This post by Don Boudreaux really helps me understand his antipathy towards Paul Krugman’s modern writing.
Essentially, Boudreaux point is that Krugman undermines the long project of getting people to understand how and why free markets increase human welfare. This is because Krugman spends the majority of his time pointing out cases where the free market is a detriment to human welfare.
The concern here is clearly understandable.
It also brings to the forefront a key question: is “defending” the free market the primary role of public economists today.
The issue is that just about all modern intellectual elites are in agreement about the core welfare enhancing properties of the market. Not only economists and policy wonks but the majority of elite economic journalists.
What I take to be the Krugman/Keynes position is that the real threat to the free market comes from succumbing to policies that in practice don’t produce real gains for much of the electorate.
Not only does this result in real human suffering but it undermines public support in the market. For example, when median incomes were rising public support for free trade was high. As they began to stagnate and fall, it fell.
Thus the practical way to get support for free trade is to make sure that median income rises.
This might, for example, mean more aggressive monetary policy than you would otherwise support or more intense redistribution that you would otherwise support.
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Monday ~ November 14th, 2011 at 12:10 pm
anon
Should we be silent about dangerous design mistakes in cars? Should be silent about poison in baby food – just because these products are so useful?
If the free market needs people to stay quiet about its spectacular failures, then it’s not a model we want to rely on.
Monday ~ November 14th, 2011 at 12:29 pm
foosion
“Free” trade is the perfect example.
Trade is beneficial to the economy as a whole, but distributional issues may make it beneficial to all or to only a tiny fraction and it may harm a large number. If, by hypothesis, trade benefits 1% by a lot but harms 90% by some amount, why should 90% support it?
Free trade has come to mean trade that increases competition to many workers, while increasing protection for intellectual property and preserving lack of competition for doctors, lawyers, etc. Limiting competition by protecting privileged classes (owners of IP and professionals) can hardly be called “free.”
Most economists ignore these issues.
Monday ~ November 14th, 2011 at 12:44 pm
Twundit (@Twundit)
a jiu jitsu move? Or just the end of the ideological cycle of market-ideology that started under Thatcher & Reagan.
Monday ~ November 14th, 2011 at 2:17 pm
Tom
Karl,
I find your response troubling coming from an economists. Do you really believe “the practical way to get support for free trade is to make sure that median income rises”? The case for free trade does not depend on the rising of median incomes. I have never read a single textbook that said trade is only beneficial when incomes are rising.
Economists should have a roll in educating the public on the benefits of markets and trade. Looking at some of the comments above you as an economist could have a teachable moment to show your commenters why markets are a model we want to rely on, why trade does not harm a large majority of people, and that free markets are not an ideology just thought up of starting with Reagan and Thatcher.
These commenters show a spectacular ignorance on not just economics but of history as well. The reason why you won’t engage these tremendously wrong-headed commenters is not that you agree with their positions, but because these are typical left-wing comments. In fact, I bet you are more likely to engage my post than those posts espousing left-wing non-sense. Why have a blog if you are not willing to educate those who read it?
Tuesday ~ November 15th, 2011 at 12:12 am
Benny Lava
I like how you answer with a tautology.
Monday ~ November 14th, 2011 at 2:42 pm
Rick Russell
I love the policy prescription implicit in the Gallup question. Exports good. Imports bad.
Monday ~ November 14th, 2011 at 3:33 pm
Lord
Many economists aren’t in favor of free trade. Many favor it when to their advantage and oppose it when not. Many ignore China’s currency manipulation or even tout it as a consumer boon. Many others will to to it but oppose any opposition to it.
Monday ~ November 14th, 2011 at 6:16 pm
Lord
The irony being, it is Boudreaux that doesn’t believe in free trade.
Monday ~ November 14th, 2011 at 5:06 pm
Effective isn’t fair, ctd « Blunt Object
[...] Boudreaux on Bastiat and Krugman (Modeled Behaviour) [...]
Monday ~ November 14th, 2011 at 5:14 pm
Becky Hargrove
Tom,
Re: trade and rising income – I had previously understood this in a general way as the airplane theory of economics, or momentum to keep the plane aloft. I actually got the grade I needed in an English Essay class by using that idea. This post by David Glasner (Uneasy Money) recently helped me understand better: ( “Europe is Having an NGDP Crisis not a Debt Crisis”)
“However, assigning blame in this way (greed, fecklessness) is really a distraction from the true cause of the crisis, which is a stagnation of income growth, making it impossible to pay off debts that were undertaken when it was expected that income would be rising. Since the debts are fixed in nominal terms, the condition for being able to pay off the debts is that nominal income (NGDP) rise fast enough to provide free cash flows to service the debts. That hasn’t happened in the five countries now unable to borrow at manageable rates.”
http://uneasymoney.com/2011/08/08/europe-is
Monday ~ November 14th, 2011 at 6:54 pm
Unlearningecon
I am concerned by your use of the term ‘free market’, seeing as no such thing exists.
Thursday ~ November 17th, 2011 at 11:58 pm
Wow…Paul Krugman really is an economist and not just a worthless political hack. | THE WESTERN EXPERIENCE
[...] Boudreaux on Bastiat and Krugman (modeledbehavior.com) [...]