Monday, March 08, 2010

Krugman Says His Own Textbook Is Bizarre

James Taranto at the Wall Street Journal points to how Paul Krugman is in effect calling his own writings bizarre. Here is what Krugman wrote the other day:

"What Democrats believe is what textbook economics says...

...But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

In Mr. Kyl’s view, then, what we really need to worry about right now — with more than five unemployed workers for every job opening, and long-term unemployment at its highest level since the Great Depression — is whether we’re reducing the incentive of the unemployed to find jobs. To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe."

Here is what Krugman himself wrote together with Robin Wells (his wife) in his textbook "Macroeconomics":

"Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries."

I guess this means that Krugman writes textbooks about other universes. Maybe he can one day tip us off about how to travel between universes. Until he does, we can ask Krugman why anyone should be interested in buying his textbooks, since most of us prefer to learn about the universe we live in, rather than bizarre ones that we can't reach.

UPDATE: I see now that Krugman here tries to explain away his contradiction by saying that NAIRU is determined differently from unemployment, and that the supply curve doesn't matter in a recession. Which is complete nonsense of course, as a shift in the supply curve from an increase in supply (which is what less generous unemployment benefits would achieve) will invariably result in a higher quantity (which in this case means a higher quantity of employment) to a lower price in all markets, including labor markets.