Krugman mocks James Pethokoukis’s reply on business uncertainty and the recovery. I think that mocking is not the best strategy for getting people to give up even ridiculous positions. It raises the cost to them of admitting that they were wrong.
Its like your facing a wrath of zombie ideas and your solution is to tighten
monetary conversation policy. And, I should note that I believe Krugman is doing it for the same reason that people are pushing for tighter monetary policy – he is letting is moral sense get in the way of his practical sense.
People with bad ideas should be mocked. But, intellectual discourse is not a morality play. The goal is to increase understanding, whatever the source of misunderstanding is.
So, how should we be dealing with an idea like “Business uncertainty is the cause of the slow recovery?”
Well, we want to lower the cost to rejecting this idea and so we should divorce rejecting it from rejecting other ideas that people hold dear.
I would start by saying: Okay, so Obama is might do all of these bad things. Well, lets start by spelling out all the bad things he might do. Then lets imagine that he actually did these things. How would markets react?
I would need the persons actually response, but I would want to show them that even if what Obama did radically lowered both welfare and output in the United States, its probably going to be difficult to get it to lower the number of people that businesses want to hire, without invoking some kind of Keynesian effect.
That is typically what we see from bad policy is lower wages and/or people dropping out of the labor force. What we typically don’t see is failure of the labor market to clear.
So, we don’t have to stop thinking any bad thoughts about Obama or his policies or any of that, to accept that to get to failure of labor markets to clear, that something somewhere has got to be sticking.
If that’s true then it opens up the possibility that monetary stimulus could unstick it.