Paul Krugman Quotes

On the whole, the monetarism for which Friedman first became famous seems clever, brilliantly argued, but shallow ― and perhaps even a bit disingenuous. Friedman's writings from that period have the feel of a smart man who knows what he wants to believe looking hard for supporting arguments. And I think it is fair to say that up until the late 1960s Friedman and his followers, while influential, were regarded by many of their colleagues as faintly disreputable.

As is often the case with major disputes in economics, the argument over fiscal policy went on for years, with some critics of fiscal policy still defending their position when this book went to press. It seems fair, however, to say that among economists a more or less Keynesian view of the effects of fiscal policy came to prevail. Careful statistical studies at the International Monetary Fund and else where showed that austerity policies have historically been followed by contraction, not expansion. Recent experience, in which countries like Spain and Greece that were forced into severe austerity also experienced severe slumps, seemed to confirm that observation. Furthermore, it was clear that those who had predicted a sharp rise in U.S. interest rates due to budget deficits, leading to conventional crowding out, had been wrong: U.S. long-term interest rates remained near record lows even during the years from 2009 to 2012, when the government ran very large deficits.

First, most of the speculation about the superiority of the communist system - including the popular view that Western economies could painlessly accelerate their own growth by borrowing some aspects of that system - was off base. Rapid growth was based entirely on one attribute: the willingness to save, to sacrifice current consumption for the sake of future production. The communist example offered no hint of a free lunch.
Second, the economic analysis of communist countries' growth implied some future limits to their industrial expansion - in other words, implied that a naive projection of their past growth rates into the future was likely to greatly overstate their real prospects. Economic growth that is based on expansion of inputs, rather than on growth in output per unit of input, is inevitably subject to diminishing returns. It was simply not possible for the Soviet economies to sustain the rates of growth of labor force participation, average education levels, and above all the physical capital stock that had prevailed in previous years. Communist growth would predictably slow down, perhaps drastically.

Why did the magic economy go away? Hundreds of books have been written on that topic. This isn't one of them ― although I'll devote part of a chapter to some plausible stories and take a number of stabs at the issue along the way. But let me cut to the chase: the real answer is that we don't know. There are a lot of stories out there. Most of them, including the ones that have achieved the widest currency, are dead wrong on logical or factual grounds. There are some less popular stories that could be right ― but if you are honest with yourself, you will admit that nobody, yourself included, knows which if any of these stories actually is right.

In the court of conventional wisdom, Ronald Reagan stands accused of inflicting a huge burden of debt upon his country. He cut taxes on the rich, increased military spending, and failed to cut enough spending elsewhere to pay for his largesse. The result was a string of unprecedented peacetime deficits, and a debt that will be a drag on the national for decades to come.
Reagan is guilty as charged. The supply-side apologists' claim that some extraordinary economic success vindicates in spite of the deficits just doesn't hold up in the face of the evidence. The question, however, is whether the crime was a felony or a misdemeanor.
The answer proposed here will not satisfy those with a taste for drama. Reagan created a deficit, and it hurt American economic growth. But even if the effects of the visible deficit are supplemented with appeals to several alleged hidden deficits of the 1980s, the cost was not catastrophic. The deficit is not nearly the monster some people imagine.

This is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.

The fact is that Democrats have already been pursuing policies that are much better for the white working class than anything the other party has to offer. Yet this has brought no political reward.

It’s a tribute to the importance of Friedman’s work that questions about his legacy bear so directly on contemporary policy issues. But for that reason it’s also important not to engage in . Friedman was a great economist, but like every other great economist in history, he was also wrong about some important things.

One interesting footnote: although Friedman made great strides in macroeconomics by applying the concept of individual rationality, he also knew where to stop. In the 1970s, some economists pushed Friedman’s analysis of inflation even further, arguing that there is no usable trade-off between inflation and unemployment even in the short run, because people will anticipate government actions and build that anticipation, as well as past experience, into their price-setting and wage-bargaining. This doctrine, known as “rational expectations,” swept through much of academic economics. But Friedman never went there.

Economics is harder than physics; luckily it is not quite as hard as sociology. Why is economics such a hard subject? Part of the answer has to do with complexity. The economy cannot be put in a box. [...] Another reason economics is hard is that the critical sociologist is right: it involves human beings, who do not behave in simple, mechanical ways.

What does Alexandria Ocasio-Cortez know about tax policy? A lot.

As I’ve just noted, Greenspan warned about irrational exuberance, but he didn’t do anything about it. And in fact, the Fed chairman holds what I believe is a unique record among central bankers: he presided over not one but two enormous asset bubbles, first in stocks, then in housing.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

The idea of comparative advantage—with its implication that trade between two nations normally raises the real incomes of both—is, like evolution via natural selection, a concept that seems simple and compelling to those who understand it. Yet anyone who becomes involved in discussions of beyond the narrow circle of academic economists quickly realizes that it must be, in some sense, a very difficult concept indeed.

Any interesting model of must exhibit a tension between two kinds of forces: "centripetal" forces that tend to pull economic activity into agglomerations, and "centrifugal" forces that tend to break up such agglomerations or limit their size.