IamA Nobel Prize-winning economist and New York Times columnist.

sychosomat · 1 year

Hello Dr. Krugman, thank you for doing this. I have a broad question that deals with how you feel about the scientific process in economics and the impact this has on determining the best fiscal policy.

It seems extremely difficult to determine the best economic policy for a country when economics appears unable to test the veracity of macroeconomic claims empirically using experiments designed to verify causality and effect size. This leaves the door open to a vast amount of debate about what the “best practices” are in macroeconomics, as individuals can make use of a massive amount of data (correlation and regressions, historical examples, etc.) to support what they see as the proper role of the government in setting economic policy.

If there is so much data, which can be interpreted post-hoc in many different ways, and is incapable of being experimentally tested, how do we determine what is not only good science, but “best practices” in macroeconomics?

Thank you!

Ashoat · 1 year

I want to ask about your perspective on increasing wealth and income disparities. There a couple camps on this issue, and it seems that mainstream economists haven't yet formed a consensus on the cause for this.

Greg Mankiw and others seem to believe that the main cause of increasing income and wealth inequality is a changing labor market that rewards and values high-skilled laborers more and more. Consequently, he argues that attempts at addressing income inequality issues should be heavily based on education reform.

On the other hand, you've made the point that a lot of the increases in income and wealth inequality come from shifting fiscal policies and government regulation. You seem to argue that decreased taxes on the rich and more lenient policies in regards to financial industry have resulted in an economy that unduly favors certain individuals. Sorry if I'm putting words in your mouth!

I have the following two questions:

Do you think any of the increased disparity has resulted from the shifting labor market?
Do you think it makes sense to focus efforts on improving higher education and increasing access to it?

jbdelong · 1 year

As you know, Paul, ever since I decided to force my 700 Econ 1 students to read Milton and Rose Director Friedman's "Free to Choose", I have been trying to understand why those who claim to be Friedman's intellectual disciples--especially those who hold appointments at the Becker-Friedman Institute--have not been aggressively out there condemning Bush, Bernanke, and Obama for insufficient policy activism. The natural generalization of virtually all of Friedman's work to the current situation is that the task of the government is to Stabilize the Growth Path of Nominal GDP by Any Means Necessary--which means issuing cash and buying stuff that is not a perfect substitute for cash with it until nominal GDP is on its previous growth path.

Yet the ranks of Friedman disciples appear to be limited to Scott Sumner and (perhaps) David Glasner.

And in this morning's FT I read my guru Martin Wolf writing about how for central banks "The immediate task is to manage an exit from the interventions." He does go on to say that "A far greater danger exists of premature retrenchment than of excessive delay..." but the initial sound bit makes me wince. And his colleague the highly-intelligent and usually reliable Gideon Rachman denounces you for shrillness and warns us that "the assumption of unlimited Dutch and German creditworthiness" to support fiscal expansion "is unconvincing".

It seems to me that we have lost not just those professional Ph.D. economists who became addicted to DSGE and RBC models and lost touch with reality, but have also lost a good many who either want to retain contact with reality or who ought to be willing to worship Milton Friedman as their guru. And I am still not sure why, or how...

Yours,

Brad DeLong

WajPuffin · 1 year

Time for a less serious matter.

In your textbooks you described some major benefits from seemingly minor innovations. For example, sticky notes or maybe the flat bottom on paper grocery bags.

What is your personal favorite "minor" innovation that has had a large impact on efficiency, and therefore, the economy?

Phersu · 1 year

Do you think the Euro can still be saved?

What should have been done to avoid this?

nytimeskrugman · 1 year

Thanks for all the questions, all. It was fun.

ripper2345 · 1 year

Are you long, neutral, or short Bitcoin?

notheory · 1 year

Here on Reddit there's a sub-reddit called "Explain like I'm Five".

I am curious whether you'd be able to articulate to me how government stimulus is supposed to help get us out of economic problems (and/or why austerity is a bad idea)?

Of course, with the assumption that i am a five year old.

bloometal · 1 year

Dr. Krugman:

Having been told that it is one of the hot topics in Economics, what is your opinion on Behavioral Economics? Do you see it becoming more than just a collection of empirical results into a unified theory?

nilme · 1 year

As a Spaniard and therefore a citizen of the next country to fall in Europe I am still amazed at the strategies that Germany has designed to 'get Europe out of the crisis'.

Do you think there's any chance we can leave this HUGE crisis following that path? Germany knows it is impossible to do so and they are going to enter recession soon according to the latest forecasts due to a fall in exports since the rest of Europe cant buy their products. Why do they insist on doing this? Do they think they will prevail and have every european country in their hands?

Thanks for coming!

nytimeskrugman · 1 year

What do you think is the best argument towards influencing people away from economic austerity?

Edit: By request for those reading that need a definition, wikipedia defines economic austerity as "...a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided."

narwal_bot · 1 year

Most (if not all) of the answers from nytimeskrugman (updated: May 03, 2012 @ 07:09:13 am EST):

Question (justarunner):

Dr. Krugman,

First off, thank you so much for doing this AMA. I'll get right to my questions.

Why do you advocate such aggressive policies by the fed to increase inflation? You even went so far as to say Ben Bernanke not doing so is being "reckless." Was it not very low interest rates by the fed that started this recession? Low rates -> Expansion of credit -> People think there is new real money -> It's really just inflation -> People start investing (in things like the housing market, tech bubble...etc, these should be called malinvestments at this point) -> and then the boom leads to its own bust?

When you debated Congressman Ron Paul, you stated that cutting spending would actually make things worse for the deficit? How is that possible? Edited* Thanks ashoat!

What did you think of Epstein's book, Econospinning? It essentially became a diatribe against you. Did you have a response to that? Or did you just brush it off?

Lastly, why are you so partisan in your articles? I know many famous economists have accused you of that. Do you think you could reach a broader audience if you weren't so divisive?

Lastly, I think it's important to say that whether people agree or disagree with you, you've done some great work in the field of Economics. I always enjoy reading your articles even when I disagree.

Thanks again!

Edit: Dr. Krugman, didn't think this comment would take off like it did. What do you think of the Keynes VS Hayek rap battles?

Answer (nytimeskrugman):

So, hi -- I'm here and on.

Let's start with the inflation issue. What we want is "appropriately" low rates -- which in this case means negative in real terms. Excessively low rates can cause problems, but we're nowhere near there right now. And for what it's worth, I don't buy that story about the bubble at all; what went wrong in 2000-2007 was runaway unregulated banks, not too-low rates.

About the deficit: the thing you need to realize is that a weaker economy means lower tax receipts. Slashing spending now hurts the economy in the short run, offsetting a large part of the initial saving. It also hurts the economy in the long run. So when you do the full arithmetic, you probably make the debt problem worse, not better.

About partisanship: I don't think I'm being partisan, I think I'm being honest. The way many people try to seem nonpartisan is by pretending that bad ideas aren't really bad, which I won't do. It's not partisan to say, for example, that Paul Ryan's budget is a fraud. It's just the uncomfortable truth.

(continued below)

tidier · 1 year

Hey Dr. Krugman,

It's wonderful to have you here on reddit with us. I'm a off-and-on follower of your blog, and at Econ student at the UofC. I'd like to ask you some more specific questions about Economics and its accompanying methodology:

1) Is there too heavy a focus on mathematical economics? While mathematical precision is always nice to have for modelling, is it relevant when the underlying assumption aren't quite watertight in the first place? To what extent is economics just decorating regressions with nice stories? And to add to that, what do you feel about the up-and-coming, more qualitative fields of economics such as behavioral economics?

2) As a well-read, academic economist yourself, how have you seen the discourse in the academic circles shift following the financial crisis? Is it evolving in a good way?

3) What do you think about the divergence between "OP-ED economics" (what you finds in the OP-ED section of newspapers) and "academic economics"? I raise this because many of your claims parallel the fact that most academic economists would outright reject many of the much more politically-motivated statements about the economy found in the newspapers. Should academic economists (not under the pay of some interest group or another) be helping to bridge this gap, or should there be more economics education in general?

4) What do you think about the evolution/state of microeconomics now? Macroeconomics tends to dominate headlines since it tries to answers big questions like national income and jobs, and developments in microeconomics get much less press.

5) Lastly, what advice do you have for an aspiring economist? :D

All the best, Dr. Krugman!

Brillobreaks · 1 year

What's your take on the seeming increase in anti-Fed/goldbuggery stuff among some young people?

thinkorthogonal · 1 year

Is there an accurate first order calculation that can describe the impact of increasing/cutting government outlays on jobs? I've always used a very basic assumption (mostly for mathematical ease) to assess the impact at $100k of spending per job...as a result, my best estimate for assessing the impact of balancing the budget through spending cuts alone would cost our country ~15M jobs (assuming our deficit is $1.5T)...how accurate/inaccurate would you characterize this analysis?

rmbjspd · 1 year

Do you think the permanent downward pressure on wages that young adults entering the labor force during a recession face is a failure of policy or an inescapable reality? How can it be mitigated?

cthwaites · 1 year

In March 1925 Lord Beaverbrook held a dinner with Churchill, then Chancellor, Keynes and a number of pro-gold standard Treasury men. The debate centered on whether a return to gold would:

Either i) “prevent life in a fool’s paradise of false prosperity” ii) “improve the terms of trade by overall cost reductions” and iii) “mean parity with Germany and the United States”.

Or i) mean “unemployment, downward wage adjustment, prolonged strikes” ii) “favor the special interests of finance at the expense of production” iii) “lead to a permanent contraction of production”.

Keynes spoke of the “paradox of unemployment amidst dearth”, when an economy can not clear wages and prices and falls into a liquidity funk. But the Treasury position prevailed and reluctantly Churchill went along. One month later, Britain restored the gold standard. It lasted seven, lean years. Everything Churchill and Keynes feared came true. Not one of the alleged benefits materialized. Churchill called it the worst decision of his career.

How close are we to repeating this?

blm849 · 1 year

What is the FED doing to help the Emperor Diocletian escape the zero lower bound?

kualumni07 · 1 year

Dr Krugman do you believe a President Romney will be vastly different (economically speaking) then a President Obama? I would love to hear your thoughts.... also if a President Obama asked would you serve as Secretary of the Treasury (a thought that probably frightens Wall Street)?

Kaiganeru · 1 year

Iama attorney, who was also an admin law judge in NYS. I've lived in several different countries, all with variants of capitalism, but with checks and balances to ensure that the rich don't reach insane limits with a corresponding level of extreme poverty.

My question is this - with everything that you've said, how do you resolve the issue that everyone seems to be avoiding; in North America, the US specifically, a very, very small (tiny) percentage of the population controls virtually ALL the resources - all of the "money" - the powerful lobbys, PACs, and hired gun psychologists and human engineers who work hard to convince us that we really have it good, and that it's unamerican to question anything. "Love it or leave it."

In the 1950s and 1960s, the disparity between the highest paid person in a company and the lowest was 20-25x -- now? Today it's thousands, millions, the sky is the limit. The very wealthiest, controlling billions of dollars don't WANT to cede power to others - they don't CARE about the environment or the fact that their companies are destroying lives - that profit comes first before curing diseases or even providing medical care.

There is no way to justify what we have now. How to change it, short of violence is my question; can it be changed, short of violence? I see, on a daily basis, members of the (relatively) new underclass and the eroding/eroded middle class, all angry and confused because they have to fight and backstab each other for a tiny part of the scraps left over, and by creating a system where anyone who fights it will not be able to get medical insurance, will not be able to afford a decent live, we're controlled quite nicely.

Europeans - the government works (largely, never entirely with any bureaucracy) for the people. Here, WE work for the government, we live in fear; the news treats us to a laundry list of things to be afraid of... disease, losing our jobs (although we often hate them) not being able to pay for -- let's see, medical care, our student loans (both things that aren't really considerations in other developed countries, or are minimal concerns rather than life decisions) - hating each other, fear.

Take the people, control them, use fear, paralyze them - what happens when the underclass (because there can't BE anything other than an underclass where so few hold almost all the resources) get tired of being the underclass? When the middle class joins them, their children in their 30s still living at home because they CAN'T AFFORD to live elsewhere and it continues to get worse?

Where talking heads assure us that it would be evil, wrong and socialist to have it otherwise, and all we need do is pull ourselves up by our bootstraps and be one of the few, the lucky privileged.

How can you come up with a system - award winning or otherwise - that doesn't address these realities?

Snapperfish5 · 1 year

For you, what is the most frustrating thing that is commonly misunderstood by the American public about economics?

And thank you so much for doing this! I've been looking forward to it for some time!

nytimeskrugman · 1 year

How do you maintain such a lovely beard?

mfulk · 1 year

I saw your head to head with Ron Paul yesterday and one of the things he said struck me as interesting and I didn't hear your response. He said why doesn't the helicopter drop hit the homeowners on the head? I think he was suggesting that the stimulus has been dropped on the heads of the bankers, and specifically the bankers who gambled the heaviest, and yet the people who actually need help with their house payments are at the bottom of that trickle down. Another question related was in regards to how the people who save a lot of money, in my case enough to purchase a reasonably priced home outright, are being punished severely by the suppression of Treasury yields via the Fed purchasing the debt.

What is your take on this?

justarunner · 1 year

Dr. Krugman,

First off, thank you so much for doing this AMA. I'll get right to my questions.

Why do you advocate such aggressive policies by the fed to increase inflation? You even went so far as to say Ben Bernanke not doing so is being "reckless." Was it not very low interest rates by the fed that started this recession? Low rates -> Expansion of credit -> People think there is new real money -> It's really just inflation -> People start investing (in things like the housing market, tech bubble...etc, these should be called malinvestments at this point) -> and then the boom leads to its own bust?
When you debated Congressman Ron Paul, you stated that cutting spending would actually make things worse for the deficit? How is that possible? Edited* Thanks ashoat!
What did you think of Epstein's book, Econospinning? It essentially became a diatribe against you. Did you have a response to that? Or did you just brush it off?
Lastly, why are you so partisan in your articles? I know many famous economists have accused you of that. Do you think you could reach a broader audience if you weren't so divisive?

Lastly, I think it's important to say that whether people agree or disagree with you, you've done some great work in the field of Economics. I always enjoy reading your articles even when I disagree.

Thanks again!

Edit: Dr. Krugman, didn't think this comment would take off like it did. What do you think of the Keynes VS Hayek rap battles?

Silent_Storm · 1 year

Hi Dr. Krugman. How do you feel about NGDP targeting, and do you think there'll be a QE3 anytime soon?

[deleted] · 1 year

Who is the best economist who differs from you?

[deleted] · 1 year

Did you enjoy the Keynes v Hayek rap video?

SlickbackForShort · 1 year

How did your cameo in "Get Him to the Greek" come about?

NumberCruncher88 · 1 year

Dr. Krugman

First i want to let you know how much you are admired here in Colombia. Your Books are mandatory estudy material every single Economics faculty here.

Second, do you think this that due the European Crisis, South America is going to become a stronger economical force in the next 10 years?. And what do you think about the american comsuption and free trade agreements with smaller countries? (i personally think that USA is trying to decrease the unnemployment expanding foreign markets)

Best Regards from Colombia. (You were great in "Get him To the Greek"...and Siryana...hahaha)

jjrs · 1 year

In the past, you've said that 100% GDP debt isn't so bad because debt was much worse in WWII, and that got paid down. But after WWII the US saw the biggest economic expansion in history. The US would need to see something comparable to reduce this debt the same way.

My question is, do you see a similar economic boom hitting America again in the next few decades? What form could it take?

I'm unencouraged by the "Japan is much worse" example, because as well as they've handled their debt up until now, I believe they will reach crisis in the next few decades. The Wile. E. Coyote moment will come.

Weisenthal · 1 year

Back in the 2000s, you frequently blasted Bush for running large deficits. However in recent posts and interviews, you've said that a country with its own sovereign, un-pegged currency can't ever face bond vigilantes.

What's more, the sovereign currency issue seems to be something of a new line of thinking for you, given that initially you wondered why Italy and Japan were paying different rates given broadly similar economic conditions. Now you seem to have found peace with that question, based on the sovereign currencies issue.

Thus in light of this change of thinking, do you still stand by your comments regarding Bush's deficits?

daedelus · 1 year

[deleted]

Megatron_McLargeHuge · 1 year

The top review of your book on Amazon gives it five stars, but says:

"The one thing that I dislike about the book is Krugman's willingness to sweep aside any discussion of structural, technological issues in the job market. There is no doubt that today's technology is having an impact, and not just for low skilled workers. That impact will only become more important in the future."

Is there a tipping point where technology-driven efficiency gains make it impossible to ever again achieve 2007 employment levels, and how do we know we're not there already? You argue that current unemployment is above the structural rate, but that aside, should we expect structural unemployment to rise significantly in the long run, and if so what do we do about it?

FLEABttn · 1 year

Dr. Krugman,

In short, what is wrong with MMT? It sounds neat but what am I missing?

Also, my Dad loves your shit.

Charming_man · 1 year

Dr. Krugman,

A frequent contention of mine is that inflation, not laissez faire, is responsible for the rich getting richer and the poor getting poorer. Expansions of the money supply, as Hayek and others have shown, enter the economy at specific points. Prices do not rise evenly. The first prices to rise are often titles to capital (equities) and higher order goods far removed from consumption (commodities, real estate to a degree).

The rich, as we know, own a disproportionate amount of stocks, and receive a disproportionate share of income from this investing. Wages are often the last thing to increase. The poor, as we know, receive most of their income from wages. It is this process that surreptitiously transfers wealth from the poor to the rich.

Higher order goods feel the first effects, with lower order goods lagging. The rich own more of the former, the poor the latter.

The rich also receive first access to this newly created money, before it has had time to percolate through the economy, causing prices to rise.

If my assumptions are correct, so called inflation "doves" are tragically advocating policies that transfer wealth from the poor and middle class to the richest of the rich. Do you see in issue in this model?

Addendum: in response to a comment that inflation helps the poor, who often have debts.

Wage inflation lags, and the poor receive a disproportionate share of income from wages (100%). Titles to capital and higher order goods far removed from consumption are the first to rise in price. In essence, as the rich have more stocks, they grow wealthier. The structure of production is what gears inflation towards benefiting the rich. Your suggestion is right in but a limited circumstances, and is dishonest in not showing the whole picture. It may be right assuming the poor person in question is loaded with debt, but if they are not, as someone below pointed out, it harms them. Additionally, their wages grow less valuable, hurting their ability to pay debt. Even if it were a good recommendation for this one poor person, it is akin to giving someone in withdrawal more heroin. Maybe it is "good" in a short term narrow sense, but it is most definitely not a good decision. Now here's your dirty secret. The rich have vast amounts more debt than the poor. They lever up all of their activities through the banking system. Go read some 10Ks and see for yourself just how much debt finances large corporations. The richest of the rich finance everything. This, not laissez faire, is why the rich get richer and the poor get poorer. The inequality in America can be ascribed to precisely these policies for which so many clamor. When deleterious effects are felt, these same people work to cover them up with policy band-aids such as transfer payments.

hasht · 1 year

Professor Krugman, what do you think of the high percentage of students (including many of your students at Princeton) choosing careers in investment banking and finance?

you'll need to login or register to do that

create a new account

privacy philosophy

login