Krugman, Today’s Milton Friedman

Don Boudreaux evaluates Tyler Cowen’s claim that Paul Krugman is his generation’s Milton Friedman, and argues that Krugman has not been as influential in the academic, policy, or public realm. While I agree with Boudreaux, for the most part, where he disagrees with Krugman — I consider myself a strong market-oriented economist —, I think he gets some of the details wrong in his analysis. While I must admit that, at first, I was skeptical of Cowen’s endorsement, ultimately there’s strong evidence that Krugman is, indeed, this generation’s Friedman. The biggest difference is that Krugman is a champion of a different ideology than Boudreaux, and as much as the latter tries to take ideology out of his assessment I think it still clouds his judgment.

Take, for instance, this statement,

Even if Krugman is correct in all that he says these days, he says mostly what the economically untutored and uninformed man-in-the-street already believes.  Krugman, therefore, doesn’t change minds so much as he reinforces pre-existing beliefs.

But, there is no homogenous “man-on-the-street.” Economic ideas that resonate with libertarians are very popular amongst a large segment of society (and not just libertarians). They are just as much “men-on-the-street” as those who believe the minimum wage helps the poor. If Krugman is only reinforcing pre-existing beliefs, we could make the same argument about Milton Friedman. After all, there were many people who already agreed with his general worldview.

Given that there are many “men-on-the-street” that disagree with Krugman, the only reason why he would be “reinforcing pre-existing beliefs” would be caused by confirmation bias. Rather than speaking poorly of Krugman, this is more damaging to the “anti-Keynesian” “man-on-the-street.” Of course, anybody can disagree with Krugman, and doing so shouldn’t necessarily count as a mark against them, but plenty of people also disagree(d) with Milton Friedman.

In any case, the fact is that Paul Krugman has done a lot to correct “man-on-the-street” economics. The left aren’t the only ones capable of spewing bad applied theory; the right has done dirty work of their own. Krugman, for instance, is absolutely right to point out that the majority of the budget deficits of the Great Recession were/are cyclical: they represent dramatic declines in tax revenue, rather than dramatic increases in government spending. He’s also right that much of the Federal fiscal stimulus was counteracted by decreases in local government expenditure. In a world where the concept of inelastic money has gained wider support, Krugman has been right to champion currency elasticity (i.e. monetary disequilibrium; although I don’t necessarily agree with his more dramatic monetary policies).

Generally, Krugman has been good at keeping the debate honest. Sure, there’s plenty to disagree with in his writing, and Krugman is not always honest himself. But, the same — to some extent — can (and has) been said about Milton Friedman, whether we agree or disagree with the criticism. But, if the average young conservative and libertarian were to read Krugman, they would emerge a better economist and would enjoy a stronger understanding of the world. If Krugman has not been influential in that sense, it’s not his fault. People can be closed minded: again, confirmation bias. But, my guess is that he has been influential and that Boudreaux only underestimated Krugman’s impact on the public. (And, where there is reinforcement of pre-existing beliefs, Krugman has typically improved the rationales for these beliefs — something Friedman did, as well.)

What about on the academic side? Boudreaux makes two major claims,

  1. Krugman’s contributions are more narrow in scope than Friedman’s;
  2. Friedman’s contributions are more relevant towards public policy.

I don’t know all of either economist’s scientific contributions intimately, and I’m sure Boudreaux has an advantage over me in this department. But, based on what I do know, I’m not sure Boudreaux gets it right here, either.

Paul Krugman’s New Trade Theory was incredibly influential. It changed trade theory from a simple comparative advantage story to one that better fit the data. Maybe this contribution is narrow in scope, but it’s not more narrow than Milton Friedman’s permanent income hypothesis. Friedman was very influential in monetary policy, and his history of U.S. monetary history — especially of the Great Depression — has guided countercyclical monetary policy. But, Krugman has a contribution of his own in this department: the liquidity trap. Arguably, the liquidity trap has also been very influential, but this is something that will have to be tested over the coming decades. Also in this area, Krugman has contributed influential work on currency crises (critiquing manipulated fixed exchange rates). Many of Krugman’s contributions in the recent crisis, although not necessarily through academic venues (although, his papers on debt and deleveraging should be considered) are comparable to Friedman’s criticisms of a stationary inflation–employment tradeoff and his natural rate hypothesis; not comparable in substance necessarily, but comparable in perceived significance.

Perhaps someone can cite evidence of obviously misleading scientific contributions on Krugman’s part. But, he would have a counterpart in Friedman in that area, as well. It’s hard to think of a paper more disputed than Milton Friedman’s essay on positive economics. And, like Friedman’s work, Krugman’s will be (and have been) improved and fleshed out by subsequent researchers, confirming or tweaking the various subtleties.

This is starting to sound too much as a debate over who’s the better economist. That isn’t my intention. If you were to argue that Milton Friedman was the better one, I would probably agree with you — after all, I agree more with Friedman than I do with Krugman. But, it’s not over who’s better (not to mention that these types of comparisons tend to suffer from obvious biases — you have to assume that your worldview is the correct one); it’s about comparing influence. I just don’t find that the historical evidence supports Boudreaux’s contention that Krugman has not (a) improved “man-on-the-street” economics and that his scientific work has been (b) of a lesser scope than Friedman’s and (c) less influential and relevant. I think that this opinion is reflective of someone who hasn’t been influenced by Krugman (which is fine; I’ve been less influenced by Krugman than others have, as well), but I don’t think Boudreaux is representative of the average person.

Is Paul Krugman’s today’s Milton Friedman? There may be an argument that Friedman was more influential than Krugman. But, this argument would be difficult to validate, and in fact there’s a lot of evidence to the contrary. At the very least, it’s clear that Krugman’s influence approaches Friedman’s. This by itself says a lot about Krugman, because we have to remember that the communication outlets for economists have become more numerous and cheaper; Krugman has more intellectual competition than Friedman did. Thus, one should read Boudreaux’s assessment with a good dose of suspicion.

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Update: Here is an example of the type of corrections of “man-of-the-street” economics Boudreaux has in mind, written by Paul Krugman: “Is Capitalism Too Productive,” Foreign Affairs 76, 5 (1997) — also available on JSTOR and PKArchive.org.

14 thoughts on “Krugman, Today’s Milton Friedman

  1. John S

    I like Krugman the economist, but Krugman the political pundit is extremely annoying–and arguably more influential with the left-leaning man on the street. In contrast with Krugman, I never got the sense that Friedman was attributing evil intentions to his opponents.

    (This isn’t to say that Friedman was a saint. Glasner recently wrote that he could be an intellectual bully, and in his Q&A sessions with the public, he often came across as high and mighty, as if dispensing economic wisdom from God.)

    Also, I think Krugman’s popular influence has been somewhat greater than Friedman’s thanks to the megaphone of his NYT column and blog (although Friedman was also a prolific columnist). Certainly no economist today has as powerful a pulpit, which I think gives the average person a lopsided impression that Krugman conveys the consensus of academic economists’ opinions.

    Reply
    1. JCatalan

      Yea, there’s a lot of stuff that Krugman writes that strikes me as ignorant; but, I do think that his efforts to keep Republicans straight (or, at least, point out their inconsistencies) is useful and should be read by more people.

      You might be right about the NYT column and blog giving Krugman a platform that mislead readers on the relationship between Krugman’s opinion and the average economist’s opinion. At the same time, how many blogs are out there that constantly criticize Krugman? I can only comment on a biased sample — I read more libertarian blogs than I do non-libertarian —, but it seems to me that there’s more criticism of Krugman out there than there is confirmation of when he’s right (although, there’s a lot of the latter too).

      Reply
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  3. Marcos P

    “because we have to remember that the communication outlets for economists have become more numerous and cheaper; Krugman has more intellectual competition than Friedman did.”

    Could it also be argued that there are more avenues in which to influence the public today than there was in Friedman’s day? In which case, it would be relatively more difficult to be able to break out and influence the public back in those days as a contrarian economist.

    Its hard to pinpoint or take a position in this debate. I really think all sides make a compelling argument. Perhaps it a touch of everything and everybody is both right and wrong.

    Reply
    1. JCatalan

      It was more difficult back then. But, Friedman was a columnist, like Krugman. Friedman had an outlet similar to the one Krugman has today (minus a blog, and minus a widespread internet in general), but it was much more difficult to get into that position. You’re right that it’s difficult to pinpoint who’s right in this debate; despite writing this post, I’m still wary of comparing Krugman to Friedman.

      Reply
      1. John S

        Re: social media influence–Krugman has about 1,077,000 Twitter followers.

        Other big names:

        Stiglitz: 76,000
        Cowen: 34,000
        DeLong: 25,000
        Steve Keen: 13,000
        John Cochrane: 2,000
        Sumner: 1,000

        So, if you subtract one million of Krugman’s followers, he still leads all major academics. And no freshwater (let alone Austrian) economist is remotely close. As I see it, NYT + Nobel + willingness to engage in Jerry Springer-like behavior (relative to most academics) = popular appeal. This isn’t good for balanced discourse, though.

        Reply
        1. JCatalan

          I’m sure the causality goes both ways: his NYT platform allows him to reach out to more people, but he earned his NYT platform because he was already popular.

          Reply
          1. John S

            True. Ironically, Krugman’s a great example of Austrian entrepreneurship. He saw a void in accessible, high-level economic commentary in the media and filled it in the 90s (books, Fortune, and–crucially–Slate in the mid-90s). No other prominent academic bothered to compete in the punditry market, so he really had no competition for the bi-weekly NYT op-ed in 2000. Since then, it’s been a snowball rout (esp. after 2005, when the NYT blog started, and the crisis, for which he was perfectly positioned to match the anti-Wall Street mood). So his overwhelming dominance over current discourse is a result of early positioning (in a branding sense) and a perfect storm of events, rather than the pure strength of his ideas.

            It is kind of strange that a guy who rails against the dominance of elites has himself has benefited from the winner-take-all, superstar culture of globalization and the internet.

          2. John S

            Krugman’s “The Myth of Asia’s Miracle” (1994) was also crucial to building his reputation as a pundit after the subsequent Asian Financial Crisis (even though the E. Asian boom/bust could easily be told from an Austrian POV: decades of govt directed credit, subsidies, and tax breaks towards large exporters + implied backstops against bank and large enterprise failures).

            http://www.ft.com/intl/cms/b8268ffe-7572-11db-aea1-0000779e2340.pdf

          3. JCatalan

            That’s a good point. Krugman has also benefited from his above-par (for an economist) communication skills, specifically in writing. That’s another thing Milton Friedman had to his advantage.

  4. Blue Aurora

    I agree with you, Jonathan, that a case can easily be made about Paul Krugman being today’s Milton Friedman. I also agree with John S – he has a penchant of being maddeningly rude to anyone who doesn’t agree with him, and I can see how others find this to be off-putting. That stated…was there anyone who really qualified as the left-wing’s answer to Milton Friedman back in the 1960ies to 1980ies? I’ve heard some people suggest Abba Lerner or even Nicholas Kaldor, but I’m not quite sure…

    Reply
  5. John S

    I think there’s a good case that Krugman comes closest to Friedman re: academic contributions and econ popularization. But who comes the closest to being a modern day Friedman from an unabashedly free market point of view?

    Reply
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