,ON ,PAUL ,KRUGMAN 

,PEOPLE 3 

,AU?OR 3 ,IA9 ,MC,KAY 

,TEXT 3 

,AS %\LD BE WELL KN[N BY N[1 ,PAUL ,KRUGMAN WON ?IS YE>'S 7NON-7,NOBEL PRIZE 9 ECONOMICS = HIS WORK ON TRADE !ORY4 

,KRUGMAN IS PRETTY MU* Y\R /&>D NEO-CLASSICAL ,KEYNESIAN1 BUT HE IS LEFT-(-C5T] & S9CE ! #b ELECTION CAMPAIGN HAS SP5T MU* TIME EXPOS+ /RUGGLE ! ,BU% ,ADM9I/RATION & ITS 5ABL]S4 ,= EXAMPLE1 :ILE 9 ! #a#i#iS HE REFUT$ RI<T-W+ ATTEMPTS TO %[ ?AT 9EQUALITY WAS NOT RIS+ 9 ,AM]ICA :ILE ?9K+ ?AT NO?+ C\LD REALLY BE DONE AB\T IT1 9 ! #bS HE HAS RAIS$ ADDRESS+ ?IS ISSUE TO =EFRONT4 

,UNSURPRIS+LY1 GIV5 ?IS1 ! AW>D+ ( ! PRIZE HAS PROV$ SOME RI<T-W+] TO PROCLAIM HIM AS A 0LEFT-W+ HACK0 & AN 0ANTI-CAPITALI/01 EV5 A 0SOCIALI/01 & :+E AB\T ! POLITICAL BIASES ( ! ,SW$I% ,C5TRAL ,BANK - OBVI\SLY ONLY 7NON-7,NOBEL PRIZES TO RI<T-W+]S C\NT6 ,?IS GNA%+ ( TEE? BY ! RI<T HAS1 RI<TLY1 BE5 A S\RCE ( MU* AMUSEM5T ON ! LEFT4 

,P]SONALLY1 ,I CAN ?9K ( WORSE PEOPLE TO GIVE IT TOO - & SO HAVE ! ,SW$ES4 ,SO WE HAVE ,MILTON ,FRI$MAN & VON ,HAYEK 0HONOR$0 9 ! #a#i#gS :ILE ,JOAN ,ROB9SON1 ,NI*OLAS ,KALDOR & ,MI*AL ,KALECKI W]E IGNOR$ 7BUT1 !N1 !Y ALL REJECT$ NEO-CLASSICAL ECONOMICS & :]E1 TO V>Y+ DEGREES1 SOCIALI/S74 ,KALDOR1 = EXAMPLE1 DE/ROY$ VON ,HAYEK'S BUS9ESS CYCLE !ORY 7:AT HE O/5SIBLY GOT ! PRIZE =7 TWICE 9 ! #a#i#cS1 BE=E MOV+ ON TO BE ! SC\RGE ( ,FRI$MAN'S ,MONET>ISM4 ,KALECKI ONLY MANAG$ TO 9DEP5D5TLY DEVELOP ! KEY CONCEPTS ( ,KEYNES ,G5]AL ,!ORY & PUBLI%$ FIR/4 ,ROB9SON EXPOS$ KEY PROBLEMS ) NEO-CLASSICAL ECONOMICS1 NOT LEA/ ! PROBLEMS ) M>G9AL PRODUCTIVITY !ORY4 ,A FEW YE>S BACK1 !Y GAVE IT TO ,$MUND ,PHELPS :OSE IDEAS HAVE BE5 US$ TO TAME ! WORK+ CLASS VIA HIS NOTION ( ! NON-ACCEL]AT+ 9FLATION RATE ( UNEMPLOYM5T 7!Y %\LD HAVE GIV5 IT TO ,K>L ,M>X1 AS IT CLE>LY E*O$ HIS ANALYSIS1 OR ,KALECKI :O PR$ICT$ ! IMPACT ( FULL EMPLOYM5T 9 ]OD+ CAPITALI/ P[] 9 ! WORKPLACE74 

,9 T]MS ( HIS TRADE !ORY WORK1 IT IS ROOT$ 9 ! 7FLAW$7 NEO-CLASSICAL MA9/REAM4 ,AS ,/EVE ,KE5 NOT$ 9 PASS+1 0! REPRES5TATIVE AG5T WAS A KLUDGE 9V5T$ 444 TO GET >\ND ! PROBLEM ?AT1 9 G5]AL1 ! PREF]5CES ( 9DIVIDUALS C\LD NOT BE AGGREGAT$ 444 REPRES5TATIVE AG5T MACROECONOMICS AM\NTS TO ASSUM+ ?AT ! ECONOMY CONSI/S ( A S+LE 9DIVIDUAL1 PRODUC+ & CONSUM+ A S+LE COMMODITY4 ,H[EV] COMPLEX MI<T BE ! REASON+ US$ BY SU* AFICIONADOS AS ,PAUL ,KRUGMAN1 ! REALM ( APPLICABILITY ( ?IS !ORY IS ?AT ( ,ROB9SON ,CRUSOE1 LIV+ (F COCONUTS BE=E ! >RIVAL ( ,MAN ,FRIDAY40 7,DEBUNK+ ,ECONOMICS1 P4 #b#a#b74 ,ONLY RADICAL ECONOMI/ ,/EPH5 ,A4 ,M>GL9 79 HIS NEW REC5T BOOK ,! ,DISMAL ,SCI5CE71 AS F> AS ,I AM AW>E1 HAS PRES5T$ A ?\<T EXP]IM5T ON H[ FREE TRADE W\LD IMPACT ON AN ECONOMY ) CLASSES & IT IS WOR? READ+4 

,GIV5 H[ FREE TRADE BAS$ ON ,RIC>DO'S !ORY ( COMP>ATIVE ADVANTAGE IS ONE ( ! MO/ POPUL> IDEOLOGICAL POSITIONS ( MA9/REAM ECONOMICS1 IT MAY COME AS A SURPRISE H[ FEW 7NONE67 C\NTRIES HAVE 9DU/RIALIZ$ BY MEANS ( IT 7& ,I'M 9CLUD+ ,HONG ,KONG74 ,9 ?IS1 ! RELATIVELY UNKN[N ,F$]ICK ,LI/ HAS BE5 REPEAT$LY PROV5 TO BE RI<T4 ,AS SU*1 ,KRUGMAN'S WORK1 H[EV] 9NOVATORY IT IS1 IS BUILD+ UPON WEAK F\NDATIONS4 

,KRUGMAN REALLY IS PRETTY MU* A MA9/REAM NEO-CLASSICAL ECONOMI/4 ,?IS CAN BE SE5 :5 HE NOTES 9 HIS 9TRODUCTION TO ECONOMIC TEXTBOOK 0! PREVAL5CE ( OLIGOPOLY0 & ADMITS IT 0IS F> MORE COMMON ?AN EI!R P]FECT COMPETITION OR MONOPOLY40 ,H[EV]1 0! ANALYSIS ( OLIGOPOLY TURNS \T TO PRES5T SOME PUZZLES = :I* !Y IS NO EASY SOLUTION0 AS 0! ANALYSIS ( OLIGOPOLY IS F> MORE DIFFICULT & MESSY ?AN ?AT ( P]FECT COMPETITION40 ,:Y8 0,:5 WE TRY TO ANALYZE OLIGOPOLY1 ! ECONOMI/S USUAL WAY ( ?9K+ -- ASK+ H[ SELF-9T]E/$ 9DIVIDUALS W\LD BEHAVE1 !N ANALYZ+ !IR 9T]ACTION -- DOES NOT WORK AS WELL AS WE MI<T HOPE40 ,RE/ ASSUR$1 ?\<1 !RE IS NOT NE$ TO RECONSID] ! 0USUAL WAY0 ( ECONOMIC ANALYSIS TO ALL[ IT TO ANALYZE SOME?+ AS M>G9AL AS ! MO/ COMMON M>KET =M =1 BY LUCK1 0! 9DU/RY BEHAVES 'ALMO/' AS IF IT W]E P]FECTLY COMPETITIVE40 7,PAUL ,KRUGMAN & ,ROB9 ,WELLS1 ,ECONOMICS1 P4 #c#h#c1 P4 #cfe & P4 #c#h#c7 ,:I* IS H&Y1 TO SAY ! LEA/4 

,:I* BR+S ME TO :Y ,I DECID$ TO WRITE ?IS BLOG 5TRY4 ,A FEW YE>S AGO1 ,I READ ,KRUGMAN'S DISMISSIVE REVIEW ( ,WILLIAM ,B4 ,GREID]'S ,ONE ,WORLD1 ,READY OR ,NOT3 ,! ,MANIC ,LOGIC ( ,GLOBAL ,CAPITALISM 7,! ,ACCID5TAL ,!ORI/74 ,HE USES IT TO 0ILLU/RATE A P>ADOX3 ,Y\ CAN'T DO S]I\S ECONOMICS UNLESS Y\ >E WILL+ TO BE PLAYFUL4 ,ECONOMIC !ORY IS NOT A COLLECTION ( DICTUMS LAID D[N BY POMP\S AU?ORITY FIGURES4 ,MA9LY1 IT IS A M5AG]IE ( ?\<T EXP]IM5TS - P>ABLES1 IF Y\ LIKE - ?AT >E 9T5D$ TO CAPTURE ! LOGIC ( ECONOMIC PROCESSES 9 A SIMPLIFI$ WAY40 ,& HE PRES5TS ONE3 

0,IMAG9E AN ECONOMY ?AT PRODUCES ONLY TWO ?+S3 HOT DOGS & BUNS4 ,CONSUM]S 9 ?IS ECONOMY 9SI/ ?AT EV]Y HOT DOG COME ) A BUN1 & VICE V]SA4 ,& LABOR IS ! ONLY 9PUT TO PRODUCTION 444 ,SUPPOSE ?AT \R ECONOMY 9ITIALLY EMPLOYS #ab MILLION WORK]S1 :I* CORRESPONDS MORE OR LESS TO FULL EMPLOYM5T 444 ,N[1 SUPPOSE ?AT IMPROV$ TE*NOLOGY ALL[S A WORK] TO PRODUCE A HOT DOG 9 ONE DAY RA!R ?AN TWO4 ,& SUPPOSE ?AT ! ECONOMY MAKES USE ( ?IS 9CREAS$ PRODUCTIVITY TO 9CREASE CONSUMPTION 444 ,?IS REQUIRES SOME REALLOCATION ( LABOR1 ) ONLY #d MILLION WORK]S N[ PRODUC+ HOT DOGS1 #h MILLION PRODUC+ BUNS4 

0,!N A FAM\S J\RNALI/ >RIVES ON ! SC5E4 ,HE TAKES A LOOK AT REC5T HI/ORY & DECL>ES ?AT SOME?+ T]RIBLE HAS HAPP5$3 ,TW5TY MILLION HOT-DOG JOBS HAVE BE5 DE/ROY$4 ,:5 HE LOOKS DEEP] 9TO ! MATT]1 HE DISCOV]S ?AT ! \TPUT ( HOT DOGS HAS ACTUALLY RIS5 #cc P]C5T1 YET EMPLOYM5T HAS DECL9$ #cc P]C5T 444 ,GLOBAL CAPITALISM1 9 %ORT1 IS HURTL+ T[>D CRISIS4 ,HE WRITES UP HIS AL>M+ CONCLUSIONS 9 A #d#g#c-PAGE BOOK2 FULL ( />TL+ FACTS 444 & PUNCTUAT$ ) OCCASIONAL B>B$ REM>KS AB\T ! BL9K]$ VISION ( CONV5TIONAL ECONOMI/S 444 

0,MEAN:ILE1 ECONOMI/S >E A BIT BEMUS$1 BECAUSE !Y CAN'T QUITE UND]/& HIS PO9T4 ,YES1 TE*NOLOGICAL *ANGE HAS L$ TO A %IFT 9 ! 9DU/RIAL /RUCTURE ( EMPLOYM5T4 ,BUT !RE HAS BE5 NO NET JOB LOSS 444 ,9 \R HYPO!TICAL ECONOMY IT IS - OR %\LD BE - OBVI\S ?AT R$UC+ ! NUMB] ( WORK]S IT TAKES TO MAKE A HOT DOG R$UCES ! NUMB] ( JOBS 9 ! HOT-DOG SECTOR BUT CREATES AN EQUAL NUMB] 9 ! BUN SECTOR1 & VICE V]SA40 

,FROM ?IS P>ABLE1 ?IS ?\<T EXP]IM5T1 ,KRUGMAN DRAWS ! OBVI\S CONCLUSION ?AT TE*NOLOGICAL *ANGE NE$ NOT BE FE>$1 ?AT ! M>KET WILL 5SURE ?AT WORK]S >E R$EPLOY$ TO NEW 9DU/RIES4 ,HE DISMISSES ! OBJECTION ?AT ?IS 0?\<T EXP]IM5T .<IS.> TOO SIMPLE TO TELL US ANY?+ AB\T ! REAL WORLD0 BY >GU+ ?AT 0IF = 'HOT DOGS' Y\ SUB/ITUTE 'MANUFACTURES' & = 'BUNS' Y\ SUB/ITUTE 'S]VICES1' MY /ORY ACTUALLY LOOKS QUITE A LOT LIKE ! HI/ORY ( ! ,U4,S4 ECONOMY OV] ! PA/ G5]ATION40 ,HE PROCLAIMS ?AT ,GREID]'S MI/AKE WAS 0SY/EMATICALLY CUT.<T+.> HIMSELF (F FROM ! K9D ( ADVICE & CRITICISM ?AT C\LD HAVE SAV$ HIM FROM HIMSELF4 ,HIS ACKN[L$GM5TS CONSPICU\SLY DO NOT 9CLUDE ANY COMPET5T ECONOMI/S 444 ,TO TE/-DRIVE AN IDEA ) SEEM+LY TRIVIAL ?\<T EXP]IM5TS1 ) HYPO!TICAL /ORIES AB\T SIMPLIFI$ ECONOMIES PRODUC+ HOT DOGS & BUNS1 W\LD BE B5EA? HIS DIGNITY4 ,& IT IS PRECISELY BECAUSE HE IS SO S]I\S ?AT HIS IDEAS >E SO FOOLI%40 ,H5CE ! CONCLUSION3 0,IT IS AN 9SI<T ?AT Y\ CAN GA9 ONLY BY PLAY+ ) HYPO!TICAL ECONOMIES - BY 5GAG+ 9 ?\<T EXP]IM5TS40 

,I WAS NOT CONV9C$ AT ALL :5 ,I FIR/ READ ?IS A FEW YE>S BACK4 ,I /ILL REJECT IT & S9CE ,KRUGMAN IS 9 ! NEWS1 ,I ?\<T N[ W\LD BE A GOOD TIME TO ACTUALLY WRITE IT D[N4 ,I DO NOT D5Y ! IMPORTANCE ( ?\<T EXP]IM5TS & SIMPLIFI$ MODELS1 BUT IF Y\ SIMPLIFY REALITY TOO MU* !N ANY CONCLUSIONS TO BE DRAWN FROM ! EXP]IM5T WILL BE DEEPLY FLAW$4 ,SIMPLY PUT1 AN UNREALI/IC MODEL WILL PRODUCE MISLEAD+ RESULTS4 

,MY OBJECTIONS LIE 9 ! OBVI\S FACT ?AT ,KRUGMAN'S LITTLE /ORY IGNORES TIME1 CLASS & M>KET P[]4 ,?IS IS NOT ?AT UNEXPECT$1 GIV5 ?AT NEO-CLASSICAL ECONOMICS WAS DEVELOP$ TO COMBAT SOCIALI/ ECONOMIC ANALYSIS & SO FOCUS$ ON 9DIVIDUALS RA!R ?AN 9/ITUTIONS & SOCIAL RELATION%IPS4 ,9/EAD ( ! CLASSICAL !ORY ( VALUE1 :I* WAS UTILIZ$ TO %[ ! DYNAMICS ( AN ECONOMY OV] TIME 7& 9ADV]T5TLY %[$ ?AT LABOR WAS EXPLOIT$ BY CAPITAL71 NEO-CLASSICAL ECONOMICS />T$ ) A FIX$ AM\NT ( GOODS & SO TOOK A SNAP%OT ( ! ECONOMY AS ITS />T+ PO9T4 ,) PRODUCTION IGNOR$1 PRICE WAS DET]M9$ BY EFFECTIVE DEM& 7SOME?+ CLASSICAL ECONOMICS DID NOT D5Y HAPP5$ 9 ! %ORT T]M74 ,SO1 NEO-CLASSICAL ECONOMICS IS BAS$ ON IGNOR+ TIME - AT BE/ IT COMP>ES TWO DIFF]5T SNAP%OTS :ILE IGNOR+ :AT HAPP5$ 9 BETWE54 

,?IS IMPACTS 9TO ! NEXT TWO IGNOR$ FACTORS1 CLASS & M>KET P[]4 ,KRUGMAN'S MODEL1 AS IS CLE>1 IS BAS$ ON WORK]S ) NO M5TION ( BOSSES4 ,! ASSUMPTION IS ?AT A CAPITALI/ ECONOMY IS ONE ( SELF-EMPLOYM5T1 ONE )\T CAPITALI/S6 ,GIV5 ?AT !RE >E CLASSES1 ) RETURNS TO BO? CAPITAL & LABOR1 9 ANY REAL CAPITALI/ ECONOMY1 ?IS SIMPLIFICATION BECOMES SIMPLY MISLEAD+4 ,PRODUCTIVITY GA9S1 REG>DLESS ( NEO-CLASSICAL ASSUMPTIONS1 NE$ NOT BE %>$ EQUALLY BETWE5 CLASSES4 ,!RE IS A /RUGGLE OV] :O GETS :AT4 

,?IS BR+S ME TO MY NEXT OBJECTION3 ! IGNOR+ ( M>KET P[]4 ,MASS UNEMPLOYM5T 9 AN ECONOMY WILL MEAN ?AT EMPLOY$ WORK]S WILL BE FE>FUL ( /&+ UP TO !IR BOSSES4 ,!Y WILL BE WELL AW>E ?AT !RE >E O!RS WAIT+ TO TAKE !IR JOBS &1 AS A RESULT1 WE W\LD EXPECT WAGES TO FALL AS WELL AS 5SUR+ ?AT PRODUCTIVITY GR[? ACCUMULATES 9TO ! H&S ( !IR BOSSES 7UNSURPRIS+LY1 ! EVID5CE IS ?AT UNEMPLOYM5T COEXI/S ) L[1 NOT1 HI< WAGES74 ,?IS 9CREASE 9 M>KET P[] ( ! BOSS CAUS$ BY UNEMPLOYM5T W\LD 9CREASE 9EQUALITY :ILE MAK+ WAGES DECREASE OR /AGNATE4 ,EV5TUALLY1 WORK]S 9 ! AFFECT$ SECTORS W\LD F9D WORK ELSE:]E1 BUT DUR+ ! TIME ?AT TOOK TO HAPP5 ALL WORK]S W\LD HAVE HAD !IR ECONOMIC P[] ]OD$1 WEAK5+ UNIONS1 DEC\PL+ PRODUCTIVITY GR[? FROM WAGE GR[? & SO ON4 

,SO1 YES1 OV] TIME EMPLOYM5T W\LD EQUALIZE OV] ! TWO SECTORS ( ! ECONOMY BUT ! BALANCE ( CLASS P[]1 ! LEVELS ( 9EQUALITY )9 ! SOCIETY & SO W\LD BE FUNDAM5TALLY DIFF]5T4 ,?IS IS ALL IGNOR$ BY ,KRUGMAN'S SIMPLI/IC MODEL4 

,KRUGMAN PO9T$ TO ! 0PA/ G5]ATION0 9 ,AM]ICAN HI/ORY4 ,! ALT]NATIVE MODEL PROPOS$ H]E IS1 BASICALLY1 EXACTLY :AT DID HAPP5 9 ,AM]ICA 7& ELSE:]E7 S9CE ! #a#i#gS4 ,IRONICALLY1 ,KRUGMAN LAM5TS PRECISELY !SE DEVELOPM5TS 9 HIS NEW BOOK 7,! ,CONSCI5CE ( A ,LIB]AL74 ,!RE IS1 HE N[ >GUES1 0NO QUE/ION ?AT ,U,S TRADE0 ) ,?IRD ,WORLD C\NTRIES 0WID5S 9EQUALITY0 & 0R$UCES JOB OPPORTUNITIES = LESS-SKILL$ ,AM]ICAN WORK]S40 7P4 #a#c#e7 ,:I* IS AN IMPROVEM5T ON HIS PREVI\S OR?ODOX DEF5SE ( GLOBALIZATION 9 ! #a#i#iS4 ,HE ALSO PO9TS TO 0*ANGES 9 9/ITUTIONS1 SU* AS ! /R5G? ( LABOR UNIONS0 7P4 #a#c#f7 AS ANO!R FACTOR 9 WID5+ 9EQUALITY1 >GU+ ?AT ! UNIONS HAD A 0DIRECT EFFECT0 ON EQUALITY BY !IR [N WAGE AGREEM5TS & AN 9DIRECT ONE1 AS !Y 0RAIS$ ! WAGES ( LESS-WELL-PAID WORK]S MORE0 AS ! UNION CONTRACTS W]E 0REFLECT$ 9 ! LABOR M>KET AS A :OLE40 7P4 #a#d#i7 ,SIGNIFICANTLY3 0,IF GA9S 9 PRODUCTIVITY HAD BE5 EV5LY %>$ ACROSS ! WORK=CE1 ! TYPICAL WORK]'S 9COME W\LD BE AB\T #ce P]C5T HI<] N[ ?AN IT WAS 9 ! E>LY SEV5TIES40 7P4 #a#b#h7 ,9/EAD1 WEAL? HAS FLOOD$ UPW>DS TO ! TOP #a.0 7OR EV5 LESS74 

,AS HE SAID3 0,9 ! 5D1 ( C\RSE1 IDEAS MU/ BE TE/$ AGA9/ ! FACTS40 ,I KN[ ?AT 9 NEO-CLASSICAL ECONOMICS TIME1 P[] & CLASS >E ALL IGNOR$ BUT !Y EXI/4 ,ONCE !SE FACTORS >E TAK5 9TO ACC\NT1 ,KRUGMAN'S 0,JU/-,SO0 /ORY CAN BE SE5 = :AT IT IS4 ,P>TICUL>LY AS HIS [N SUBSEQU5T WORK CAN1 9 P>T1 BE US$ AS EVID5CE = ANO!R ?\<T-EXP]IM5T :I* DOES NOT AB/RACT FROM ESS5TIAL ELEM5TS ( ANY REAL CAPITALI/ ECONOMY4 

,SO IF ?IS AW>D GETS MORE PEOPLE READ+ ,KRUGMAN'S EXPOSURES ( ! ,BU% ,JUNTA & HIS WELL DOCUM5T$ ACC\NTS ( ! EXPLOSION ( 9EQUALITY 9 ,AM]ICA !N1 ,I W\LD SUGGE/1 IT W\LD BE = ! BE/4 ,HOPEFULLY1 ?\<1 !Y WILL SEE PA/ ! LIMITATIONS ( BO? HIS 7NEO-CLASSICAL ROOT$7 ECONOMICS & HIS ,NEW ,DEAL-/YLE POLITICS TO SOME?+ MORE RADICAL 9 T]MS ( BO? ANALYSIS & SOLUTIONS TO ! SOCIAL QUE/ION4 

,FROM 3 ,!,AN>*I/,LIBR>Y4ORG4 

,*RONOLOGY 3 
,FEBRU>Y #a#a1 #bba 3 ,ON ,PAUL ,KRUGMAN -- ,ADD$4 
,JANU>Y #g1 #bbb 3 ,ON ,PAUL ,KRUGMAN -- ,UPDAT$4 

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