Wednesday, February 11, 2009

Will Wilkinson's strange theory about Krugman

Will Wilkinson mocks Paul Krugman for not including political factors in his economic thinking:

Perhaps more than any economist of his caliber, Krugman understands that policy is largely determined by the outcome of the public opinion shoutfest. Yet this recognition seems to have no effect on Krugman’s ideas. Rather than bring inside his models disagreement over economic theory and the lack of political incentive to faithfully apply them, which would lead him to radically revise his prescriptions, Krugman leaves his textbook theory untouched and simply tries to win the shoutfest. Krugman’s often unbearable stridency seems to reflect an attempt to overcome the problems of democratic disagreement and incentive compatibility through sheer force of will–as if the deep reality of politics is no match for the rhetorical gifts and gold-plated reputation of Paul Freaking Krugman.
It's strange that Wilkinson espoused this theory just days after Krugman laid out the economic case for including the "Buy American" provision in the stimulus bill, and then rejected the provision for reasons of political economy. Here's how Krugman summarized his views the next day:
First of all: my piece was NOT an endorsement of protectionism — it was an explanation that there is an economic case for it, but also that there is a strong political economy case (which I consider dominant) against acting on that economic case. It was, in short, an attempt to be intellectually honest.
If Wilkinson's theory was right, then Krugman would have tried to "win the shoutfest" on the "Buy American" provision. But he didn't. Instead, Krugman essentially acknowledged that he couldn't win the shoutfest—that is, neither he nor anyone else would be able to stop the cycle of protectionist retaliations. Recognizing this, he concluded that the "political economy case" against the "Buy American" provision was dominant. It would be hard to come up with a better example of Krugman incorporating politics into his economic thinking. Krugman's treatment of the "Buy American" provision definitely disproves Wilkinson's theory about Krugman sticking to the pure economics and trying to "win the shoutfest." Which makes it all the more amusing that Wilkinson espoused his theory a mere 4 days after Krugman disproved it.

3 comments:

Don said...

It's actually wonderful and a step forward having an economist who understands that political economy is more important than economics.

Don the libertarian Democrat

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