The Krugmanian Platonic universe

Krugman’s Slice of Labor

by Theodore Dalrymple

One would hesitate, for the most obvious of reasons, to dispute astrophysics with a Nobel Prize-winning astrophysicist, but the case is quite otherwise with a Nobel prize-winning economist. This at the very least suggests a difference in the intellectual difficulty, rigor, or foundation of the two sciences. Common sense will not get you very far with black holes or antimatter, but in economics common sense is a necessary if not a sufficient quality in him who would think about it.

I therefore read with interest an article entitled “The Punishment Cure,” published on 9 December in the New York Times by the Nobel Prize-winning economist, Paul Krugman. It seemed to me entirely lacking in common sense, and to disregard considerations obvious to any intelligent person over the age of 15 or 16. In this I might, of course, be mistaken.

Let me begin by pointing out the author’s facile resort to abuse as if it were argument. In respect of a proposal to reduce the period during which the unemployed in America may claim unemployment benefits, Mr Krugman refers to the Republican’s ‘desire to punish the unemployed’ [my emphasis].

I have little doubt that there are some among Republicans who viscerally hate the poor and wish to visit suffering upon them in order to relieve their own feelings, just as there are some among the Democrats who see in the unemployed a permanent constituency for themselves. But in fact there is a legitimate debate to be had about how to reduce unemployment in a modern economy without at the same time introducing unsustainable costs or deformations into it. If it were easy, everyone would have done it by now.

Mr Krugman takes the Republicans to task for believing that if unemployment benefits were more limited, more of the unemployed would find work from the sheer necessity to do so. This, he says, is fallacy. He writes:

Ask yourself how, exactly, ending unemployment benefits would create more jobs. It’s true that some of the currently unemployed, finding themselves even more desperate than before, might snatch away jobs from those who already have them.

Now this passage seems to me to indicate that the model of an economy in the author’s mind is that of a static zero-sum game, in which one man’s job is another man’s unemployment and vice versa: the view of an economy that fueled the two disastrous totalitarianisms of the Twentieth Century, communism and Nazism. Furthermore (and very oddly for any economist, let alone one who won the Nobel Prize), Mr Krugman lives in a world without prices, for he says:

The point is that employment in today’s American economy is limited by demand, not supply. Demand and supply, then, live in some kind of Krugmanian Platonic universe, completely divorced from price.

It’s obvious that price is not the only determinant of demand. If I don’t like caviar, then halving of its price will not encourage me to go out and buy some. Whatever the price of alcohol, I shall never become an alcoholic. Reducing or stopping unemployment benefits will not affect neurosurgeons very much because most unemployed people are not neurosurgeons and can never be turned into such. Something more than mere availability for work is required of neurosurgeons.

If the price of labor, however, had nothing important to do with the number of jobs, how would Mr Krugman explain the outsourcing of jobs to countries such as China and India? It is not for reasons of climate that jobs once done in America or Europe have migrated to the other end of the earth. But in fact there are many conceivable jobs that the unemployed could perform in Europe and America if the price of their labor made it worthwhile for people to hire them to do those jobs. Forcing the wages of the unemployed down to that level might not be the right thing to do because there are many other things to be considered, but if unemployment is an evil independent of remuneration (which, within limits, it is), then reducing the incomes of the unemployed might not merely be what Mr Krugman calls ‘a perfect marriage of callousness… with bad economics.’

Read more at :

http://www.libertylawsite.org/2013/12/16/krugmans-slice-of-labor/