Yes, this is a nerdblog. Yes, we focus on technology. No, this post isn’t about technology. Today we turn our attention to Paul Krugman. Why? Your JoeDog studied economics and sometimes he likes to distribute nerdy turd droppings. Consider this a dropping.
In a recent post Paul Krugman devoted time to the virtue of skepticism. In particular, he says, you should be leery of studies that neatly correspond with your own political preferences.
That’s good advice. For illumination he offers this nugget:
For example, I’ve been aggressively skeptical of studies that seem to show a negative relationship between inequality and growth, precisely because that result is so convenient for my political tribe (which doesn’t mean that it’s wrong.)
Now Your JoeDog’s high-level macroeconomic views generally align with the New York Times columnist. Like Krugman, he was schooled on Paul Samuelson’s Macroeconomics textbook. That book provides a framework that is recognizable to Krugman’s readers. Sadly the similarities end there. Krugman is a Nobel Laureate and Your JoeDog is a guy who yells at him on the Internets.
When he sees Krugman is extra skeptical of views that support his political position, that gives cause for pause.
When Thomas Piketty made a stir with Capital In the 21st Century, Krugman was an early cheerleader. Consider this column. It was written ten days after the book was available in the US. Krugman may have had an advance but how long is the period of extra skepticism? Two months?
Look, Piketty also supports Your JoeDog’s priors but he remains skeptical of his economic analysis. It contradicts much of what he learned in Macro 101. It probably contradicts what Krugman teaches his own students. When we follow the framework that Samuelson provides, we expect wages to rise as unemployment falls, amirite? That’s what happens when companies compete for workers. Supply and demand, motherfsckers.
What stands in the way of 1990s employment levels is politics. When governments prioritize low inflation over low unemployment they do the bidding of wealthy benefactors. Piketty makes more sense when he’s viewed in this context. People with money can (and do) influence policy. From a macroeconomic perspective, his data seems to track the symptom rather than the cause.
If Krugman now practices aggressive skepticism, that’s a good thing. Piketty should be scrutinized. In the meantime, the answers for wage stagnation already exist in Krugman’s own textbooks. Let’s hope he avoids distraction and promotes those ideas more aggressively. In the long run, we’ll know if Piketty was onto something but we already have the tools to fix wage stagnation. That’s is where our focus should be now.