Paul Krugman, pussycat

The Conscience of a Liberal is um…not that polemic.  It’s not that shrill.  There is an argument, to be sure, but the book has much more economic history than I had expected, and much more political history.

I’ve already blogged on The Great Compression; Krugman’s more detailed account in the book does emphasize the role of war, wage and price controls, and very high rates of taxation.  Normative questions aside, Krugman’s positive analysis isn’t as far from mine as I had been expecting from his blog post.

Some claims in the book are simply wrong: "…if there’s a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions."  (p.49)  Of course it was instead greater capital investment per head and better technology; if Krugman means relative status he needs to say so.  This conflation of relative and absolute magnitudes is a running problem throughout the first part of the book.

Most of all, today’s world — or even an extrapolated version thereof — isn’t nearly as like the Gilded Age as Krugman suggests.  Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don’t the economy is not at fault.

Krugman writes of "the vast right-wing conspiracy" repeatedly, and in these moments he verges on the shrill.  But Bush receives virtually no attention; perhaps Krugman is simply sick of writing about the guy

Conservatism rose in the 1980s in large part because the mid to late 1970s were such an economic mess and because American had lost so much relative status internationally.  Krugman won’t face up to that; instead he blames the Republican manipulation of "the race card," even though at the time racial tensions arguably were lower than ever before.  Of course in a relatively close election any single factor can be called decisive but I found this discussion well below the standards of the political science literature, even the popular political science literature.

Krugman calls for single-payer health insurance, tax hikes, and raising the minimum wage.  He doesn’t come off as all that radical.

His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves, and that’s all we hear on what’s wrong with government.  That’s the part of the book I find hardest to swallow, but if you’re asking "should I read this?" the answer is yes.

My prediction: For lack of red meat, this book won’t sell nearly as well as Naomi Klein’s latest.  At my Borders, circa 4 p.m., they hadn’t even unpacked it.  "Yeah, we have that in the back somewhere, I haven’t seen it yet." was what the guy said.

My question:  Is Paul Krugman willing to come out and simply pronounce: "Margaret Thatcher turned the UK around and for the better"?  If so, how does this square with his broader narrative?  And if not, why not?

Addendum: Here is Ed Glaeser’s review.


But it's relative status that makes us happy...

"It took until the late '60s for the rest of the world's industrial production to really catch up and that's when we started having problems."

If it is competition from other countries that is responsible for increasing income equality, why did the inequality not increase in Germany and Japan then or now. They must compete with each other as well as us.

As far as I can tell the Government keeps getting bigger and more in the form that Democrats want it to be. It seems to me that Democrats win every battle just not in as big chunks as they would want.

Check out the Amazon page for Conscience of a Liberal that Tyler links to.
Krugman's book is being paired with Robert Reich's latest for a discount price.
If you read some of Krugman's popular work circa 1997 you'll see why this incredibly funny.
Well, you'll see why it's mildly amusing, anyways.

He's a good writer but his policy recommendations leave something to be desired. Asia's recovered quite nicely without the neo-Keynesianism he was calling for in The Return Of Depression Economics. His critical thinking seems to switch off when it comes to his political views.

"Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don't the economy is not at fault."

Well yes, but so do relative standards of living. This is a very important issue but I feel that it's glossed over. I'd love to read a critique of the thesis I keep hearing that above a certain basic minimum level of income people don't get much happier.

What a surprise, Tyler suggests reading the book!

"But it's relative status that makes us happy..."

"Anyone who believes that is going to feel a lot of misery throughout life. . ."

Not if they focus their attention on lower-status people.


I had the same reaction. Why does Tyler recommend books that he thinks have sloppy/bad analysis? I'd rather not waste my time reading Krugman or Naomi Klein given the mediocre reviews and the bad arguments being made by the two. And yet Tyler recommends both! Someone explain.

"Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don't the economy is not at fault."

Well, yes. But there are improvements that can be made in the economy, perhaps even at some cost to mean absolute SOL, to improve the lowest SOLs in the country (and bring up the median!). And that's a trade-off which many of us are willing to make, and the argument over what's worth trading is a political one on which disagreement is both legitimate and healthy.

"The only problem with focusing on relative standards of living is that there is no government policy that can deal with the situation without harming absolute standards of living."

That's quite a claim. The wealthiest countries in the EU (barring Luxembourg and Ireland) are also the countries with the smallest gaps in standards of living. The US is richer but it's not yet clear what the reasons for this are. There are good reasons to suppose working hours (longer), the size of the market and labour flexibility have more to do with it than redistribution through high taxes.

And for what it's worth, we Nordics are happier than you Americans and it's not just because of our balmy weather.

"But it's relative status that makes us happy..."

Well, yes, there's a lot of research backing that up. The key to happiness appears to be good genes, good health, and being in the top 10% relative to the people you hang out with, in that order.

If absolute wealth meant anything to happiness, one wonders how anyone living before, say, 1800 could ever have been happy.


I don't understand why a book as silly as this and with all the errors you pointed out is worth reading.

We compete for sexual partners on a relative basis.

Doesn't union success lead to employers to substitute capital for labor, thus bringing about "greater capital investment per head and better technology"?

You write:

"His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves"

You understand the reason for this argument, don't you? It is to dodge the inability of the left to justify its redistribution proposition on its own merits.

Let's cut to the chase, here. Rich, poor, left, right, everybody is interested in some self-redistribution, and the state always makes a convenient vehicle. Don't tax you, don't tax me, tax that fellow behind the tree, etc, etc.

But it's relative status that makes us happy"
Yes ,if you are full of envy and resentment


Yes, if one accepts Krugman's line of reasoning, then one could reasonably propose that all incomes should be equal. Of course Krugman did not want to come to grips with that idea- it has already been found to be a disaster whereever it has been tried, but to be fair, the Soviet citizens only knew they were destitute because of the existence of the Western Alliance.

"Yet Western Europe's standard of living has dropped for 30 years versus the U.S., to the point that the Swedish would be America's poorest demographic group. Could it be that the wealthiest European nations are also homogenous? Italy, for instance, has a large difference between north and south."

The answer is that it's very complex. A number of factors explain each country's wealth. However, your basic point is wrong. Finland is quite homogenous but Sweden, for example, has a roughly similar number of foreign-born residents as the US and they are largely refugees, who are more difficult to assimilate. I would also point out that Sweden wouldn't be the US's poorest demographic group. I think you mean it would be one of the poorest states. That's true but yet it would be one of the happiest states too, with the longest holidays, best materity and paternity leave, least poverty (relative or absolute) and the list goes on.

Also, Southern Italy is not poorer because of race but because of trust.

Regardless, my only point was that the link between absolute wealth and inequality is not clear.

I haven't read the book and therefore can't contest most of Glaeser's points (and wouldn't be qualified to if they were about economics), except to note that he gets the title of the book badly and repeatedly wrong .

I recall that in PJ O'Rourke's book Eat the Rich he mentions a story in which some Swede confronted Milton Friedman with the fact that in Sweden there is almost no poverty. Friedman supposedly responded that among Americans of Swedish descent there is also almost no poverty (I read somewhere it is around 5%).

I wonder if this holds also for happiness.

The argument about relative vs. absolute status is misleading because there is no such thing as absolute status. When Tyler says "absolute status" he means relative status, but compared to people living in the past rather than people living in the present.

His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves

Why, exactly, would that be surprising, or even controversial?

That's the *norm* with governments throughout history, isn't it?

When the right-wingers are in the saddle, they're the ones best placed to do the hijacking. I think the emphasis is on "wealthy."

Republicans in power, as opposed to Republicans on campaign, are not in favor of the free market. They are in favor of steering government largesse to their contributors, friends, and families.

This is not to say that Democrats don't do the same thing; but the wealthy are more likely to be Republican, and the Republicans since 1981 have been better poised to do the hijacking.

I don't really understand your comment "Conservatism rose in the 1980s in large part because the mid to late 1970s were such an economic mess and because American had lost so much relative status internationally." American conservatism has been around as long as the country has, and re-emerged in the 1980s largely because of Reagan's election - itself the result of 1) inept monetary management under Miller and especially Burns (Nixon's appointee), 2) the backlash against increasingly relaxed social attitudes and particularly integration.

As a relatively liberal economist, I can only say that I find both parties fairly unappealing, but every time the Democrats do something stupid the Republicans do something so egregiously greedy, intolerant, jingoistic, or inhumane that they send me back into the arms of their less openly unattractive opponents.

Most people believe they are too smart too fall into the relative status trap or climb onto the hedonic treadmill.

But...Guess what.....

Even the vast majority of those who understand the research and psychology on this subject fall into the traps anyway.

“Being that Krugman is an economist, I am so far a little puzzled by his lack of economic reasoning in making his arguments. He's relying an awful lot on "numbers" and statistics of his choosing to assert causation.†

“†¦the empiricist in me has a hard time seeing the sound causal connection.†

Oh, the irony.

People are actually migrating towards more economic and social freedom.

I have no doubt that I could live like a king on what I make in a country like Vietnam or Belarus.

Two problems exist though, my job and the institutions that support it don't exist in those countries and if they did the government would take any economic surplus I gain for myself if I could work there. Not to mention nasty problems I'd have with kidnapping and robbery. The fact of the matter is I would rather be in the top 1% but since I'm going to be in the bottom 70% no matter where I go I'd rather live in a place where the bottom 70% has food.

Several commenters have hitched onto the "beautiful women" argument to explain relative-status striving, and the essential fallacy of trying to achieve social equality (that is, the societal top 10% will always get the top 10% of eligible mates).

It seems clear, [said the commenter, putting on his "Tyrone" (Tyryan?) cap] that Krugman is essentially arguing for a national beautiful-women creation program, so that all women are above average ("Operation Miss Lake Woebegone").

Perhaps this explains the strong Democratic support for genetic engineering research. They want to clone supermodels for social engineering purposes!

Already married,

Tyler Cowen writes: "the part of the book I find hardest to swallow... [Krugman's narrative that] wealthy right-wingers hijack the state to redistribute wealth to themselves."

But wait, I thought that that was one of the favorite and best (as in often accurate) right-wing narratives: that the growth of government that supposedly claims to be to help the poor, the farmers or the middle class should be opposed going to subsidize the upper middle class and wealthy special interests (e.g. agroindustry in agriculture in the US) or protected industry in the developing world.
If you abandon that narrative then where are you left? That strong organized economic interests do not try to take hold of the apparatus of government in their favor!?

My brother-in-law was born in Mexico. I have a hard time understanding his and his family's attitude about his wife's (my sister in law's) station in life.

Armando (not his real name) and his Mexican family seem overwhelmed by the prospect of ever being able to achieve our standard of living. He can't imagine supporting his wife in "the style to which she has become accustomed." He sees us as being "rich." His mother works only sporadically and urges Armando to apply for and accept welfare, food stamps, Medi-Cal, etc.

My husband and I, my mother and father-in-law, and my other sister in law, live in homes we own (with mortgages) - standard three bedroom, two bath homes (heck two of them are mobile homes!).

This American environment seems to make Armando miserable. He seems capable of working only at minimum wage jobs (so does my sister in law, for that matter). Yet his family's conditions are 100 times better than the adobe huts and dirt floors they had in Mexico. He seems to be in a perpetual state of despair about this.

I wonder how I can understand his hopelessness about achieving things in the US. It doesn't seem that difficult to me to succeed, but maybe growing up here skewed my outlook. I grew up sometimes poor, sometimes homeless, but never saw myself as "down and out." I always believed we could overcome whatever conditions we were in.

Can anyone relate to Armando's view of life, or explain it?

In the early 1970 I made the minimum wage. Today I make about twice the minimum wage.
With the exception of the availability of high tech gadgets and potential access to high tech medical care I am less well off in real terms than I was at that time.
By well off I mean that I could afford to buy a home then and it would be ludicrous for me to even try now. I could afford to buy a new car then with saved money, now I need a long term loan. I was able to pay for college from earnings then, that would be a laughable hope now. Then full coverage health insurance was a matter of a half days work, I don't think I have to mention the price of health insurance now.

I frequently read people use the phrase 'better off in real terms today'. I see little indication that those "real terms" relate to real people living in a real world.
Income inequality in real terms removes real money from the real economy that would otherwise have been put to real use by real people working real jobs.

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