Paul Krugman proudly tells us he can’t bring himself to learn any economics produced before he was a graduate student and written in plain English — and he’s constantly proving the case with crashingly ignorant discussion of economic history and the history of economic thought.  Krugman has combined his patent ignorance in these two fields with a sadly boorish and pathetic discussion of Hayek & Robbins’ 1932 rejoinder to Keynes & Pigou on what to do about then DECADE long British unemployment and production crisis, made much worse by Churchill’s SEVEN YEAR old decision to return the highly inflated pound to a version of the gold standard at pre-WWI parity.

With seemingly his every word, Krugman makes plain his ignorance.  Krugman shows us that knows nothing of Hayek’s economics.  Krugman shows us that he knows nothing of the alternative pragmatic policy considerations behind many of Hayek’s policy statements — pragmatic considerations Hayek changed his mind about in light of experience.  And Krugman shows us he knows nothing of Hayek’s later re-evaluation of this historical episode based on new empirical data (but using exactly the same theoretical considerations he had always held),  i.e. a re-evaluation in the light of significant advances in the empirical literature on the time period (e.g. publication of the work of Schwartz & Friedman in the 1960s.)  People are still learning important new empirical facts, e.g. about gold reserves, unknown to contemporary observers.  But Krugman reveals himself to be no student at all of the period — knowing nothing of the basics of Hayek’s economics or his pragmatic and political policy considerations, and seemingly nothing of the history, esp. of British and European economic history in the 1920s.

The first thing to note is the Hayek was addressing a British policy situation, which had evolved out of an already DECADE long British situation — Hayek was NOT addressing the Americans or the new American situation.   And note well.  The “Great Depression” was not a universal world wide phenomena, and for Britain it did not begin in 1929.

More later.

UPDATE:  Does Paul Krugman know even any modern macroeconomics?

Daniel Kuehn, “In fairness to Hayek, he was talking about Britain.”

Robert Wenzel weighs in.  Snippet:

Krugman claims that the letter insists:

that big deficits somehow caused the crisis [{the American} Great Depression]

The letter does no such thing. It is simply stating that borrowing, once a crisis starts, has the harmful effect of crowding out private sector borrowing, and making it much more difficult for the economy to recover. That’s all the five paragraph letter says about borrowing.

… Krugman goes on via charts to “prove” Hayek wrong through the distortions he makes of  Hayek’s views.

I’m exhausted.  I may add something more tomorrow.

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  1. If PK studied the history of economic thought, he would be rapidly confronted by the realization that the abstract methodology that he relies upon, and the ocean of data he has used for his analyses, is the record of, and methodology of, a ‘special circumstance’ of temporary economic conditions, and that his short term methodology is incongruous with the anglo political model that is the source of western political stability, and he would then realize that conservative and libertarian observations are functions of long term political stability regardless of short term environmental conditions.

    That is, if he was intellectually honest.

    Ok. Wait. That’s an unrealistic assumption.

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