Read Kinsley's take
on Krugman's response
What kind of fool gets into a public argument about economics with Paul
Krugman? In the April Atlantic, there is a column by me
alarm about the possible return of debilitating inflation, or even
hyperinflation, as the only way that a government unable either to cut
spending or raise taxes will be able to reduce the burden of the
national debt. I acknowledged that all the big-name economists,
including Krugman, think differently. Writing in his New York Times blog
, Krugman demonstrates that at least I got that part right.
Krugman says that I mistakenly conflate inflation and hyperinflation,
although "textbook economics...makes a real distinction" between the two.
I will confess that I was not aware of this distinction. I thought
hyperinflation was inflation out-of-control. Mea culpa. However:
(1) Krugman should stop bullying people with accusations of economic
ignorance. I would never pretend to know a tenth of economics Paul
knows. But if he means, in calling this distinction a matter of
"textbook economics [subtext: you idiot]," that economic textbooks make
this distinction, he is wrong. Or at least no such distinction between
inflation and hyperinflation is made, despite an extensive discussion
of inflation, in the leading economics textbook, by Harvard Professor
(2) Krugman's definition of hyperinflation--"when
governments can't either raise taxes or borrow to pay for their
spending, they sometimes turn to the printing press"--is more or less
precisely what I wrote that I was afraid of. I suppose there's a
difference between the government printing money to pay off its debts
(Krugman's definition) and the government printing money to reduce the
real value of its debts (my fear). But not much of one.
Krugman, Brad DeLong
, Matt Yglesias
and others make the point that
there is no current economic evidence of inflation on on the horizon. I
conceded as much in the original piece. But using Krugman's definition,
hyperinflation is the result of explicit policy choices by public
officials. There is a "real distinction" between this and inflation
, which results naturally from the interplay of economic
forces. Therefore, the fact that there is no sign of inflation today
says very little about whether there may be hyperinflation
tomorrow.There are reasons to worry that our political leaders may opt
for inflation even if there is no economic evidence of it happening
naturally. (Of course the interplay of economic forces can force the
hand of public officials. But if we go down this road, we are muddying
that key distinction between hyperinflation and inflation.)
have been waiting for Paul Krugman to tell me how we are going to
handle the debt, once we get this recession out of the way. No, really.
There's no economist whose judgment I trust more. (About economics,
that is.) I've been all for the stimulus and the jobs bill and even, I
guess, the sundry bailouts. But don't we at some point have to start
paying the money back? And how are we going to do that? Krugman's
failure (unless I've missed it) to give us an answer to that question
is one of the things that makes me worry.
A final word to Matt Yglesias, who thinks my problem
is "thinking too moralistically about the economy," because I express
doubt that we can escape without pain from the dilemma we find
ourselves in. Obviously (or perhaps not) this is a prediction and not a
hope. I am not in favor of pain. I just don't see any way to avoid it.
Yglesias apparently believes that we can escape our fiscal dilemma
without pain. I would like to know how. And if there is such a way, why
have we denied ourselves for so long? Why do we ever bother to show
fiscal restraint? Why have taxes at all? Why deny ourselves anything
money can buy? If $15 trillion in debt can be a freebie, why not $30
trillion or $60 trillion?
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mkinsley at theatlantic dot com.
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