Paul Krugman: Economics

Paul Krugman is American economist. Explore interesting quotes on economics.
Paul Krugman: 212   quotes 1   like

“Many of the stories economists tell take the form of models—for whatever else they are, economic models are stories about how the world works.”

Paul Krugman

Preface
Economics (4th ed., 2015)

World

“That's a hard answer to accept, especially for those American policy intellectuals who recoil from the dreary task of reducing deficits and raising the national savings rate. But economics is not a dismal science because the economists like it that way; it is because in the end we must submit to the tyranny not just of the numbers, but of the logic they express.”

Paul Krugman

Pop Internationalism (1996), Asia's Miracle (1994)

Way , Science

“When the economy is in a depression, scarcity ceases to rule. Productive resources sit idle, so that it is possible to have more of some things without having less of others; free lunches are all around. As a result, all the usual rules of economics are stood on their head; we enter a looking-glass world in which virtue is vice and prudence is folly. Thrift hurts our future prospects; sound money makes us poorer. Moreover, that's the kind of world we have been living in for the past several years, which means that it is a kind of world that students should understand. […] Depression economics is marked by paradoxes, in which seemingly virtuous actions have perverse, harmful effects. Two paradoxes in particular stand out: the paradox of thrift, in which the attempt to save more actually leads to the nation as a whole saving less, and the less-well-known paradox of flexibility, in which the willingness of workers to protect their jobs by accepting lower wages actually reduces total employment. […] In times of depression, the rules are different. Conventionally sound policy – balanced budgets, a firm commitment to price stability – helps to keep the economy depressed. Once again, this is not normal. Most of the time we are not in a depression. But sometimes we are – and 2013, when this chapter was written, was one of those times.”

Paul Krugman

“Depressions are Different”, in Robert M. Solow, ed. Economics for the Curious: Inside the Minds of 12 Nobel Laureates. 2014.

Money , World , Understanding , Time

“Many of those who reject the idea of economic models are ill-informed or even (perhaps unconsciously) intellectually dishonest.”

Paul Krugman

Development, Geography, and Economic Theory (1995), Ch. 3. Models and Metaphors

Idea

“Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem.”

Paul Krugman

The New York Times Columns, The Populism Perplex (November 25, 2016)

Problem

“I would summarize the Keynesian view in terms of four points:1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.
2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.
3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down.
4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.”

Paul Krugman

Keynesianism Explained http://krugman.blogs.nytimes.com/2015/09/15/keynesianism-explained (September 15, 2015)
The Conscience of a Liberal blog

Money , Pain , Question , Loss

“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.”

Paul Krugman book Peddling Prosperity

Preface
Peddling Prosperity (1994)

Way , Parting , Box

“Economists, like everyone, have their political biases, but these are by no means as strong an influence on what they are willing to consider as you might think. For example, one might have thought that strongly liberal economists like, say, James Tobin would be at least mildly sympathetic to the views of radical economists who draw their inspiration from Marx, or of heterodox economic thinkers like Galbraith. After all, in such fields as history and sociology the Marxist or post-Marxist left has long received a respectful hearing. And yet you don't find this happening: liberal economists are almost as quick as their conservative colleagues to condemn heterodox leftist ideas as foolish it was the liberal Robert Solow, not Milton Friedman, who defended orthodoxy in the bitter "capital controversy" with British radicals.”

Paul Krugman

Development, Geography, and Economic Theory (1995), Ch. 1. The Fall and Rise of Development Economics

History , Idea , Thinking , Strong

“Like any major intellectual contribution, Keynes's ideas were bitterly criticized. To many people it seems obvious that massive economic slumps must have deep roots. To them, Keynes's argument that they are essentially no more than a problem of mixed signals, which can be cured by printing a bit more money, seems unbelievable.”

Paul Krugman book Peddling Prosperity

Source: Peddling Prosperity (1994), Ch. 1 : The Attack on Keynes

Money , People , Idea , Problem

“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.”

Paul Krugman

"Who Was Milton Friedman?", The New York Review of Books (February 15, 2007)
The New York Review of Books articles

People , Past

“The appeal to the intellectually insecure is also more important than it might seem. Because economics touches so much of life, everyone wants to have an opinion. Yet the kind of economics covered in the textbooks is a technical subject that many people find hard to follow. How reassuring, then, to be told that it is all irrelevant -- that all you really need to know are a few simple ideas! Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them.”

Paul Krugman

"Virus Strikes Again", Originally "Supply-Side Virus Strikes Again: Why there is no cure for this virulent infection" http://web.mit.edu/krugman/www/virus.html, undated draft at web.mit.edu of a "The Dismal Science" column for Slate
The Accidental Theorist: And Other Dispatches From The Dismal Science (1998)

Life , People , Fools , History

“The legend of King Midas has been generally misunderstood. Most people think the curse that turned everything the old miser touched into gold, leaving him unable to eat or drink, was a lesson in the perils of avarice. But Midas’s true sin was his failure to understand monetary economics. What the gods were really telling him is that gold is just a metal. If it sometimes seems to be more, that is only because society has found it convenient to use gold as a medium of exchange—a bridge between other, truly desirable, objects. There are other possible mediums of exchange, and it is silly to imagine that this pretty, but only moderately useful, substance has some irreplaceable significance.”

Paul Krugman

"The Gold Bug Variations", Originally published in Slate (Nov. 23, 1996)
The Accidental Theorist: And Other Dispatches From The Dismal Science (1998)

God , People , Imagination , Failure

“The idea that a country's economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets.”

Paul Krugman

Pop Internationalism (1996), Competitiveness: A Dangerous Obsession (1994)

Truth , World , Idea , Failure

“The best you can say about economic policy in this slump is that we have for the most part avoided a full repeat of the Great Depression. I say “for the most part” because we actually are seeing a Depression-level slump in Greece, and very bad slumps elsewhere in the European periphery. Still, the overall downturn hasn’t been a full 1930s replay. But all of that, I think, can be attributed to the financial rescue of 2008-2009 and automatic stabilizers. Deliberate policy to offset the crash in private spending has been largely absent.”

Paul Krugman

"Economics in the Crisis" http://krugman.blogs.nytimes.com/2012/03/05/economics-in-the-crisis/ (March 5, 2012)
The Conscience of a Liberal blog

Thinking , Parting

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

Paul Krugman The Theory of Interstellar Trade

Of his paper "The Theory of Interstellar Trade"; quoted in The Economist, 26 October 2013, p. 86

“There are three kinds of writing in economics: Greek-letter, up-and-down, and airport. Greek-letter writing formal, theoretical, mathematical is how professors communicate. Like any academic field, economics has its fair share of hacks and phonies, who use complicated language to hide the banality of their ideas; it also contains profound thinkers, who use the specialized language of the discipline as an efficient way to express deep insights. […] Up-and-down economics is what one encounters on the business pages of newspapers, or for that matter on TV. It is preoccupied with the latest news and the latest numbers, hence its name. […] Finally, airport economics is the language of economics bestsellers. These books are most prominently displayed at airport bookstores, where the delayed business traveler is likely to buy them. Most of these books predict disaster: a new great depression, the evisceration of our economy by Japanese multinationals, the collapse of our money. A minority have the opposite view, a boundless optimism: new technology or supply-side economics is about to lead us into an era of unprecedented economic progress. Whether pessimistic or optimistic, airport economics is usually fun, rarely well informed, and never serious.”

Paul Krugman

Preface
The Age of Diminished Expectations (1990; 1994; 1997)

Money , Books , Way , Travel

“If there is one single area of economics in which path dependence is unmistakable, it is in economic geography – the location of production in space.”

Paul Krugman

"History and Industry Location: The Case of the Manufacturing Belt", The American Economic Review, Vol. 81, No. 2, (May, 1991)

Dependency

“What I believe is that the age of creative silliness is not past. Virtue, as an economic theorist, does not consist in squeezing the last drop of blood out of assumptions that have come to seem natural because they have been used in a few hundred earlier papers. If a new set of assumptions seems to yield a valuable set of insights, then never mind if they seem strange.”

Paul Krugman

How I Work (1993)

Age , Nature , Past

“But the honest truth is that what drives me as an economist is that economics is fun. I think I understand why so many people think that economics is a boring subject, but they are wrong. On the contrary, there is hardly anything I know that is as exciting as finding that the great events that move history, the forces that determine the destiny of empires and the fate of kings, can sometimes be explained, predicted, or even controlled by a few symbols on a printed page. We all want power, we all want success, but the ultimate reward is the simple joy of understanding.”

Paul Krugman

Incidents from my career http://web.mit.edu/krugman/www/incidents.html (1995)

Fate , People , Truth , History

“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 Soviet economic 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.”

Paul Krugman

Pop Internationalism (1996), Asia's Miracle (1994)

Education , Past , Future , Country