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Krugman Talking About Productive Capacity, and Demand vs. Supply Shocks, After the Crisis Struck

Summary:
I am mostly making this post for bookkeeping purposes for myself, but for those of you arguing with me in the comments of my recent posts, take a look. I welcome your comments. The following posts are from Krugman, discussing other economists who were trying to defuse the calls for more stimulus, by saying the economy post-2008 was facing structural problems. I have ranked them in order of helping my cause in the current dispute over potential GDP. 1) In this 2012 post, Krugman can’t believe even professional economists think that the economy’s productive capacity could be lower. They are confusing supply and demand. 2) In this post from 2012 Krugman singles out the Austrians by name, who claim that the economy’s productive capacity is lower because of

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I am mostly making this post for bookkeeping purposes for myself, but for those of you arguing with me in the comments of my recent posts, take a look. I welcome your comments.

The following posts are from Krugman, discussing other economists who were trying to defuse the calls for more stimulus, by saying the economy post-2008 was facing structural problems. I have ranked them in order of helping my cause in the current dispute over potential GDP.

1) In this 2012 post, Krugman can’t believe even professional economists think that the economy’s productive capacity could be lower. They are confusing supply and demand.

2) In this post from 2012 Krugman singles out the Austrians by name, who claim that the economy’s productive capacity is lower because of malinvestments made during the boom. He says no, the data show that can’t be right. Now to be sure, Krugman isn’t now saying that potential output in 2012 was lower because of boom-time malinvestments, but he IS saying it was lower. So he was clearly wrong, back in 2012, when he was saying any moron could tell from looking at CPI and bond yields that the Austrian story made no sense.

3) In this piece from mid-2013 Krugman dismisses people saying the economy had a structural problem. In fairness, you could say there that he was focusing on sectoral mismatches. (Incidentally, note the non sequitur in that post. His data are entirely consistent with my worldview. It’s amazing to see his inability to get into other people’s heads. Of COURSE unemployment would fall the most in states where it initially rose the most. Duh.)

4) In this late 2013 piece Krugman again says he can’t believe some economists are still banging on about the economy facing a structural issue. Clearly the problem is lack of demand.

Robert Murphy
Christian, Austrian economist, and libertarian theorist. Research Prof at Texas Tech and author of *Choice*. Paul Krugman's worst nightmare.

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