Paul Krugman Quotes

Homo economicus is an implausible caricature, but a highly productive one, and no useful alternative has yet been found.

If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman’s followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian heresy. By the century’s end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.

In a way, the worst sin of the conservatives was that of hypocrisy. They proclaimed growth as their objective, offered it as the answer to all problems, all while following policies that actually inhibited that growth at least a bit. At the end of the day, however, the most striking fact is how little happened to U.S. long-term growth, good or bad, on their watch.

Whose fault is the replacement of serious discussion of world trade by what I have come to think of as "pop internationalism"? To some extent, of course, it is the result of basic human instincts: intellectual laziness, even among those who would be seen as wise and deep, will always be a powerful force. To some extent it also reflects the decline in the influence of economists in general: the high prestige of the profession a generation ago had much to do with the presumed effectiveness of Keynesian macroeconomic policies, and has suffered greatly as macroeconomics has dissolved into squabbling factions. And one should not ignore the role of editors, who often prefer what pop internationalists have to say to the disturbingly difficult ideas of people who know how to read national accounts or understand that the trade balance is also the difference between savings and investment. Indeed, some important editors, like James Fallows at The Atlantic or Robert Kuttner at The American Prospect are pop internationalists themselves; they deliberately use their magazines as platforms for what amounts to an anti-intellectual crusade.

It's tempting to give up—either to retreat to the ivory tower, or to start to play the policy entrepreneur game. After all, what is the use of sophisticated policy thinking or careful examination of the facts if simplistic ideas win every time?
One answer is simply that it would be wrong to give up. If the people with good ideas do not fight for them, they have no right to complain about the outcome.
But good ideas will still often lose to convenient nonsense. When that happens, every serious economist is ultimately sustained by a faith that the right ideas will eventually prevail.

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.

Whether the influence of increasing returns on trade and geography is rising or falling, one thing is clear: much was learned from the intellectual revolution that brought increasing returns into the heart of how we think about the world economy. It wasn't just that economists could make sense of previously puzzling data, we found ourselves able to see things that had previously been in an intellectual blind spot. Many people contributed to this process of enlightenment; I'm proud to have been a part of the journey.

Where do ideas about economics come from? They come, of course from economists—where by an "economist" I mean someone who thinks and writes regularly about economic issues. But not all economists are alike, and in fact the genus includes two radically distinct species: The professors and the policy entrepreneurs.

Most economists, to the extent that they think about the subject at all, regard the Great Depression of the 1930s as a gratuitous, unnecessary tragedy.

A temporary evolution of ignorance, a period when our insistence on looking in certain directions leaves us unable to see what is right under our noses, may be the price of progress, an inevitable part of what happens when we try to make sense of the world's complexity.

To make a harsh but not entirely unjustified analogy, a government wedded to the ideology of competitiveness is as unlikely to make good economic policy as a government committed to creationism is to make good science policy, even in areas that have no direct relationship to the theory of evolution.

It is important to realize that even now Fed officials are not quite sure how they pulled this rescue off. At the height of the crisis it seemed entirely possible that cutting interest rates would be entirely ineffectual—after all, if nobody can borrow, what difference does it make what the price would be if they could? And if everyone had believed that the world was coming to an end, their panic might—as in so many other countries—have ended up being a self-fulfilling prophecy. In retrospect Greenspan seemed to have been like a general who rides out in front of his demoralized army waves his sword and shouts encouragement, and somehow turns the tide of battle: well done, but not something you would want to count on working next time.

What’s odd about Friedman’s absolutism on the virtues of markets and the vices of government is that in his work as an economist’s economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn’t he exhibit the same restraint in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.
In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there’s a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I’d argue, is a counter-counterreformation.

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.

As Branko says, there was a time when Serbs and Croats seemed to get along fairly well, indeed intermarrying at a high rate. But could anyone now put Yugoslavia back together? At this rate, we’ll soon be asking the same question about America.