The best of Paul Krugman vs Reddit

Nobel prize-winning economist fields questions from "The Front Page of the Internet". What could go

Paul Krugman has a new book coming out, which means he is doing a lot of thing that one doesn't normally see from a Nobel Prize-winning economist. First he debated Ron Paul on Bloomberg TV, including a bizarre interlude involving inflation in third-century Rome. Then yesterday, he did a question and answer session with Reddit, the hugely popular social news site which brands itself "The Front Page of the Internet".

Under the headline IamA Nobel Prize-winning economist and New York Times columnist, Krugman – username nytimeskrugman – spent a couple of hours answering questions from Reddit users. Here are some of his best answers.

Responding to user sychosomat, who asked about the problems caused by the inability to perform experiments in economics, Krugman wrote:

Well, not being able to do experiments is a problem, but not as bad as all that. We do have statistical techniques for trying to sort out what's going on, although I'm skeptical about their power. But mainly we can look for "natural experiments", which often tell you a lot. In End This Depression I talk about how wars provide a natural experiment on fiscal policy; right now forced austerity in Europe is providing another set of natural experiments.

You may ask whether both sides in every debate won't nonetheless find ways to support their positions. My answer here is that this is not, in fact, happening. On the question of whether austerity is expansionary or contractionary, we had some alleged evidence for expansionary effects, but it was quickly shot down by the normal process of scholarly discussion. In any normal scientific debate, this would now be a settled issue.

I guess that what I'm saying here is that while the non-experimental nature of economics is an issue, the apparent inability to resolve differences that you see right now is about politics, not the inherent problems of the discipline.

Cthwaites asked how close we are to repeating the mistake in 1925, when Britain returned to the gold standard for seven disastrous years. Kurgman:

All around Europe's periphery they're doing it as we speak, er, type. The euro has served as the functional equivalent of the gold standard.

The difference for, say, Spain is that since they don't have their own currency, it's much harder to change course than it would have been for Britain under gold. But if you look at, say, Latvia, they're doing the full Churchill -- and being hailed as a role model even as they enforce a devastating slump on themselves.

Asked by Curbsidejohnman to give the best argument against austerity, Krugman replied:

I think it is to point out that if nobody is buying, nobody can sell. Austerity in a depressed economy makes the depression deeper, and that is, I believe, a point people can grasp. Of course, it's a point made easier to grasp now that the Irish and others have given us such clear examples of how bad the results of austerity can be.

Bloometal asked about Krugman's views on behavioural economics. Krugman wrote:

I think there's a lot of very good work in behavioral econ. But I don't expect a unified theory for many, many years. There are just two many ways the assumption of perfect rationality can fail, and I don't think we have enough broader understanding to put it all in one package.

That said, we can use behavioral econ even as it is, as long as we're modest about modeling. As long as we are prepared to say "this is how people actually seem to behave" without demanding general theorems -- for example the obvious reluctance to accept nominal wage cuts -- we can go a long way toward analyzing real-world issue in a way that can guide both prediction and policy.

Finally, one of Krugman's answers which works best without any context:

Shave around it every day, and get your wife to clip it fairly often.

(Oh all right, he was talking about his beard)

Photograph: Getty Images/Reddit.com

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

GETTY
Show Hide image

Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.