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Posts Tagged ‘Paul Krugman’

EconomicPolicyJournal.com: Krugman: Trump’s Tweets on Trade and Tariffs are So Idiotic That I Am Going to Reference Them in My Textbooks

Posted by M. C. on May 8, 2019

“to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it.”

https://www.economicpolicyjournal.com/2019/05/krugman-trumps-tweets-on-trade-and.html

Paul Krugman nails it again. Trump is so bad on trade that he makes Krugman look like a sound economist.

PK writes in his new New York Times newsletter:

Trump’s tweets over the past few days may well be featured in future economics textbooks as perfect illustrations of how people misunderstand the basics of international trade and trade policy. In fact, I can pretty much guarantee it, since I’m the co-author of two textbooks.

First, Trump is still saying that because we run a $500 billion trade deficit with China — it’s actually $379 billion, but who’s counting? — that means we lose $500 billion. As some economists quickly pointed out, by this logic we all lose when we go shopping at our local supermarkets. After all, do the supermarkets buy anything from us in return? No!

Second, Trump keeps asserting that China is paying the tariffs he has already imposed. This could be true, if tariffs were driving Chinese prices down; in fact, the threat of more Chinese tariffs on U.S. agricultural exports is one reason grain prices have just plunged to a record low.

But enough time has passed for economists to look at the actual results of Trump’s trade policy so far, and the Chinese are not, in fact, paying the tariffs. As I wrote a couple of months ago, “to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it.”

So if you’re trying to make sense of what’s happening on trade, you should start with the basic point that Trump has no idea what he’s doing, that there isn’t any coherent U.S. policy goal.

RW

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Krugman Needs a Lesson on Why Truckers Are Paid Less Now than in the 1970s | Mises Wire

Posted by M. C. on April 19, 2019

https://mises.org/wire/krugman-needs-lesson-why-truckers-are-paid-less-now-1970s?utm_source=Mises+Institute+Subscriptions&utm_campaign=2bc55116d4-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-2bc55116d4-228343965

..In a recent column and blog post , Krugman lamented the fact that income for transfer truck drivers has fallen in the past 40 years, and he used that as “proof” that overall payment for labor services is lower than it was in the 1970s. He claims that the decline of organized labor in the USA is the main reason for this “injustice,” in which (according to Krugman) almost all of the productivity gains in the economy have accrued to a tiny number of people, thus, appealing to the urban legend, “The rich get richer, and the poor get poorer.) He writes:

The decline of unions , which covered a quarter of private-sector workers in 1973 but only 6 percent now, may not be as obviously political. But other countries haven’t seen the same kind of decline. Canada is as unionized now as the U.S. was in 1973; in the Nordic nations unions cover two-thirds of the work force. What made America exceptional was a political environment deeply hostile to labor organizing and friendly toward union-busting employers.

And the decline of unions has made a huge difference. Consider the case of trucking, which used to be a good job but now pays a third less than it did in the 1970s, with terrible working conditions. What made the difference? De-unionization was a big part of the story.

There is much here not to agree with the various laws of economics, but this analysis will be limited to Krugman’s last paragraph about truck driving, as his statement about compensation for truck drivers demonstrates a stunning lack of understanding of what economists call marginal utility and the discounted marginal revenue product, or DMRP. (Murray Rothbard refers to it as discounted marginal value product, or DMVP.) As I will point out, Krugman’s errors are not trivial; they are fundamental to the understanding of economic theory itself.

In explaining the concept of DMVP, Rothbard writes: “…the marginal value product of a factor service unit is equal to its marginal physical product times the price of that product.” Rothbard further points out that as the number of available factors increases, its DMVP, naturally, will fall, owing to the Law of Diminishing Returns to factors of production and the decline in marginal revenue as supply of the final good increases.

What does this have to do with Krugman’s assessment of the decline in pay of American truck drivers? First, we have to remember that Krugman is engaging in an “apples and oranges” comparing of trucking 40 years ago and trucking today. The trucking industry is 1979 was much smaller than it is today due to the fact that the Interstate Commerce Commission tightly controlled the industry by severely limiting routes trucks could use and suppressing competition between trucking firms.

Business Insider notes that before the early 1980s, the trucking industry was much smaller than it is now, as the government restricted industry growth:

In 1935, the Interstate Commerce Commission (ICC) became the oversight board for the trucking industry. A law also passed that limited the number of new entrants to the trucking industry.

Trucking companies that were already in existence could continue operation, but new carriers “found it extremely difficult to get certificates,” wrote Thomas Gale Moore, then a senior fellow at Stanford University’s conservative public policy think tank Hoover Institution.

The legislation set forth other limitations, according to Moore. Companies had to file their rates with the ICC thirty days before they came into effect. Other companies or individual carriers were allowed to see those rates, and would often protest the rates if they found them low enough that they would undercut their own business. The ICC could then suspend those rates as it inspected them.

Truckers also had to buy routes, usually from firms that already had the authority to operate on those routes, and it often led to inefficiencies. Even if a trucker had the authority to transport, say, produce from Sacramento to Seattle, he or she might lack the authority to carry anything on the return trip.

To put it another way, the ICC regulated trucking in the same way it did passenger airlines and railroads and, not surprisingly, many of the gains fell to the industry’s unionized workforce. Writes Business Insider:

These route regulations were jacking up the price of goods. Certain goods exempt from regulation moved at rates 20% to 40% below similar products that were regulated. Moore noted that rates for “cooked poultry” were 50% higher than rates for “fresh dressed poultry.”

However, the average truck driver during this era was well-paid. It was the sort of high-quality, blue-collar job that many lament doesn’t exist today. In 1977, the mean earnings of a unionized truck driver stood at $96,552 in 2018 dollars. At least 80% of drivers were unionized at this time.

That arrangement ended in 1980 with the passage of the Motor Carrier Act, which ended ICC oversight, allowed much more competition in the industry, along with ending the ICC’s near-prohibition on new industry entrants. Not surprisingly, the unions and the trucking firms themselves opposed the law. (When running for president in 1980, Ronald Reagan gained the endorsement of the Teamsters Union by promising to delay carrying out deregulation for two years.)

As Business Insider demonstrates, the lifting of restrictions led to a doubling of trucking firms within a decade and hauling prices dropped dramatically, leading to lower consumer prices and much more availability of consumer goods. None of this is surprising. Business Insider estimates that overall trucking costs have fallen (in real terms) more than 40 percent since 1980:

Truckload shipment rates fell by about 25%, adjusted for inflation, from 1977 to 1982. Logistics (half of which are trucking costs) used to account for 16% of our country’s annual expenditure. Even though we’re shipping more goods than ever, it’s now down to less than 8%.

Of course, the explosion of new trucking firms meant new demand for drivers, but with deregulation also came a lessening of the restrictions on people becoming drivers. When the industry was under tight government control, it operated as a legal cartel supervised by regulators “captured” by industry executives and organized labor. Owners and employees received monopoly rents that simply would not have existed in a competitive industry.

The addition of new factors of production into trucking also has had the effect of lowering the DMVP of drivers, which means truck-driving pay is less in real terms than it was when the number of drivers was artificially limited by self-serving regulation. To put it another way, while marginal compensation to drivers is less than pay in the past, total compensation to factors is greater. This is simple economics at work.

Although Krugman does not bring the DMVP, he clearly confuses total compensation with marginal compensation and is extrapolating the decline in truck driving pay to the entire workforce. Thus, he presents a picture in which real American wages have fallen in the last four decades, which implies that American workers have a lower standard of living than they did in the 1970s. There can be no other meaning to Krugman’s claims.

Mark J. Perry of the American Enterprise Institute, however, notes that contrary to what Krugman is saying, living standards for American workers are much higher than they were in the “golden days” of regulated government cartels. This should surprise no one, as when government regulations artificially restricting productivity are lifted, the economy becomes more productive, which means that consumers are the main beneficiaries. It would seem, then, that Krugman is arguing for a return to the era when entire industries were regulated cartels or, like AT&T before its breakup and telecommunications deregulation, had government-protected monopolies.

Krugman is partially correct on one point, and that is regarding the decline of labor unions in the United States. I say partially correct because the Teamsters Union was a powerful force in keeping the trucking industry much smaller and less productive than it is now, with union members capturing much of the monopoly rents created by the regulatory arrangements. However, if Krugman is claiming that the Teamsters could somehow have managed to keep the same pay levels for truck drivers and the industry also become more productive and cost-efficient, he is not telling the truth…

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EconomicPolicyJournal.com: Krugman: Use Taxation to Do Hidden Regulation

Posted by M. C. on March 12, 2019

https://www.economicpolicyjournal.com/2019/03/krugman-use-taxation-to-do-hidden.html

In his latest New York Times column, the sneaky lefty, Paul Krugman, let his guard down and explained that taxation could be used as a sneaky way to regulate:

I guess there’s some case for using taxes rather than regulations to control pollution, since you won’t be telling people directly what to do.

What does he mean by pollution? Like Starbucks, he appears to hold the view that plastic straws from the United States are suffocating the ocean. He writes:

Plastic straws really are a source of ocean pollution.

To understand how misguided this Krugman sentence is, see: The Idiotic Thinking Behind the Elimination of Plastic Straws By Starbucks.

Krugman is nothing but an apologist for the expanding state.

RW

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Who is Paying the Steel Tariff?

Posted by M. C. on December 13, 2018

The Masochist’s Tax

http://www.economicpolicyjournal.com/2018/12/who-is-paying-steel-tariff.html

Some are claiming that the Chinese are absorbing the price of the steel tariff imposed by President Trump.

But the data show otherwise.

You have to watch Paul Krugman carefully because he can be a Lefty sneak with distorted data but he presents truth here:

Paul Krugman

@paulkrugman

A note for Tariff Man, who thinks foreigners pay tariffs. Here are steel prices in the US and world export markets as the Trump tariff went into effect, from http://steelbenchmarker.com/files/history.pdf  Kind of looks as if Americans paid the tariff, doesn’t it?

RW 

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EconomicPolicyJournal.com: Key Snippets From Paul Krugman’s Interview With Tyler Cowen

Posted by M. C. on October 11, 2018

A moment of self discovery. This guy is a Nobel winner. (So were Yassir Arrafat and Obama, both for the peace prize. But that is another story).

http://www.economicpolicyjournal.com/2018/10/key-snippets-from-paul-krugmans.html#more

Recently, Tyler Cowen sat down to interview Paul Krugman.  Here are actual key snippets from Krugman replies to Cowen questions:

COWEN: The New York Times recently referred to a new movement. They called it “hipster antitrust.” The notion, for instance, that maybe Amazon was bad for a more general commercial ecosystem of publishing and retail. Do you have an opinion on hipster antitrust?

KRUGMAN: [sighs] We need something. I haven’t actually looked at the hipster antitrust…

COWEN: Let me throw out a number of ways we might do that, and tell me what you think. Universal basic income.

KRUGMAN: I’m still debating with myself over UBI…
—-
COWEN: Ending the war on drugs and moving to either decriminalization or legalization. Would it help our cities or hurt them?

KRUGMAN: It probably would help, but I’ve put in no thought at all on drugs. I’ve just done no homework. Read the rest of this entry »

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Can We Trust Experts? – LewRockwell

Posted by M. C. on July 25, 2018

https://www.lewrockwell.com/2018/07/walter-e-williams/can-we-trust-experts/

By 

Former Treasury Secretary Larry Summers predicted that if Donald Trump were elected, there would be a protracted recession within 18 months. Heeding its experts, a month before the election, The Washington Post ran an editorial with the headline “A President Trump could destroy the world economy.” …

Nobel Prize-winning economist and New York Times columnist Paul Krugman warned that the world was “very probably looking at a global recession, with no end in sight.” By the way, Krugman has been so wrong in so many of his economic predictions, but that doesn’t stop him from making more shameless predictions… Read the rest of this entry »

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EconomicPolicyJournal.com: Is Paul Krugman the New Intellectual Front for Donald Trump?

Posted by M. C. on May 12, 2018

You have to talk out of both sides of your mouth when you are desperate to make sense.

Nothing spells CONTROL like KRUGMAN.

http://www.economicpolicyjournal.com/2018/05/is-paul-krugman-intellectual-front-for.html

Robert Wenzel

New York Times columnist Paul Krugman has gone from bad to worse. During the current period where the stock market and cotton are high and the living is easy with unemployment low, straight Keynesian theory would call for a shrinkage in government spending. But not Paulie K.
He tells his readers at the Gray Lady:

The bottom line here is that the case for aggressive monetary and, when necessary, fiscal policies to sustain demand is much stronger than we used to think. Errors like the turn to austerity and the ECB’s 2011 rate hike were much bigger mistakes than the previous doctrine allowed for; premature Fed rate hikes would be a bigger sin than even the Fed seems to realize now…

On that view, the failure to supply enough demand after 2008 imposed an enormous cost, which we can never regain. And looking forward, the risks of being too loose versus too tight are hugely asymmetric: letting the economy slump again will again impose big costs that are never made up, while running it hot won’t store up any meaningful trouble for the future.

Got that? He is trying to nudge the Federal Reserve to go slow on interest rate hikes.
This is straight out Donald Trump theory. See: Fed Chairman Finalist Leaks His Oval Office Conversation With Trump.
Krugman should be embarrassed. He has become the intellectual front for wacky Trump economic thinking.

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Paul Krugman: Evangelist of Political Salvation

Posted by M. C. on December 30, 2017

https://www.garynorth.com/public/17550.cfm

 Paul Krugman won the Nobel Prize in economics. He is also the resident economist for The New York Times.

In his latest article, he laments the power of Donald Trump and the Republican Party. He tries to offer eschatological hope. He assures his readers that there is hope politically because the Democrats may eventually come back into power. But this is only hope, he says. The United States of America is on the path to becoming a Third World tyranny. He actually believes this.

I want to stress this fact: he is as sound a political analyst as he is a sound economist

 Bill Clinton had majorities in both houses of Congress in the first half of his first term. Nothing radical came of this. Obama had the same thing in the first half of his first term. Only ObamaCare came out of this. That anybody on the Left could still believe in political salvation by the Democratic Party is mind-boggling. But Krugman does.

Bipartisanship is why I don’t worry much about the looming triumph of the Democrats in the election of 2020. They will no doubt raise taxes marginally in 2021. They will unquestionably run massive deficits. But the government already runs massive deficits. Congress will extend unemployment insurance to millions of unemployed Americans who lose their jobs in the recession. But there will be no fundamental economic changes. The unfunded liabilities of Medicare and Social Security will increase, just as they will this year. The more things change, the more they stay the same.

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Deflation Scare Tactics

Posted by M. C. on October 20, 2014

War Street Journal red alert. Deflation is raising its ugly head.

We need 2% inflation. Why?

One of the basic tenets of free market economics is the market responds to demand by increasing production. This is accomplished by improving processes and efficiency. The end result is prices go down and more products are sold.

The WSJ via Paul Krugman, the New York Times resident Keynesian, says this is bad.

Krugman has three reasons to be wary of falling prices

Falling prices cause people to hold off on purchases, waiting for prices to further decrease.

Deflation makes the dollar worth more causing debtors to pay off debts with higher value dollars.

Wages decrease with prices.

Baloney. Read the rest of this entry »

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