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Paul Krugman’s alien version of Keynesian economics

Paul Krugman, a Nobel laureate Keynesian economist, is apparently so frustrated by the lack of support for an even larger second stimulus that he’s now saying on national television that an alien invasion of the U.S. might be just the thing to give the economy the boost it needs.

On Sunday, Krugman appeared on CNN. Speaking with Harvard economist Ken Rogoff, he gave the same economic advice that he has been giving for years–that more government spending would cause the economy to rebound.

Krugman quipped, “If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he said. “And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–”

“We need Orson Welles, is what you’re saying,” Rogoff interrupted.

“There was a ‘Twilight Zone’ episode like this in which scientists fake an alien threat in order to achieve world peace,” Krugman said. “Well, this time, we don’t need it, we need it in order to get some fiscal stimulus.”

Krugman, like most liberal economists, believe that the economy improved while massive amounts of money was spent during the Depression and with the buildup of national defense during World War 2.

However, the money spent during the decade of the Depression, prior to World War II tripled spending from $3 billion a year to $9 billion. But unemployment at the end of the thrities was still 17.2 percent.

Not very good example for Keynesian economics. If the U.S. tripled spending from the current $3.5T today, we would have to spend $11.5T, which would increase the annual deficit to over $9T per year. It didn’t work in the thirties and it will not work today.

So, Krugman suggests that we spend like we’re being attacked by space aliens in order to achieve the level of spending that occurred during World War II. By 1945, the spending was ten times bigger than it was at the end of the ’30s - over $90B.

Despite the spending, the GDP decreased by 1.1% in 1945, 10.9% in 1946 and again decreased the following year. Also, not a very good endorsement for Keynesian economics, but this is the solution that Krugman says the country needs to repeat.

Do you think that aliens have already visited Earth and replaced a few of our Keynesian economists?

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31 Comments

  1. I think it’s a very entertaining notion and good to have some levity on a Sunday morning. Thanks Ted, I enjoyed reading your column today.

  2. gowader

    We are being attacked by aliens. They are coming from Mexico this time and not outer space.
    But seriously the entire thought of spending your way out of a depression only works if Americans are put to work. Right now if we were invaded from aliens China would be the only one’s working. Back in the 40′s the global economy was not so slighted against America. Basically we made all of our weapons right here on American soil. Plus technology was not so advanced, and manpower was needed. Now one machine can replace hundreds of workers.

    This whole liberal non sense that government creates jobs is just that non sense.The only thing that will create jobs in America is American companies doing business with each other on American soil. The progressives want us to think that a glorious global economy will create the US jobs. But they forget to mention not every country is playing fair. And that millions of jobs have been lost because of NAFTA and China’s favored trade status.

    Not to mention that liberalism in itself makes people lazy and stupid. There just isn’t enough smart workers here to work if we had the jobs.

  3. Terry C

    Ted, you can stop calling this hack a Nobel laureate, he has no Nobel prize (and neither does any other economist). It’s just an afterthought of a Swedish bank in the 1960′s. Alfred Nobel certainly never thought it was worth one of his prizes (after all, economics is a “social science” which of course means it’s not science at all).

    http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences

    The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics,[1] is an award for outstanding contributions to the field of economics. It is generally considered one of the most prestigious awards for that field.[2] The official name is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Swedish: Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne). It is not one of the Nobel Prizes established by the will of Alfred Nobel in 1895, but is commonly identified with them.[2][3][4][5][6] The Prize in Economics, as it is referred to by the Nobel Foundation, was established and endowed by Sveriges Riksbank, Sweden’s central bank, during 1968 on the Bank’s 300th anniversary, in memory of Alfred Nobel’s 1895 will.[2][7][8][9] Like the Nobel Laureates in Chemistry and Physics, Laureates in Economics are selected by the Royal Swedish Academy of Sciences, and a Prize Committee similar to the Nobel Committees is used.[10][11] It was first awarded in 1969 to the Dutch and Norwegian economists Jan Tinbergen and Ragnar Frisch, “for having developed and applied dynamic models for the analysis of economic processes.”[9][12][13]

    Since economics deals with thousands of variables that are almost impossible to quantify, and cannot be investigated experimentally with any degree of accuracy to the real world, you can put economists in the realm of the other “social scientists”, as well as astrologers. That’s why there are as many different “economic models” and opinions as there are economists.

  4. shawnnews

    The 2008 prize to Paul Krugman, a major critic of George W. Bush, provoked controversy about a left-wing bias of the award, prompting the prize committee to deny “the committee has ever taken a political stance.”
    That’s from your own link, Terry C.
    The argument used against Nobel Prize winners is usually that the specific area they were given a prize for is their field of expertise rather than a blanket endorsement of their ideas. So Friedman can get an award for predicting stagflation and Krugman can get one for analyzing trade patterns without the committee endorsing their other views. However, to say Krugman isn’t a Nobel Laureate or isn’t a real one is fiction.

  5. Terry C

    Shawn, did you actually read the wikipedia article? There is no such thing as a Nobel Prize in economics. He has a prize, but so what, those are given out by lots of organizations, governments, and universities. The only Nobel Prizes were set up by Alfred Nobel’s will in 1895. You can call his prize the “Greatest Smartest Dude on the Planet” prize, but that still doesn’t make it one.

    Also, economics is not a science, it’s more akin to psychiatry or anthropology, a wishy-washy combination of intuition, statistics, and mathematical-computer models that have so many variables that they are pretty much useless as predictors of current let alone future economic activity of a region, country, or the world. Why do you think there are so many economic models out there, with proponents and opponents of all of them armwaving at each other? It’s because most of them have very little relation to reality.

  6. shawnnews

    That’s like saying there’s no such thing as the winter olympics because the Greeks didn’t really have winter sports. You are changing the definition being used in every discussion from the prizes awarded authorized to use the Nobel name to the original set of prizes. Using thst logic everything would be bound to its original set up — Illinois wouldn’t really be a state because it wasn’t one of the first 13 colonies. Any new category of Academy Award wouldn’t be a “real” Academy Award.
    You couldn’t call Hayek or Friedman Nobel laureates either but they are.

  7. Adam Faber

    Gowader is funny: “There just isn’t enough smart workers here to work if we had the jobs.” Yup, there just *isn’t*.

  8. shawnnews is correct. The prizes awarded are authentic. You may not like the winner’s opinions or catagories that were added, but that doesn’t make the prize not a real.

    The checks given don’t bounce, so I’d say that’s pretty real in my book.

  9. gowader

    Adam; Have you ever heard the words skilled labor. The US is far behind other countries with workers who have degrees in electronics, engineering and so on. What I have seen for a labor pool in Rockford is pathetic. No longer can we thrive on general labor jobs that only require a GED. There are plenty of CNC and other high tech jobs out there that cannot be filled.

    • Ted Biondo

      gowader, you are right. 80% of the current expanding new jobs require at least an Associate degree and in Rockford we have over 30 % of the population that can’t read, we have half the college graduates that reside in other communities – we have jobs open for skilled workers and no one to fill them! Of course, many have an entitlement attitude that companies can just create jobs for people that can’t do anything except move an object from one place to another. But then, Fareed Zakaria, a journalist and author on CNN said that, “Keynesian economics boils down to “employing people to dig a ditch and then fill it up again,” because they’d be “productively employed” and pay taxes.” I guess that’s what Adam wants?

  10. “The prizes are authentic” . So is Obama’s Peace Prize, but, was it deserved, or merely a piece of Leftist political frass, to try and justify part of a failed agenda?

  11. Adam Faber

    Ted and Gowader, what went over your head is that I thought it was funny that, while Gowader was pontificating about lazy and stupid people, he failed to use correct grammar. I even put asterisks around the culprit word, and you both *still* missed it. We all make mistakes in our posts, but seldom in such a context.

    Now, Ted, please explain how my scorn of Gowader’s grammar could be construed as support for “employing people to dig a ditch and then fill it up again.” That’s quite a stretch.

    • Ted Biondo

      Adam, I wasn’t addressing your comment at all. I was addressing gowader’s comment about lack of skilled labor regarding CNC and other high tech jobs that can’t be filled with the pathetic labor pool here, not his previous comment.

  12. Those sneaky Leftist are just everywhere!

    Tell me, using what some say here about them being lazy, stupid, and can’t figure much out in relationship to the economy, how did they find a way to infliltrate the Nobel Committee?

    Is everything just about politics, Gentlemen, or are somethings actually not related to who sits in the White House in the good old U.S.A.?

    Do we now select whom we feel is entitled to this prize in any given area of it by their politics?

    Will the Pulitzer Prize for Literature be the next one that will be applauded according to the political thinking of the writer by some and scorned by others for the exact reason. ?

  13. Adam Faber

    Then what did you mean by “I guess that’s what Adam wants?”

  14. Terry C

    Carol Foster Says:

    “Will the Pulitzer Prize for Literature be the next one that will be applauded according to the political thinking of the writer by some and scorned by others for the exact reason. ?”

    Do you mean the NOBEL Prize in literature? And, I’m pretty sure that politics plays a very important role in handing out the Nobel Prizes in peace and literature, as well as the Pulitzer prize in literature. And, since the “so-called” Nobel prize in economics is a social science, of course politics plays an important role in who gets it as well.

    The actual natural science Nobels are physics, chemistry, and medicine/physiology. The value (and validity) of these two separate sets of prizes are as different as night and day.

  15. Terry C

    And, for the other misinformed commenters, no there is no Nobel prize in economics, nor are there any Nobel laureates (Paul Krugman or anyone else) in economics.

    In 1968, Sveriges Riksbank instituted an award that is often associated with the Nobel prizes, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The first such prize was awarded in 1969. Although it is not an official Nobel Prize, its announcements and presentations are made along with the other prizes.

    Comments about academy awards and other awards are irrelevant to the subject at hand.

    http://en.wikipedia.org/wiki/Nobel_Prize

  16. No, Terry C, I did mean the Pulitzer Prize. If you begin questioning one prize by judging it with a political point of view, then so will go the rest.

    The Nobel Prizes are not American but the Pulitzer Prize is, so where does placing a certain brand of politics end?

    What happened to you applauded the winners and didn’t waste your time looking for some underhanded reason why they were the winner?

    Krugman & the aliens thing is a hoot and I’ve got no problem with Ted pointing that out. Gave me a laugh Sunday morning. When people begin taking the prize he won into another place then it’s time to question our ability to judge good behavior from bad. If everything must relate to politics, then I feel you have a very sad life, and need a refresher class in plain old -fashioned manners.

    If you can’t congratulate a winner, you say nothing. Anything else referencing the win is very bad manners. Just the way I was raised.

  17. shawnnews

    http://www.nobelprize.org/nobel_prizes/economics/laureates/
    It’s listed on tge Nobel site. Whether or not you think there should be a prize in economics is your opinion but there is a Nobel prize in economics that Hayek, Friedman and Krugman have each won giving them the organization’s recognition as a laureate. It doesn’t matter if the banks fund it — the Nobel people use that title.

  18. Terry C

    “Whether or not you think there should be a prize in economics is your opinion but there is a Nobel prize in economics that Hayek, Friedman and Krugman have each won giving them the organization’s recognition as a laureate. It doesn’t matter if the banks fund it — the Nobel people use that title.”

    No, Shawn, the Nobel people do NOT use that title. And Carol, you are still wrong.

    “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides “for their analysis of markets with search frictions”.” -Direct quote from the Nobel web site.
    http://www.nobelprize.org/nobel_prizes/economics/laureates/2010/

    It’s harder to make it plainer than this for the thick of head. You will probably make some ridiculous comeback comment, but you might as well save it, because you will still be wrong. Why don’t you just let the facts speak for themselves, there is NO SUCH THING as a Nobel laureate in economics!

  19. OK, Terryc, you’re right, there’s no such thing and Ted is thick of head for using it in the beginning of his column.

    Our mistake for trusting Ted had it right.

    Just kidding you Ted, I don’t think you got it wrong until you say for yourself it’s not correct.

  20. Scott Phillips

    Boy, we sure got way off the subject here. The Nobel prize doesn’t mean squat, especially after Obama won for it peace. The article here was about that dope Krugman and his clinging to Keynesian economics.
    Ted – With regard to your first response to gowader and your quote from Fareed Zakaria: “Keynesian economics boils down to “employing people to dig a ditch and then fill it up again,” because they’d be “productively employed” and pay taxes”. I am reminded of an observation Milton Friedman made while visiting a country in Asia when he saw a group of workers digging a ditch with shovels. He asked the gov’t official in charge of the project if using heavy equipment wouldn’t be more productive, to which the gov’t official replied that this way more people are being employed and that that’s a good thing. Friedman replied back, “Why don’t you give them spoons to dig the ditch?”

    • Ted Biondo

      Welcome to the blog, Scott. Yes, I’m familiar with that great line of Friedman’s. You point out another problem with some of the people getting off topic when the topic is embarrassing to one of the liberal hero’s views. It happens all the time.

  21. Scott Phillips

    Ted – I’ll go off subject a tad myself now. Are you familiar with Swedish economist Johan Norberg and his follow up film to Milton Friedman’s ‘Free To Choose’ from 30 years ago? It’s been out almost a year I guess. It’s slowly making its way around the country. In it Norberg retraces some of Friedman’s steps he took in filming ‘Free To Choose’. It looks great! Here’s a preview of ‘Free or Equal’.
    http://www.youtube.com/watch?v=Z5QM2CUmqGc

    • Ted Biondo

      Scott, I don’t think a youtube concerning examples of free enterprise is off topic at all. It is the antithesis of Keynesian economics, and I much favor free enterprise. Thanks for the video, it’s great to see free enterprise at work somewhere!

  22. Terry C

    Ted, if most of us responders sound like we have very little respect for the field of economics, it’s probably because we have little to no respect for the views of the economists themselves. Try this one on for size:

    http://www.thefiscaltimes.com/Columns/2011/08/30/What-Caused-the-Financial-Crisis-Dont-Ask-an-Economist.aspx#page1

    After reading this, you’ll see why I badmouthed Krugman so much (by the way, it’s not just him, it’s the whole “profession”). I’ve been a geologist for 35 years, and I also have an MBA, so I see both sides of the fence, the natural sciences and the ones who want to influence whole governments/economies/societies with their pet ideas du jour.

    • Ted Biondo

      Terry C, great point and a good article in the Fiscal Times! Points out why there are so many economic opinions and how the various sides can hand pick someone who agrees with them. Kind of like psychiatrists at a trial – one side says the defendant didn’t know right from wrong and other paid expert says the person is a genius!

  23. Scott Phillips

    Terry C – I think economists deserve their due respect. Both Friedman and Keynes, and his present day incarnation Krugman, and the whole Austrian and Chicago schools have taught me quite a bit. And I quite admire Thomas Sowell. These guys have provided much insight, at least for me, into how the world operates. It’s all good food for thought. And there are real world examples of the influence of someone like Friedman. We only need to look to places like Hong Kong and more recently Estonia to see the influence of Friedman. Here, former Estonian PM Mart Laar discusses Friedman influence’s in reshaping Estonia:

    http://www.youtube.com/watch?v=4JhF8UpGDgs

    Economic theory goes in and out of fashion with each new president it seems. Presidents, who often have little business experience will latch onto the theory most fits their ideology, along the lines of the article here. Keynesian economics is currently in fashion because Obama is in office. I predict once Obama leaves office Friedman’s economic theory will most likely be re-instated.

    The one think I really wish gov’t would get a handle on is that it can’t continue helping to create problems and then think only it can solve the problems. Big gov’t programs always start with good intentions but, when we come out the other end what we’re left with are the unintended consequences. Kind of like the Community Reinvestment Act and the role it played in the recent boom and bust.

  24. Terry C

    Scott Phillips says:

    “These guys have provided much insight”…

    Nostradamus provided lots of insight, too, that doesn’t make economists respectable or accurate.

    Sorry, Scott, but I give about as much due to economists as I do sociologists, psychologists, anthropologists, and educational “experts”, in other words, not much.

  25. Donnewald

    Regarding the comment that the general populace in Rockford is lacking skilled machinists familiar with setting up and\or operating CNC machines, I’d like to point out that such a person will not sit and wait for hibernating Rockford to stir. Those machinists are long gone and employed elsewhere.

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