An 'Ignobel' Prize in Economics

Who said this? "Economists don’t know how to make a poor country rich, or bring back the magic of economic growth when it seems to have gone away."

And this: “Social Security as it is currently constituted is very efficient. We’re talking about a system that really works quite well."

Believe it or not, these are vacuous statements made by the new winner of the Nobel Prize in economics, Paul Krugman. A professor at Princeton University and a columnist for the New York Times, Krugman is probably the most famous economic commentator since the passing of John Kenneth Galbraith and Milton Friedman two years ago.

Now that he’s won the Nobel Prize, we will never hear of the end of the ranting of this blowhard who calls himself a “liberal” and “progressive.” “Reactionary” might be a better word. Krugman’s #1 goal is to return to the good ol’ days of Franklin Delano Roosevelt and the New Deal. He wants to transfer power back to the labor unions and impose sharply higher progressive taxes to reduce inequality of income and wealth. Sen. Obama would be pleased.

I guess we should not be surprised by this selection out of Sweden, which is famous for giving Nobels in literature to Marxists and Peace prizes to the likes of Al Gore.

But the prize in economics is supposed to be more objective, more scientific, like its prize in chemistry, medicine, and physics. In the past, politics have played a role, but never like this year. Krugman is without question the most polemical partisan economist to win the prize.

Admittedly, Krugman made some solid contributions to international trade theory in the late 1970s, showing that economies of scale and cost cutting can increase trade and the diversity of products and can expand the number of countries involved in a production of a product or service. He also demonstrated that increased immigration can raise real wages as companies can make better use of economies of scale, create a greater variety of goods, and lower prices.

But Krugman hasn’t written any serious academic papers or books for years. After making his positive contributions in international trade, Paul Krugman went off the deep end as an unabashed Keynesian and partisan Democrat. I’ve followed Krugman’s populist writings for some time, and he’s written some of the most embarrassing statements ever by a professional economist. Here’s a sample of his nihilistic writings:

"Economists don’t know how to make a poor country rich, or bring back the magic of economic growth when it seems to have gone away."

"Nobody really knows why the U. S. economy could generate 3 percent annual productivity growth before 1973 and only 1 percent afterwards."

"Nobody really knows why Japan surged from defeat to global economic power after World War II, while Britain slid slowly into third-rate status."

All of the above quotes are from Krugman’s bestseller, "Peddling Prosperity," published in 1994. Subtitled "The Age of Diminishing Expectations,” the book was ironically published at a time when Third World developing nations were experiencing "rising" expectations for the first time.

His 2000 book was called "The Return of Depression Economics"…..He was eight years too early!

His next book "The Great Unraveling" came out four years later. Hey, maybe his predictive powers are getting better with age.

But I fear not. In his latest book, “The Conscience of a Liberal,” Krugman’s hero is Franklin Delano Roosevelt. He contends that the New Deal, not free enterprise, is responsible for the post-WWII boom in America. There’s hardly a single statistic in the whole book, and he can’t even get his facts straight about George W. Bush. He blames the failures of the Bush administration for pursuing a “laissez-faire” policy of limited government, when in fact Bush is a Big Government Republican who has supported a massive increase in government size and power with such programs as the Medicare prescription drug plan, the Federally mandated “No Child Left Behind” educational system, huge federal deficits, and the War in Iraq, among others.

Krugman calls the bankrupt Ponzi scheme Social Security the "crown jewel" of the New Deal. He states, “Social Security as it is currently constituted is very efficient. We’re talking about a system that really works quite well."

His solution for Japan’s slow-growth economy? Simply inflate the supply of yen. He said that the 9-11 terrorist attacks would stimulate the economy……and that if the rich get richer, the poor and middle-class must get poorer as "a matter of arithmatic."

What to do about the current credit crunch and real estate crisis? Cut rates, inject liquidity, nationalize the banks, and guarantee everything — what I call a return to crude Keynesianism. As a devote student of Keynes’s “General Theory” (he recently wrote a new introduction), Krugman undoubtedly favors a comprehensive “socialization of investment,” Keynes’s solution to the irrational “animal spirits” of financial capitalism. The success of this new government bailout is likely to last as long as yesterday’s super-rally on Wall Street.

Sadly, I suspect we are going to hear a lot more nonsense from the Crude Keynesian Krugman in the near future.