This post has nothing to do with Piketty; it’s all about Krugman > Rothbard. Or, why Paul Krugman is a better economist than Murray Rothbard was. My argument might be somewhat controversial to a handful of Austrians, but it really should not be. K > R does not imply that Rothbard was a poor economist, or even that he was not a good economist. The fact is, however, that Krugman is an exceptional economist, and Rothbard was just “above average.” I’ve received some flak for making this argument in passing, here — I also once compared Krugman to Milton Friedman (not in beliefs, of course) —, and it might be worth it to provide some evidence.
Truth is, the evidence screams. Krugman was the main player in a theoretical breakthrough made during the 1960s and 70s: economies of scale can explain trade, without having to make any of the assumptions of Ricardian comparative advantage. He also was in the vanguard with his work on exchange rates and crises. And, while Krugman is not known as a macroeconomist, much of his work in this area is widely cited. In short, Krugman’s academic career is characterized by a reasonable amount of high quality output. And, a fraction of his work is responsible for a major change in worldview (what earned him his Nobel Memorial prize).
The quality of Rothbard’s output (as an economist) is less obvious. Man, Economy, and State is Rothbard’s magnum opus, but it’s hard to think of a single idea original to Rothbard that has been seen as a major theoretical breakthrough. One could argue that Rothbard, as a “heterodox” economist, was at a disadvantage. Maybe, but it’s just as hard to think of a major single idea original to Rothbard that has been widely accepted even within his own school of thought (e.g. monopoly theory). His best book is, perhaps, a great textbook, but as a piece of economic research it’s not comparable to Krugman’s work — even if it’s more than what the average economist accomplishes in a lifetime. Other than MES, Rothbard does not have another important book on theoretical economics, and no academic paper really comes to mind as impressive (in the context discussed in this post).
Here’s the test: would economics be worse off if either Rothbard or Krugman never existed? In the case of the former, economics wouldn’t even notice. In Krugman’s case, on the other hand, we would be short a very simple, straightforward, and clear model of the role of increasing returns in trade, and therefore short of the implications Krugman was able to draw thanks to his model. We would be just as unable to explain part of real world trade patterns, because we would still be trapped within the “Ricardian box.” Think of a production possibilities frontier, where the curve shows the limits to current economic thought — Krugman produced outside the curve, Rothbard produced inside the curve.
I am not disparaging Rothbard. I am not saying that Rothbard’s work is useless. I, in fact, enjoy reading Rothbard. (I enjoy reading Rothbard even though I disagree with many of his ideas; you should be able to do the same with Krugman — as I often do.) He, no less, was crucial for the revival of the Austrian school. He is seen as a major intellectual forebearer to many modern Austrian economists. He was clearly an important guy. But, he is simply not comparable to Krugman as an economist.
My Rothbard credentials
Neither is it because Rothbard is an Austrian. I think Hayek and Mises are comparable to Krugman. Mises’ socialist calculation problem was a major theoretical breakthrough, and it was very influential for the profession. It changed the terms of the socialist calculation debate — a controversy that is difficult to value from a modern point of view, but that at the time was very important. Hayek was, maybe, less influential (although, I don’t entirely agree), but his work on business cycle theory has influenced a large fraction of economists, and at one point was seen as important work in the vanguard (between ~1931–37). Hayek’s institutional economics also influenced modern institutionalism; not just the likes of Ostrom, Williamson, and Coase, but also economists from different traditions, such as Douglass North. It’s no surprise Hayek also won the Nobel Memorial prize; Mises probably would have won it had it been awarded earlier.
Wrong economics versus correct economics offers Rothbard no help here, either. Rothbard could often be very wrong, as evidenced by his critique of fractional reserve banking. But, that’s an eternal debate, and it’s better to go down a separate route. Krugman’s academic work is usually right, and it’s never entirely wrong. If you don’t appreciate Krugman’s trade theory, you just don’t know it. If you can’t think of anything of value in Krugman’s work, you simply haven’t read it. (And this is all too often the case with some of Krugman’s biggest haters.) This seems like a strong claim, but it doesn’t appear so strong when you read some of the common “internet” criticisms: (a) he assumes homogenous capital; (b) mathematics can’t tell us anything about economics; (c) perfect competition cannot exist in the real world (which somehow makes it useless as a tool, and it also, somehow, makes imperfect competition useless as a tool); et cetera. These are just throw away lines to dismiss a line of reasoning without having to really consider it or think about it. They are either very silly (i.e. the arguments v. math and monopolistic competition as tools), or they don’t change anything (i.e. you could, I suppose, explicitly include capital heterogeneity in your model — an infinite set of inputs? —, but one wonders what use that would be).
As an academic economist, Krugman’s major ideas are novel and visionary, he is relatively flexible in his argument (a relatively simple formal model, with generalized results), and usually right. Rothbard, on the other hand, was very often wrong, which is ironic given the status he ordained on “watertight” praxeology. Finally, ignoring right v. wrong, Rothbard did not produce a game-changing idea. His influence — on a very small number of economists — is constrained to popularizing theories that may have otherwise died, which has its value, but value which is incomparable to the value added by Krugman’s research.