Paul Krugman Wins the Nobel

As if the financial news were not already pretty trashy, the Nobel Committee announced that Paul Krugman won the Nobel in Economics. Remember this is the guy who called 40 of the last 3 recessions. A lot of Krugman's recent writing is in zero sum terms (one wins while others lose) and that is simply wrong-headed.

But his contributions to trade theory, which he won the award for, are substantive. He argued a couple of decades ago both for the importance of trade and that the world is not flat - linkages do matter in trade. But for the last decade he has taken on the role of a public intellectual - and there his contributions are less substantive.

In an NYT magazine article he said "For the America I grew up in -- the America of the 1950's and 1960's -- was a middle-class society, both in reality and in feel. The vast income and wealth inequalities of the Gilded Age had disappeared. Yes, of course, there was the poverty of the underclass -- but the conventional wisdom of the time viewed that as a social rather than an economic problem. Yes, of course, some wealthy businessmen and heirs to large fortunes lived far better than the average American. But they weren't rich the way the robber barons who built the mansions had been rich, and there weren't that many of them. The days when plutocrats were a force to be reckoned with in American society, economically or politically, seemed long past." That kind of stunning "analysis" reflects a misunderstanding of the first era of capital growth in the country, and also of the era in which Krugman grew up. He called this era the new "gilded" age.

Any student of both the history of the first age of American capitalism looks at the growth in well being of all Americans during the time and also of the gradual leveling of incomes as time passed. It was not because of governmental policy. The high taxes in the FDR era did not make the wealthy less wealthy nor the poor richer.

Krugman has some commendatory work on building our understanding of trade but on the whole most of his public writing is partisan bunk. In the Times Magazine article Krugman quoted Kevin Phillips, who like Krugman seems to believe in a new gilded age. While that makes for stunning partisan yammering it is lousy economics.