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Greg Mankiw Blasts Paul Krugman

The former chair of the White House Council of Economic Advisers is, to put it mildly, quite critical of the New York Times columnist:

Economist Greg Mankiw Sounds Off… (Fortune)

Q: So you often read the paper and slap your forehead?

A: Let me give you example. This is as I was arriving [as the new chair of the White House Council of Economic Advisers]. Glenn Hubbard, my predecessor, was leaving. I read one of Paul Krugman’s New York Times’ columns, and he said something like, “Hubbard said he was leaving to be with his family, but you could see the knives sticking out of his back.” The suggestion was that he’s being kicked out. I knew that wasn’t true. I knew I got the job in large part because Glenn recommended me. So here we have Krugman sitting in some office in New Jersey making a supposition about what’s going on in Washington and then writing for the New York Times, with readers presuming that he knew something.

Q: Krugman is a very respected economist. What are your thoughts on his transformation into a columnist?

A: I had Paul as a teacher at MIT. And when I was at CEA in ’82 and ’83, he was there as well. I was a junior staffer in the Reagan administration. Two members of the senior staff were Krugman and (former Harvard economics professor, Clinton Treasury Secretary and current Harvard president Lawrence) Summers. At that time he was a brilliant economist. I thought he’d win a Nobel prize. I think there’s a good chance he still will. His early work on international trade theory deserves it.

It’s strange what’s happened since then. When he became a New York Times columnist, he decided to abandon writing about economics as an economist does. He’s very liberal, which is fine—most of my friends at Harvard are liberal—but whenever someone disagrees with him, his first inclination is to think that person is either a liar or a fool. It’s amazing to me that an academic would behave that way. The one thing that I value about academia is open-mindedness, the premise that all ideas and different points of view should be considered. No one has a monopoly on the truth. The one defining characteristic of a good professor is to be open to all viewpoints.

Q: How do you explain what you describe as this change in Krugman?

A: I guess if you’re a columnist, you want to be widely talked about and be the most e-mailed. It’s the same thing that drives talk show hosts to become Jerry Springer. You end up overstating the case because it makes good reading. The problem is that economists by their nature—with a lot of “on the one hand” and “on the other hand” in their prose—can make boring reading.

Well, at least Krugman now has confirmation that DC powerbrokers read his pieces.

Mankiw also discusses Karl Rove: “To the extent there was a political constraint, it wasn’t from Karl’s shop, it was from Congress.” If you’re interested in more substantive discussions, he has thoughts on Social Security, deficits, and inflation, among other topics.

(Via Tyler Cowen.)

Update: Needless to say, Mankiw isn’t following the Richard Clarke model of official departure.

My favorite part of the interview is the following:

I think all economists walk around wishing more policymakers and voters knew basic economics. That’s why I like teaching Ec10 (the basic introductory economics course at Harvard and one of the most widely attended classes at the university) next year—that’s the big news today here at Harvard, at least my corner of it. The debate about outsourcing, for example, was basically about what the gains from trade are.

It’s the Harvard mantra: every professor in every economic class that I’ve taken has filed this very complaint. While I generally agree, Mankiw should have still been more mindful of his outsourcing remark. The United States does indeed benefit to the extent that countries like India become better complements. For instance, if the Indians improve in how they operate call centers and other business services, which are what we import, then Americans gain. But what if these improvements enable the Indians to make significant progress in software development, which is what we presumably specialize in and export? Then our gains from trade become undercut. Obviously, I lack the data for this empirical question (though I tend to side with Mankiw overall). But the issue isn’t as clear-cut as his remark suggested, even among those who have some understanding of basic economics. And this is setting aside distributional considerations that get people really exercised.

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About Robert Tagorda

Comments

  1. Cornfields says:

    Being Conservative does not mean buying the idea of “Supply Side” economics… I personally prefer balanced budgets, low tax rates, and smaller government. While I understand the need to spend on national defense, the budget policies of this administration are just disasterous.

    Mankiw in principle agreed in his book “Principles of Economics,” published in the 1990s.

    In a subchapter titled “Charlatans and Cranks,” Mr. Mankiw referred to 80s supply side economics as “fad economics.”

    “An example of fad economics occurred in 1980,” Mr. Mankiw wrote, “when a small group of economists advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise revenue.”

    “[W]hen politicians rely on the advice of charlatans and cranks,” Mankiw concluded, “they rarely get the desirable results they anticipate.”

    Too bad he couldn’t have taken his own advice and pursued a responsible economic policy while in office… the Medicare Drug benefit is a disaster. Missile defense is costing us billions and is unworkable. The Farm bill is a monumental testament to Pork (I blame both parties for it, but the Republican congress took the lead). etc. etc. etc. We need a real small government conservative in office.

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  2. Steve Verdon says:

    While I generally agree, Mankiw should have still been more mindful of his outsourcing remark. The United States does indeed benefit to the extent that countries like India become better complements. For instance, if the Indians improve in how they operate call centers and other business services, which are what we import, then Americans gain. But what if these improvements enable the Indians to make significant progress in software development, which is what we presumably specialize in and export? Then our gains from trade become undercut. Obviously, I lack the data for this empirical question (though I tend to side with Mankiw overall).

    Think of this: Back 150 or so years ago the major economic sector was agriculture. Should we not have gone ahead with mechanization of farming for the economic damage it would have done to the country? Sure dislocations from such changes are difficult, especially for those dislocated, but it isn’t, as is commonly believed, the end of the world. The resources freed up by such dislocations find other forms of employment and economic output increases. Further, Mankiw’s full quote on the topic of outsourcing noted the problem of dislocation and that whatever can be done to minimize such difficults should be implemented.

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  3. Steve Verdon says:

    Too bad he couldn’t have taken his own advice and pursued a responsible economic policy while in office… the Medicare Drug benefit is a disaster. Missile defense is costing us billions and is unworkable. The Farm bill is a monumental testament to Pork (I blame both parties for it, but the Republican congress took the lead). etc. etc. etc. We need a real small government conservative in office.

    I think you greatly overestimate the importance and power of the top economic advisor.

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  4. Cornfields says:

    Steve,

    I think you are right… it’s just a general comment really, from someone disappointed that Mankiw, who I believe is very sharp, is doing much as Krugman has done for the Democrats… they are both offering figleafs to bad economic policies…

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  5. I fully agree, Steve. That’s the primary argument for outsourcing that every economist I’ve seen would agree with (specialization along the lines of comparative advantage). And, yes, Mankiw made a point of referring to trade adjustment assistance and other programs that would ease dislocations.

    But I think where it gets a bit murky is when we look closely at the terms of trade. Let’s assume, as I did in the post, that India is the trading partner, and we export software while importing business services like call-center operations. If we outsource call-center jobs, thereby allowing India to specialize, our terms of trade improve and our country achieves a higher national welfare. But then the question becomes: Does the outsourcing enable India to become more complementary or more competitive relative to us? If it becomes more complementary — i.e., it improves in business services — then we should gain even further. But if it becomes more competitive — i.e., it uses outsourcing to gain entry into the software industry and moves into our specialization — then our terms of trade could diminish. Frankly, I have no idea which is the correct assessment; that’s an empirical question I’m unprepared to answer. But it seems to me that the terms-of-trade argument could be a little more delicate than I’ve seen discussed in public fora.

    Now, even if our terms of trade don’t improve quite as much as we would like (i.e., India does become more competitive), it could still be the case that outsourcing is preferable, for reasons that you suggest. I tend to take that view: even if we consider that dislocations pose short-term domestic problems and that India’s growth could have negative implications for us, I believe that outsourcing will still bring net gains. But it doesn’t seem to me to be a no-brainer.

    Of course, I could be wrong all in all. My economic background is limited, and international trade isn’t really my specialty. But that’s what I know.

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  6. bryan says:

    The resources freed up by such dislocations find other forms of employment and economic output increases.

    I think this statement shows exactly why economists don’t “get” most resources voters.

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  7. Steve Verdon says:

    Robert,

    The problem is that competition is almost always a good thing. The problem I’m having with your example is that we don’t live in a two good world. Further, there are new goods and services coming into existence as well. Still even if we limit ourselves to the two good world, what really matters is comparative advantage. Even if India moves closer to the U.S. in terms of producing software, so long as the U.S. has a comparative advantage specialization will occur. Heck it will occur even if India ends up with an absolute advantage in call centers and software programing.

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