la libertad y el mercado o se asisten mutuamente o se hunden juntos

"Libertad y mercado" de Federico Jiménez Losantos:

Krugman, uno de tantos progres que se niegan a aprender de sus derrotas –el negocio de la progresía es ese: la negación del principio de realidad económica o política y la afirmación del principio del placer de sentirse superiores moralmente a los demás- ha llegado a España, cuya economía dice que le aterra, de la mano del terrorífico Zapatero. A tal señor, tal honor. Y critica a su adorado Obama por la misma razón de fondo por la que critica los diez años de Depresión tras 1929: porque el New Deal rooseveltiano no se atrevió "a ir hasta el final" en su intervencionismo. Lo hicieron soviéticos, fascistas, nazis y demás depredadores de la libertad social y defensores de la idolatría del Estado. De eso no hablan los progres, pero en última instancia lo que se critica en Roosevelt es lo que define a keynesianos a lo Krugman: nunca se atreven a llevar hasta el final su ataque al libre mercado: son totalitarios pero sin valor para reconocerlo, una cobardía subvencionada respetuosamente por los liberales de boquilla, que suelen ser tan intervencionistas como todos los políticos de cualquier condición. Y si hay algo clarísimo es que el proteccionismo da más poder al Poder y quita poder al ciudadano. Por eso la libertad y el mercado o se asisten mutuamente o se hunden juntos.

Myth: path dependence: busted

"Typing Errors":

Stanford University economist Paul Krugman offered the central claim of this literature boldly and with admirable simplicity: "In QWERTY worlds, markets can't be trusted." The reason that he uses "QWERTY worlds," and not DOS worlds, or VHS worlds, is that the DOS and VHS examples are not very compelling. Almost no one uses DOS anymore, and many video recorder purchasers thought VHS was better than Beta (as it was, in terms of recording time, as we have discussed at length elsewhere).

The typewriter keyboard is central to this literature because it appears to be the single best example where luck caused an inferior product to defeat a demonstrably superior product. It is an often repeated story that is generally believed to be true. Interestingly, the typewriter story, though charming, is also false.

The Importance of Capital Theory

"The Importance of Capital Theory" by Bob Murphy:

The elementary flaw in Krugman's objection is that he is ignoring the time structure of production. When workers get laid off in the industries that produce investment goods, they can't simply switch over to cranking out TVs and steak dinners. This is because the production of TVs and steak dinners relies on capital goods that must have already been produced. In our sushi economy, the unemployed islanders couldn't jump into sushi rolling, because there weren't yet enough fish being produced. And they couldn't jump into fish production, because there weren't enough boats and nets to make their efforts worthwhile. And finally, they couldn't jump into boat and net production, because there were already enough islanders working in that area to restore the fleet and collection of nets back to their long-run sustainable level.

People in grad school would sometimes ask me why I bothered with an "obsolete" school of thought. I didn't bother citing subjectivism, monetary theory, or even entrepreneurship, though those are all areas where the Austrian school is superior to the neoclassical mainstream. Nope, I would always say, "Their capital theory and business-cycle theory are the best I have found." Our current economic crisis — and the fact that Nobel laureates don't even understand what is happening — shows that I chose wisely.

So Now Saving Is Bad

"So Now Saving Is Bad" by Sheldon Richman:

Keynes is back! Unfortunately. If you want to make sense of most of the reporting and commentary on the econony these days, you have to realize that most reporters and commentators and politicians are working from the Keynesian position that, as Paul Krugman puts it, “[I]ndividual virtue can be public vice… attempts by consumers to do the right thing by saving more can leave everyone worse off.” This is Keynes’s so-called “Paradox of Thrift.”

From Economics in One Lesson from Henry Hazlitt:

The enemies of saving are not through. They begin by drawing a distinction, which is proper enough, between "savings" and "investment." But then they start to talk as if the two were independent variables and as if it were merely an accident that they should ever equal each other. These writers paint a portentous picture. On the one side are savers automatically, pointlessly, stupidly continuing to save; on the other side are limited "investment opportunities" that cannot absorb this saving. The result, alas, is stagnation. The only solution, they declare, is for the government to expropriate these stupid and harmful savings and to invent its own projects, even if these are only useless ditches or pyramids, to use up the money and provide employment.

Good reading: Visions and Frameworks in Macroeconomics

Consumers Don’t Cause Recessions

"Consumers Don't Cause Recessions" by Bob Murphy:

.... the circular-flow diagram above is a very misleading model of the economy. It leads us to think that output of finished consumer goods can immediately rise and fall with "spending." This framework would hold if there were no capital goods, meaning that all consumer goods and services were produced immediately, as workers took gifts of nature and produced the finished item on the spot.

Once we grasp the stunning complexity of the true "economic problem"—how all of this interlocking human activity is coordinated so that production flows smoothly and predictably—we see the absurdity of Keynesian pump-priming remedies....

In his discussion of the "paradox of thrift," Paul Krugman proves that he is not an economist—or at least, not a very good one. His policy recommendations are based on a Keynesian model bereft of time and the capital structure of production.

Krugman’s prize (2)

Following the post "Krugman’s prize", the Robert Samuelson article on Real Clear Politics "Poor Aren't Poor Because Rich Are Rich":

By and large, the poor aren't poor because the rich are rich. They're usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck.

The presumption implicit in the criticism of growing economic inequality is that society's income is a given and, if the rich have less, others will have more.

The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be redistributed because it doesn't exist. Everyone's poorer.

Neutrality of money

From the wikipedia:

In economics, neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages and exchange rates, having no effect on real variables like GDP, employment, and consumption.

Paul Krugman:

The proposition known as the neutrality of money - the assertion that other things equal the price level is proportional to the money supply - is central to every monetary theory I know of.

Ludwig Von Mises (The Non-Neutrality of Money, 1934):

.... the essence of the fallacy of money's neutrality [is] that .... changes in purchasing power [are] brought about simultaneously in the whole market and that they [affect] all commodities to the same extent ....

To simplify and to shorten our analysis let us look at the case of inflation only. The additional quantity of money does not find its way at first into the pockets of all individuals; not every individual of those benefited first gets the same amount and not every individual reacts to the same additional quantity in the same way .... The result is that there is in the economic system a new dispersion of wealth and income and in this new social order the wants of individuals are satisfied to different relative degrees, than formerly. Prices in this new order can not simply be a multiple of the previous prices.

.... I wish to emphasize that in a living and changing world, in a world of action, there is no room left for a neutral money. Money is non-neutral or it does not exist.

Why Paul Krugman deserved the Nobel Prize.

Not as Bad as You Thought by Arnold Kling, in Reason Magazine:

Paul Krugman received a Nobel Prize for his contributions to international trade theory. Even for those of us who disagree with his political views and see little value in his recent work as a columnist, this award brings neither surprise nor disappointment.

Krugman’s Posthumous Nobel

"Krugman’s Posthumous Nobel" by Donald Luskin:

Prior to 2008 the Nobel Prize had never been awarded posthumously. So great minds such as John Maynard Keynes and Fischer Black never received the coveted award. But all that has changed. This year, the prize for economics is going to Paul Krugman, an economist who died a decade ago.

This living Paul Krugman can’t be the same person as the dead economist. The dead economist wrote eloquently of the supreme importance of globalization and international trade as engines of prosperity. But the living public intellectual remains silent on these subjects when the Democratic party’s nominee for president threatens to abrogate the North American Free Trade Agreement.

These days Krugman’s liberal agenda always takes precedence over economic principle ....

Further reading: "An open letter from Joe the Plumber to Paul Krugman"

Krugman’s prize

"Krugman's prize" by Russell Roberts:

Everyone has their own least favorite Krugman quote. There was his disrespectful treatment of Milton Friedman after Friedman's death. There was his broken window analysis of the economics of 9-11. Today, now that he has won the Nobel Prize, I'd like to remember the quote that made it clear to me that the economic way of thinking was no longer of concern to him, when he wrote in the New York Times Sunday Magazine:

Although America has higher per capita income than other advanced countries, it turns out that that's mainly because our rich are much richer. And here's a radical thought: if the rich get more, that leaves less for everyone else. That statement -- which is simply a matter of arithmetic -- is guaranteed to bring accusations of ''class warfare.''

From Krugman Watch:

Zero-sum. So, Paul, who got poorer as a result of your prize money?