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Source link: http://archive.mises.org/18610/paul-krugman-makes-opportunity-cost-disappear/

Paul Krugman makes Opportunity Cost disappear!

October 4, 2011 by

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.

{ 6 comments }

John P. October 4, 2011 at 3:12 pm

Woooh! I can buy anything I want without any consequence! Oh wait, no I can’t… since I don’t have a printing press. I needs me get some.

J. Murray October 4, 2011 at 4:19 pm

That would be a horrible world to live in, where everything is perfectly equal in value. Liquidity trap wouldn’t even be a remote problem, we would all be living in the world of Buridan’s Ass.

FDominicus October 5, 2011 at 10:40 am

Krugman would also claim that the sun turns around the earth just giving enough leverage and/or fiat-money. It’s a shame without end that such persons do get a nobel prize….

Walt D. October 5, 2011 at 11:28 am

Paul Krugman is right (an Ayn Rand axiomatic contradiction?). Opportunity costs have disappeared, because opportunity itself has disappeared.
I contend that the banks are following Ricardo’s Law of comparative advantage.

Ricardo Quiel October 5, 2011 at 12:47 pm

Change the title of your commentarie on Krugman to “Wonder in Krugmanland”

Seattle October 6, 2011 at 10:56 pm

My Little Krugman: Printing presses are Magic

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