The ridiculous Paul Krugman
Gee, he makes makes me laugh out loud sometimes. Here is Krugman trying to explain why we are all "Keynesians:" The iPhone Stimulus. (h/t Mark Thoma).
What I’m interested in, instead, are suggestions that the unveiling of the iPhone 5 might provide a significant boost to the U.S. economy, adding measurably to economic growth over the next quarter or two.
Do you find this plausible? If so, I have news for you: you are, whether you know it or not, a Keynesian — and you have implicitly accepted the case that the government should spend more, not less, in a depressed economy.
Yes Paul, I find that plausible. No Paul, I do not see how your astonishing conclusion follows.
The crucial thing to understand here is that these likely short-run benefits from the new phone have almost nothing to do with how good it is — with how much it improves the quality of buyers’ lives or their productivity. Such effects will kick in only over the longer run.
Yes, O.K. But what does this have to do with "Keynesian" economics? The same thing is true in a neoclassical model; see here: Can News About the Future Drive the Business Cycle?
And to believe that more spending will provide an economic boost, you have to believe — as you should — that demand, not supply, is what’s holding the economy back.
As you should...lol. Thank you for telling us what we should believe, Herr Doktor Professor.
As I have written repeatedly, it is easy to generate what looks like a negative aggregate demand shock by appealing to a "bad news" shock in a general equilibrium model. Investment demand contracts. Spending contracts. GDP contracts. There is downward pressure on the price-level. But none of this necessarily implies a role for fiscal policy; see here, for example. Embed the same sort of shock in a labor market search model and you generate prolonged unemployment. Etc. etc.
Now, this should not be taken as an argument to discredit "Keynesian" interpretations of what is ailing the economy. It is meant as a reminder to keep our minds open to alternative interpretations that have nothing to do with "standard" Keynesian reasoning.
Certainly, one can accept the idea that a technological innovation is likely to spur spending and growth, without accepting the K-man's bald assertion that doing so makes us "Keynesian."
Certainly, one can accept the idea that a technological innovation is likely to spur spending and growth, without accepting the K-man's bald assertion that doing so makes us "Keynesian."
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