Wednesday, July 07, 2010

Krugmanophobia Landsburgensis

Steve Landsburg is an economist with a bit of a Krugman fixation. He rarely misses a chance to bash him, and this post is a case in point.

His target is This Krugman NYT Op-ED

Paul Krugman is at it again, casting aspersions on everyone who opposes extended unemployment benefits while offering absolutely no positive argument for those benefits. Let me explain what would count, to an economist, as a positive argument.

Perhaps Steve missed it, but Krugman does offer an argument, brief here, but explained in great detail in his other popular writings:

One main reason there aren’t enough jobs right now is weak consumer demand.

Now no economist, not even one of the far right, could miss the idea that the present crisis is one of a failure of final demand. The true believers might imagine that this is not the case, but they could hardly be so innocent of history as not to recognize this argument. So does Landsburg try to refute Krugman’s argument or confront it in any way? No and no – he instead chooses to ignore and constructs instead a “toy model”, as he styles it, where his argument has some traction. (Toy Model)

Look through the toy model for any hint that final demand or any other macroeconomic consideration could be a factor in his calculations – I don’t think you will find any. Especially you won’t find any hint that the economy right now is producing trillions of dollars fewer worth of goods than it would if employment were normal. I wasn’t in the mood to check the details, but it could be that he slipped in an arithmetic error or so as well – it couldn’t matter because the whole exercise entirely ignores the point.