When John Maynard Keynes decided that Say’s Law was pesky and got in the way of his master General Theory, he simply created a straw man, demolished it, and — Voila! — academic economists celebrated its demise. Paul Krugman, however, does Keynes one better and allows us to get rid of that oppressive and evil Law of Opportunity Cost.
Krugman continues to insist that if the economy is in a “liquidity trap,” the “old rules” no longer apply, and that means the Law of Comparative Advantage. Since comparative advantage is nothing more than an application of the Law of Opportunity Cost, Krugman is claiming that when there are “special circumstances,” the Law of Opportunity Cost does not apply. And without that lousy law, governments can perform magic with the printing press! I deal with this in my latest post on Krugman-in-Wonderland.