is a science and that heterodox critiques are, presumably, as misguided as a crank trying to criticise the foundations of mathematics or chemistry. This is tied up with the idea — shared by Krugman — that our goal is to get rid of people like them. But as I wrote in response to Wren-Lewis in his comment section:
Heterodox economists do not reject much mainstream thought simply for the sake of rejecting it but rather because they believe it to be logically flawed. The only way that I can read your comment is “if a defining characteristic of heterodox thought is that it must reject anything that is mainstream, that is a problem FOR ME”. It is not a Problem in the abstract. You just don’t like it.
Also the [Manchester student’s] report is quite clear that we’re not talking about getting rid of mainstream economics altogether. I recognise that while I may think that it is a ghastly, illogical mess other people may not think so. They should be allowed to teach what they think to be Science. But that should not prevent others from pointing out that it may not be Science at all.
You think that mainstream economics is a Science. What gives your opinion weight? Presumably your PhD in economics. Well, I know literally hundreds of PhDs in economics that think exactly the opposite. The students are correct that both sides should get a hearing. If you are as convinced as you seem to be that your side is Scientific then you should be confident enough that you can defend this position rationally and convince students accordingly.
This is the line that heterodox critics must push. We’re not looking to lock people like Krugman and Wren-Lewis in a cage. We’re asking them to let people hear both sides of the argument. Personally, I know that the critics will win the argument if it is ever laid out; at least, to anyone who approaches it without a vested interest in maintaining the status quo.
But I suspect that Krugman senses this. I think he knows that he might lose the argument if the cat is ever let out of the bag. So, he wants to avoid the argument at all costs. Meanwhile, the DSGE crowd like Wren-Lewis are literally walking around like zombies that haven’t yet realised that their arguments have been rejected, by policymakers, central bankers, newspaper journalists and, now, students.
It’s a sad show to watch and speaks volumes about an all-too-human tendency to myopia and the problems associated with academic privilege. But it is a show that will not stop no matter how many blogposts Krugman writes to defend the status quo. That much can be told merely by reading Krugman’s own comments section.
Update: Stephanie Kelton has directed me to this excellent essay by James Galbraith from 2009. It is well worth a read.