Monday, January 20, 2014

Russ Roberts Knotes Krugman Kontradiction?

No, I don't buy it. Roberts quotes Krugman as saying:
People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job.
This is supposed to contradict his statement that "enhanced UI actually creates jobs when the economy is depressed."

Well, sorry, no it doesn't. In the first paragraph he says that extended unemployment benefits may reduce the incentive to look for a job. In the second statement he says that in the special case of a depression, the increase in aggregate demand can more than outweigh any disincentive effects for jobseekers.

Krugman may be wrong on the latter point. But it does not contradict the first point, and, in fact, it is rather obvious that it does not contradict the first point. In the first quote he is talking about incentives for individual jobseekers, and in the second he's talking about an aggregate demand effect. Is not at all noteworthy that in a textbook he would simply present the general case, and leave discussion of the more advanced special case for more advanced classes.

Again, he may be wrong, but how in the world can Roberts think there is a contradiction here? I can understand someone liking Roberts as a fellow partisan. But how do you respect him as an economist when he sees contradictions where there are none? (Here I kid, but hey Prof. Roberts, turnaround is fair play, right?*)

* You will note I am just parodying Roberts' here.



    1. "In them, Krugman completely disowns the claim about incentives that he made in his textbook."

      Well, except for the little fact he does no such thing, Henderson has a point!

    2. Henderson is doubling down on Roberts' bad bet!

  2. I think I'll put up a new post that says, "Gene Callahan and Daniel Kuehn object to Russ Roberts, David Henderson, and me because Gene and Daniel say that extending unemployment is a good idea. But I disagree, it's a bad idea, and here's why..."

    That would be analogous to how you guys have treated us. We literally said that what you are claiming here is NOT our point. Then David agrees with us that it's not our point, and you say David is "doubling down." Right, he is, because he believed us when Russ and I said what our problem with Krugman was.

    1. "We literally said that what you are claiming here is NOT our point."

      I did not mention you here. I had not read what you wrote when I wrote the above. So it is ridiculous to accuse me of distorting anything you said, because I mentioned nothing you said.

      But Roberts said: "But how do you respect him as an economist when he ignores incentives? What he writes doesn’t just contradict thoughtful economics. It contradicts the thoughtful economics he himself writes in the latest editions of his textbook."

      He very clearly stated here that these two statements CONTRADICT each other.

      If he later tried to squirm out of this, that is not my problem, is it?

    2. And your problem with Krugman, which I only read later, relies on an inaccurate description of Krugman's criticism of... ah, whoever it was. It's late.


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