Paul Krugman in a recent blog post claims that businesses are sitting on cash, which, if spent, would help end the current recession. The argument is this: (A) Businesses have large unused capacity, which makes them reluctant to invest (spending, according to Keynesians); (B) The cause of the unused capacity is the lack of business spending; therefore (C) Businesses have caused their own problems because they won’t spend.
I deal with Krugman’s claims in this Krugman-in-Wonderland post today.
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At least Krugman is being consistent. Keynesians view the economy as a circular flow, and if that flow can be maintained, it will take off by itself towards prosperity. So his use of circular logic is not surprising.
What is surprising, is that he gets mad when people call him crude.
I’d like to see him try punching someone. That feeble waste of skin wouldn’t survive past the first punch.
Krugman’s entire blog is a lie.
His blog is entitled, “The Conscience of a Liberal”. A blog entitled “The Conscience of a Liberal” would have to be blank.
this made me laugh
Remember in 2003 when Krugman recommended hyper-expanding the housing bubble in order to avoid an economic recession?
Bill,
I don’t want to call “conspiracy!” (yet) but I just wrote about Yves Smith’s latest op-ed in the NYT where she complained about the exact same phenomenon and suggested “aggressive taxes on retained earnings not spent within 2 years” to force businesses to spend rather than save. The timing on Krugman, Smith and other related op-eds seems more than coincidental. It’s almost as if someone is coordinating what hitpieces to write on which issues, when.
Here’s my post: Yves Smith, Economic Know-Nothing
The more cake we eat the more we’ll have. We are we so stubborn as to not see this?
Because of the Austrian emphasis on capital, and capital accumulation, necessarily involving a deliberate restriction of consumption. Keynesian econ fails because it is based on a flawed premise.
Regarding Krugman’s complaint at being called a “crude Keynesian”, there is a funny but very typical comment added afterward.
This is perhaps getting at the essence of Keynesianism. It’s the theory of cranks, written for the benefit of political cranks, which puts crisp, new government checks into the hands of the daydreaming cranks who grew up reading Popular Science magazines and who now feel somehow ripped off that having reached their 45th birthday they have not yet been provided with 5-mile tall skyscrapers with nuclear-powered elevators and door-to-door levitating monorail service.
But it’s not all bad. Another commenter gives Krugman a serious punch in the nose.
Thank you, Sean in Florida.
Let’s build a monorail
Many a true word spoken in jest. Despite the fact that California is bankrupt, the voters approved a ballot measure to build a bullet train from San Francisco and Sacramento to Los Angeles and Anaheim – presumably it will link up with the monorail at Disneyland?
Hmmm, Dat God is still failing…..
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