Paul Krugman, mainstream intellectual

Paul Krugman, Princeton economics professor, winner of the Nobel prize in economics for 2008 and New York Times op-ed writer is a person worth paying some attention to. Unlike most other mainstream commentators he does not deal mainly in cliches and often shows respect towards his readers by supporting his positions with hard data. He is also willing to take some risk by, on occasion, pushing against the envelope of mainstream propriety and using impolite words toward people with power.

Of course, he is not without faults. Of course, none of us is. The point is that Krugman’s faults are not too different than those of many of his colleagues. In other words, while Krugman is somewhat of an exquisite specimen of the mainstream intellectual, he is still very much such a specimen.

Firstly, while he is willing to push propriety against some elements of power, Krugman is loyal to others (even if a loyal oppositionist). He will condemn, relatively early, and relatively aggressively, the legalization of torture under Bush. He remains silent, however, with regard to Obama’s policy of immunizing the torturers (at all levels) and at least partial continuation of the torture regime. Krugman has not been an avid Obama supporter (seemingly preferring Edwards first and then Clinton in the primaries – New York Times writers are not allowed to express explicit endorsements) and has been realistic in terms of Obama’s corporatist ideology, but it is one thing to criticize Obama on the shortcomings of his healthcare proposals and it is another thing to call the Democratic president a torturer.

Similarly, Krugman has somehow maneuvered himself into an embarrassingly partisan position in the affair of Jon Gruber’s discreet relations with the White House. Not only did Krugman close ranks with a fellow academic, who apparently is also close to him ideologically, but he did not hesitate to turn the issue into a personal matter rather than a substantial one.

More damning, not morally, but intellectually, are Krugman’s failures when discussing matters that fall within his area of expertise – economics. In those cases Krugman engages in the standard practice among mainstream intellectuals of providing arguments that are simplistic and easily refutable so that their only force stems from the supposed expertise and credibility of the speaker and of the venue that he is given.

One recent case of this kind is Krugman’s arguments regarding the supposed inseparability of the components of the Obama healthcare plan. Krugman argues that the Obama healthcare plan is made of three components – community rating (i.e., disallowing insurance companies to charge different rate of different people based on their health condition), mandatory insurance (people must buy health insurance from a private insurer on pain of a fine), and subsidies for low income households. He claims that the first component (which is desirable and popular) cannot be implemented without the second one (which is undesirable and unpopular), or it will lead to a situation in which the healthy will choose not to get insurance.

This argument – which Krugman presents as definitive – is very weak. First, it is not clear at all that many healthy people would choose to live without health insurance even if community ratings were the only change compared to the current situation. Living without health insurance is a significant risk that most people would be reluctant to take, even if on average they are better off living without insurance. People who are employed by employers who provide insurance – i.e., most of the insured – are already paying what amounts to a community rated insurance. If there was a tendency among healthy people to think that this is not a good deal, these people be demanding that their employers would reimburse them for opting out of the employer provided insurance and allow them to seek a privately purchased insurance (at better rates, supposedly). This does not seem to be happening.

But while the problem of healthy people opting out of health insurance may not materialize, it cannot be denied that it may. The second and more important weakness of Krugman’s argument, however, is that such a situation – if it does occur – can be addressed in various ways that do not involve mandatory insurance purchase. One natural policy to handle this problem would be to simply extend the community rating offer only to people who have not opted out of insurance over, say, 10 years. Many similar schemes can be easily devised. Even if he thinks those alternatives cannot, for some reason, be implemented, Krugman must at least acknowledge that they exist and indicate why, in his opinion, they would not do. The simplistic argument Krugman is advancing can only be the result of blindness in his own area of expertise or of a deliberate attempt to mislead his readers.

A second recent example of Krugman’s poor analysis in an economics-related issue is his argument supporting a cap-and-trade system for carbon emissions control. This case may be more of a standard dogma-induced blindness than the previous one (which may exemplify loyalty-induced blindness). Here Krugman argues that contrary to claims that carbon tax is a superior alternative to cap-and-trade, “the basic economic analysis says […] that an emissions tax […] and a system of tradable emission permits, aka cap and trade, are essentially equivalent in their effects.”

Now, “basic economic analysis” could show almost anything, depending on the model being used. It should not be difficult for Krugman or anyone else to invent various models in which tax and permits are very different. The fact that Krugman seems to think that his particular model reflects reality to such an extent that it is a substitute to careful consideration is absurd dogmatism. In particular, the model Krugman offers completely ignores uncertainty – the fact that emissions producers cannot know at the time that they commit to pay a price for the permits how much a permit would be worth. This uncertainty, of course, is exactly the reason that a cap and trade scheme is favored by the financial industry which stands to profit by supposedly “managing” the uncertainty (with results that may very well be similar to those obtained by the “management” of risk in the mortgage industry) – but the uncertainty is not caused by the involvement of financial manipulators, it is merely the reason the manipulators are attracted to the scheme. Krugman does bother to deny that financial manipulations are a potential problem (although his argument that concerns about this problem are “bizzare” is very weak – emission permits are no more “straightforward” than mortgages. If the latter can be used for manipulation, why can’t the former?). But he avoids even mentioning the inherent source of the problem – the artificial creation of risk in the permit scheme, an issue that would be present even if the permits were not tradable, and the financial industry were not involved.

Here again, then, Krugman avoids, in his own area of expertise, some clear and crucial points, expecting apparently to have his authority carry the weight of the argument.

Krugman, like all mainstream intellectuals, makes such weakly argued points when backing the position of power, when it can be expected that no strong resistance will be encountered. It is his strength that on occasion he goes against the grain – it is his weakness that most of the time he will not.

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