Tag Archives: Paul Krugman

Paul Krugman: Sanders Needs to Distance Himself from ‘Fantasy Economics’

Nobel Prize winning, progressive-leaning economist Paul Krugman said in an op-ed on Wednesday that the Bernie Sanders presidential campaign needs to distance itself from unrealistically rosy predictions regarding the potential consequences of his economic proposals, or else risk making Jeb Bush’s policy proposals “look realistic.

Krugman takes issue with the fact that the Sanders campaign’s policy director praised University of Massachusetts Amherst economics professor Gerald Friedman’s comprehensive analysis of Sanders’ economic proposals as “excellent work.

According to CNN Money’s Tami Luhby, Friedman predicted that the sum of Sanders’ policies, if passed into law, would push median household income to “$82,200 by 2026, far higher than the $59,300 projected by the Congressional Budget Office.” He suggested that unemployment would drop to 3.8 percent and that the labor participation rate would surge back to 1999 levels.

In addition, [Friedman claimed that] poverty would plummet to a record low 6%, as opposed to the CBO’s forecast of 13.9%. The U.S. economy would grow by 5.3% per year, instead of 2.1%, and the nation’s $1.3 trillion deficit would turn into a large surplus by Sanders’ second term,” Luhby added.

[RELATED: DNC Chair: Superdelegates Exist to Protect Party Leaders from Grassroots Competition]

Following the release of Friedman’s predictions, a group of former chairs of the Council of Economic Advisers under Bill Clinton and Barack Obama, specifically Alan Krueger, Austan Goolsbee, Christina Romer, and Laura D’Andrea Tyson, signed an open letter to Sen. Sanders and Friedman which said, “We are concerned to see the Sanders campaign citing extreme claims by Gerald Friedman about the effect of Senator Sanders’s economic plan—claims that cannot be supported by the economic evidence. Friedman asserts that your plan will have huge beneficial impacts on growth rates, income and employment that exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals.

Krugman, in his Wednesday op ed for The New York Times, parroted the fears of the former CEA chairs and wrote, “OK, progressives have, rightly, mocked Jeb Bush for claiming that he could double growth to 4 percent. Now people close to Sanders say 5.3???

The point is not that all of this is impossible, but it’s very unlikely — and these are numbers we would describe as deep voodoo if they came from a tax-cutting Republican,” said Krugman, who argued that Friedman’s predictions regarding the growth and unemployment effects of Sanders’ policies are unlikely to take place in the face of a “long-term downward trend” in the labor participation rate due to an “aging population.”

[RELATED: Reality Check: After Being Trounced By Sanders in NH, Clinton Still Wins More Delegates Thanks to DNC Insiders]

Sanders needs to disassociate himself from this kind of fantasy economics right now. If his campaign responds instead by lashing out [against the former CEA chairs’ open letter] — well, a campaign that treats Alan Krueger, Christy Romer, and Laura Tyson as right-wing enemies is well on its way to making Donald Trump president,” concluded Krugman.

On February 3, the Committee for a Responsible Federal Budget released a fact check of offsets that Bernie Sanders has proposed in an effort to fund his single-payer healthcare plan, which stated, “By our rough estimates, his proposed offsets would cover only three-quarters of his claimed cost, leaving a $3 trillion shortfall over ten years. Even that discrepancy, though, assumes that the campaign’s estimate of the cost of their single-payer plan is correct. An alternate analysis by respected health economist Kenneth Thorpe of Emory University finds a substantially higher cost, which would leave Sanders’s plan $14 trillion short. The plan would also increase the top tax rate beyond the point where most economists believe it could continue generating more revenue and thus could result in even larger deficits as a result of slowed economic growth.

Sanders’ chief policy adviser Warren Gunnels called the former CEA chairs “the establishment of the establishment” and told NPR, “[The open letter criticizing Sanders’ embracing of Friedman’s projections] does not bother us at all. What bothers us is the fact that the U.S. has more kids living in poverty than nearly any major country on Earth.

For more 2016 election coverage, click here.

Follow Barry Donegan on Facebook and Twitter.

Krugman: Land Use Regulations Block Affordable Housing Development

Nobel prize winning economist Paul Krugman, a self-described liberal, took an unexpectedly free-market oriented stance on zoning laws and land use restrictions in a Nov. 30 op-ed for The New York Times.

In his article on urban gentrification and affordable housing, Krugman asked rhetorically, “But what about all the people, surely a large majority, who are being priced out of America’s urban revival? Does it have to be that way?

[RELATED: Exclusive Interview: Dr. Boulet on the Fallacies of Paul Krugman]

[pull_quote_center]The answer, surely, is no, at least not to the extent we’re seeing now. Rising demand for urban living by the elite could be met largely by increasing supply. There’s still room to build, even in New York, especially upward. Yet while there is something of a building boom in the city, it’s far smaller than the soaring prices warrant, mainly because land use restrictions are in the way.[/pull_quote_center]

Yes, this is an issue on which you don’t have to be a conservative to believe that we have too much regulation,” added Krugman.

[RELATED: FEE: Krugman Is Clueless About Bitcoin]

The Washington Post’s Ilya Somin pointed out the fact that a growing number of left-leaning public policy wonks are beginning to oppose overzealous zoning laws. “Libertarians and other free market advocates have criticized zoning on such grounds for decades, at least as far back as the late Bernard Siegan’s classic 1972 book Land Use Without Zoning. Present-day pro-market scholars such as Steve Horwitz and Harvard economist Edward Glaeser have continued in a similar vein. More recently, however, the critique of zoning has been taken up by prominent left of center commentators,” he wrote, listing Paul Krugman, Council of Economic Advisers chairman Jason Furman, Stony Brook University assistant professor of finance Noah Smith, and Matthew Yglesias as examples.

Somin said that he finds left-leaning opposition to zoning laws “particularly significant” because “the most liberal cities also tend to be ones with the most restrictive zoning laws” and “it would be good if more politically influential liberals become aware of the problem, and began [to] advocate measures to curb zoning.

Exclusive Interview: Dr. Boulet on the Fallacies of Paul Krugman

Joshua Cook spoke with Dr. Jon Boulet, economics professor at North Greenville University, about economist Paul Krugman’s new op-ed piece Enemies of the Sun featured in the New York Times.

Dr. Boulet described how Krugman uses a tactic of the progressive left by calling skeptics of global warming “deniers” instead of debating the objective facts or science.

“He [Paul Krugman] is not just a statist, he is an elitist,” said Dr. Boulet. “Even more so of dealing with the bad policy prescriptions is the fact of those who oppose him are called deniers. For Krugman, a denier is someone who is not worthy of discussion and that is one of the greatest dangers of modern America.”

Boulet said that in the 1970’s, the consensus was that the cause of global cooling was the result of burning fossil fuels and the solution, according to the progressive left, was a government-run economy ran by elites by Paul Krugman.

Cook asked Dr. Boulet about Krugman’s claim that solar is adding more jobs than the coal industry.

“Frankly that’s a sign of inefficiency,” said Dr. Boulet. “Solar provides approximately 1 percent of the power in the United States which is being generous.”

“So solar is generating 1 percent of the power and is using more labor than we use coal miners in the United States who generate 38 percent of our power,” said Dr. Boulet. “One industry is spending more on labor to provide 1 percent of the power than it is to use the same amount labor to generate 30 times the amount of power.”

Dr. Boulet said, “someone might say ‘well that’s more jobs that will be great.'”

“But who will pay for these jobs?” Dr. Boulet continued. “If you get rid of coal tomorrow and say we’re all going to provide solar, will people like it when people’s power increases by 10, 20, 30, 40 or 50 fold? People will get royally ticked off.”

Near the end of the interview Cook and Dr. Boulet talked about the Federal Reserve and how elites get richer at the expense of the poor and middle class.

“A handful of large banks and financial institutions go to the Fed and borrow money at .5 percent and they turn around and feed the stock market bubble and they make a killing. It allows the mega-rich to get even richer,” said Dr. Boulet.

Dr. Boulet doesn’t like the term “crony capitalism.” He prefers to use “crony socialism.”

“There’s nothing crony about capitalism,” said Dr. Boulet. “Socialism is crony because these firms go to the government because the government is their sugar daddy.”

Listen to the entire interview here.

FEE: Krugman Is Clueless About Bitcoin

By Max Borders 

In this video clip, Paul Krugman demonstrates once again that prizes don’t make you an expert on everything. Indeed, his poor prognostications happen so frequently that one wonders if Krugman is an expert on anything. I don’t say that to be unpleasant. If you’re going on TV and enjoying a lavish lifestyle by pretending to know what you’re talking about, shouldn’t you be held to a higher standard?

Let’s pass over for a moment how woefully wrong Krugman was about the Internet. What about the internet of money?

Krugman first says: “At this point bitcoin is not looking too good.”

It is true that investment often follows the Gartner hype cycle. So bitcoin has indeed fallen from great heights and is probably just now making its ascent out of the “trough of disillusionment.”

trough of disillusionment
Image FEE.org

But so what? There is nothing inherently wrong with bitcoin. In fact, some very savvy, patient people are building an unbelievable set of technologies within and around the blockchain. And if you believe Gartner, most really interesting tech goes through this cycle.

Let’s look back at the Internet. When the dotcom bubble and subsequent burst looked like this:

Bitcoin Chart
Image FEE.org

Do we conclude that because in 2002 the Internet wasn’t “looking so good” that TCP/IP was not viable? That would have been a very short-sighted thing to say, particularly about a system that is a robust “dumb network“ like the internet.

Bitcoin is also a dumb network. But don’t let the “dumb” part fool you, says bitcoin expert Andreas Andronopoulos. “So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge.”

Then Krugman goes on to ask, “Why does a piece of paper with a dead president on it have value?” Answering his own question he says “Because other people think it has value.”

And this is not untrue. But the problem with this line of thinking is — subjective value notwithstanding — the value of money is also contingent. You might say the value of fiat money is too contingent — especially upon political whims, upon the limited knowledge of the folks at the Federal Reserve, and upon the fact that its unit of account is no longer anything scarce, such as gold.

By contrast, bitcoin has standard of scarcity programmed into it. So, bitcoin is in limited supply, thanks to a sophisticated algorithm.

In a fully decentralized monetary system, there is no central authority that regulates the monetary base. Instead, currency is created by the nodes of a peer-to-peer network. The bitcoin generation algorithm defines, in advance, how currency can be created and at what rate. Any currency that is generated by a malicious user that does not follow the rules will be rejected by the network and thus is worthless. (To learn more about this algorithm, visit “Currency with a Finite Supply.”)

Perhaps you don’t trust this algorithm. Certainly Paul Krugman does not. That’s okay, because digital currencies compete, so you can find one you do trust. One crypto currency is backed by gold and funnily enough, it’s called “the Hayek” after the Nobel laureate who wrote about competing private currencies.

Now, what shall we make of the magic of the dollar? Krugman says it is “the fact that you can use it to pay taxes.” That’s sort of like saying that the Internet works because of eFile. Let’s just assume Krugman was kidding.

But Krugman thinks, without irony, that bitcoin “levitates.” That is to say, he’s okay with the idea that the dollar has value because other people value it, but he’s not okay with the idea that bitcoin has value because other people value it, which is a rather curious thing to say in the same two-minute stretch. He goes on to argue that bitcoin is built on libertarian ideology, and that it doesn’t do anything that digitizing the dollar hasn’t done.

And that’s when we realize that Krugman doesn’t have any earthly clue about bitcoin.

But Freeman columnist Andreas Antonopoulos does:

Open-source currencies have another layer that multiplies these underlying effects: the currency itself. Not only is the investment in infrastructure and innovation shared by all, but the shared benefit may also manifest in increased value for the common currency.

Currency is the quintessential shared good, because its value correlates strongly to the economic activity that it enables. In simple terms, a currency is valuable because many people use it, and the more who use it, the more valuable it becomes.

Unlike national currencies, which are generally restricted to use within a country’s borders, digital currencies like bitcoin are global and can therefore be readily adopted and used by almost any user who is part of the networked global society.

What Krugman also fails to appreciate is that bitcoin and the bitcoin network is disintermediated. That’s a fancy way of saying it’s direct and peer-to-peer. This elimination of the mediating institutions — banks, governments, and credit card companies — means bitcoin transactions are far, far cheaper. But that also means these institutions could be far less powerful over time. And that’s precisely why it’s being adopted most quickly by the world’s poorest people and countries with hyperinflation.

Hey, look, I understand. In many ways, Krugman is a twentieth-century mind. Keynesian. Unhealthy obsession with aggregates and dirigisme. He believes in big central solutions to problems that robust, decentralized systems are far better equipped to tackle. And he’s not terribly plugged into tech innovation. In fact, here’s that well-played Internet quote in case you forgot:

The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law” — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other!

By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

To grok the power decentralization, you have to have a twenty-first century mind.



Reprinted from FEE with permission under Creative Commons Attribution License

Overstock.com Libertarians’ New Favorite Company? CEO Has Strong Words For Krugman & Bitcoin

Kurt Wallace of Rare.us recently interviewed Overstock.com CEO Dr. Patrick Byrne who had some very strong words on bitcoin and economist Paul Krugman.

Bryne calls Krugman’s economic theology “extreme and magical.” He goes on to say that Krugman’s thinking has no ties to reality.

Bryne tells Wallace that he hopes Bitcoin will destroy central banking. The online retailer recently made headlines for accepting bitcoins as payment.

You can listen to the entire interview below.

Follow Michael Lotfi on Facebook & on Twitter: @MichaelLotfi