Paul Krugman: Hypocritical Dishonesty

Runningw235 · Jan 10, 2015

http://krugman.blogs.nytimes.com/2014/12/30/keynesians-and-the-volcker-disinflation/

Krugman, 12/31/14:

Right-wing economists like Stephen Moore and John Cochrane - it's becoming ever harder to tell the difference - have some curious beliefs about history. One of those beliefs is that the experience of disinflation in the 1980s was a huge shock to Keynesians, refuting everything they believed. What makes this belief curious is that it's the exact opposite of the truth. Keynesians came into the Volcker disinflation - yes, it was mainly the Fed's doing, not Reagan's - with a standard, indeed textbook, model of what should happen. And events matched their expectations almost precisely.

<blockquote>So were Keynesian economists feeling amazed and dismayed by the events of the 1980s? On the contrary, they were feeling pretty smug: disinflation had played out exactly the way the models in their textbooks said it should.
Indeed, it was the other side of the macro divide that was left scrambling for answers. The models Chicago was promoting in the 1970s, based on the work of Robert Lucas and company, said that unemployment should have come down quickly, as soon as people realized that the Fed really was bringing down inflation. By a few years into the 80s it was obvious that those models were unsustainable in the face of the data. But rather than admit that their dismissal of Keynes was premature, most of those guys went into real business cycle theory - basically, denying that the Fed had anything to do with recessions. And from there they just kept digging ever deeper into the rabbit hole.
But anyway, what you need to know is that the 80s were actually a decade of Keynesian analysis triumphant.
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</blockquote>

So what was Krugman saying about price levels in the early 80s? He so arrogantly declares his school of thought "triumphant" over others (and uses this to infer his own credibility about inflation risks at present).

Krugman, Summers 1982:

I. The Inflation Time Bomb?
We believe that it is reasonable to expect a significant reacceleration of inflation in the near future. Much of the apparent progress against inflation has resulted from the *temporary* side effects of tight money and high real interest rates. These side effects must be expected to reverse themselves as real interest rates decline and the economy expands.
â€¦Our very rough guess is that correction of these distorted relative prices will add five percentage points to future increases in consumer pricesâ€¦This estimate is conservative in that it assumes stable oil prices.
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Between 1982 and 1990 we had disinflation (a relatively lower rate of inflation) rather than his predicted, massive five point increase in CPI. I don't have a problem with this, and I don't think I have a crystal ball with future inflation rates. What is bothersome is the type of arrogant criticism and rewriting history. This makes economics, which in it's true form is non-normative and apolitical, a political pissing contest between various talking heads.

Deleted member 472633 · Jan 10, 2015

Krugman makes me wish we had a purge day every year like that movie. He carries on the keynesian tradition of smug ignorance.

goober0331 · Jan 10, 2015

Academia can be very elitist and biased, Krugman seems to be more interested in being a political ideologue than being consistent.

brybry12345 · Jan 11, 2015

Krugman is a tool.

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Paul Krugman: Hypocritical Dishonesty

Runningw235 Registered User

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goober0331 Thinking of a master plan

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