http://www.nytimes.com/2009/08/24/opinion/24krugman.html?hpw Op-Ed Columnist
All the President?s Zombies
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By PAUL KRUGMAN
Published: August 23, 2009
The debate over the ?public option? in health care has been dismaying in many ways. Perhaps the most depressing aspect for progressives, however, has been the extent to which opponents of greater choice in health care have gained traction ? in Congress, if not with the broader public ? simply by repeating, over and over again, that the public option would be, horrors, a government program.
Washington, it seems, is still ruled by Reaganism ? by an ideology that says government intervention is always bad, and leaving the private sector to its own devices is always good.
Call me na?ve, but I actually hoped that the failure of Reaganism in practice would kill it. It turns out, however, to be a zombie doctrine: even though it should be dead, it keeps on coming.
Let?s talk for a moment about why the age of Reagan should be over.
First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the ?magic of the marketplace? were supposed to lead to dramatically better outcomes for everyone? Well, it didn?t happen.
To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years.
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57Paul Krugman, Nobel - Forbes.com Paul Krugman, Nobel
Arvind Panagariya, 10.13.08, 12:14 PM EDT
Next, Jagdish Bhagwati?
pic
After nearly 30 years, the Swedish Academy has returned to international trade awarding the Nobel Prize to Princeton economist Paul Krugman. Earlier, in 1977, the award had gone to two giants, Bertil Ohlin and James Meade, whose brilliant work formed the foundations of trade theory as it was taught when I came to Princeton to do my Ph.D. in 1974. Krugman, no less a giant, revolutionized the field.
Until the end of the 1970s, the Heckscher-Ohlin theory for which Bertil Ohlin won the prize--Eli Heckscher died before the Nobel Prize in economics was instituted--dominated the field. This theory explained well why labor-abundant countries such as South Korea and Taiwan would export labor-intensive products such apparel, toys and footwear and capital-abundant countries such as the United States would export machinery and aircraft.
But it could not satisfactorily explain the two-way trade that was widely known to exist: Many countries exported automobiles and televisions, but they also imported them. The Heckscher-Ohlin theory also did not adequately explain why rich entities such as Europe and the United States, which had very similar endowments of capital and labor, traded more intensively than those with very dissimilar endowments. While descriptive explanations of these phenomena existed, a tight theory explaining them was lacking.
Starting in 1979, Krugman published a series of papers that successfully tackled these and many other related questions. He postulated that consumers like variety in what they consume. For the same expenditure, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products. But the production of a new variety has setup costs. This leads to declining per-unit costs as a larger quantity of the variety is produced and places a limit on the number of varieties the market can profitably supply. A firm produces a new variety only if it can capture a large enough market to allow profitable sales.
This seemingly simple structure gives rise to a tight theory that leads to rich implications: Countries gain from trade not only because larger market allows them to better exploit scale economies, but also because consumers can access a larger variety of products. And even identical economies can gain from trade through scale economies and a larger variety of products. The theory also brought imperfect competition into a formal trade model.
In subsequent work, Krugman combined this simple model of product differentiation and scale economies with transport costs. Scale economies push toward production in one location to minimize costs and then shipping the product to the locations where consumers are. But transport costs push toward locating production near consumers. These opposing forces give rise to large concentrations of populations such as those along the East Coast corridor of the United States.
A hallmark of Krugman's work is parsimony. His models are among the most elegant: lean and thin and transparent. They have all the required parts but no unnecessary fat. It is quite remarkable that while other scholars in the field handsomely incorporated the Krugman model into their research, perhaps the most insightful and elegant applications still came from Krugman, as a quick reading of the chapter on economies of scale in my graduate textbook (co-authored with Jagdish Bhagwati and T. N. Srinivasan) would testify.
Arvind Panagariya, 10.13.08, 12:14 PM EDT
Next, Jagdish Bhagwati?
pic
After nearly 30 years, the Swedish Academy has returned to international trade awarding the Nobel Prize to Princeton economist Paul Krugman. Earlier, in 1977, the award had gone to two giants, Bertil Ohlin and James Meade, whose brilliant work formed the foundations of trade theory as it was taught when I came to Princeton to do my Ph.D. in 1974. Krugman, no less a giant, revolutionized the field.
Until the end of the 1970s, the Heckscher-Ohlin theory for which Bertil Ohlin won the prize--Eli Heckscher died before the Nobel Prize in economics was instituted--dominated the field. This theory explained well why labor-abundant countries such as South Korea and Taiwan would export labor-intensive products such apparel, toys and footwear and capital-abundant countries such as the United States would export machinery and aircraft.
But it could not satisfactorily explain the two-way trade that was widely known to exist: Many countries exported automobiles and televisions, but they also imported them. The Heckscher-Ohlin theory also did not adequately explain why rich entities such as Europe and the United States, which had very similar endowments of capital and labor, traded more intensively than those with very dissimilar endowments. While descriptive explanations of these phenomena existed, a tight theory explaining them was lacking.
Starting in 1979, Krugman published a series of papers that successfully tackled these and many other related questions. He postulated that consumers like variety in what they consume. For the same expenditure, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products. But the production of a new variety has setup costs. This leads to declining per-unit costs as a larger quantity of the variety is produced and places a limit on the number of varieties the market can profitably supply. A firm produces a new variety only if it can capture a large enough market to allow profitable sales.
This seemingly simple structure gives rise to a tight theory that leads to rich implications: Countries gain from trade not only because larger market allows them to better exploit scale economies, but also because consumers can access a larger variety of products. And even identical economies can gain from trade through scale economies and a larger variety of products. The theory also brought imperfect competition into a formal trade model.
In subsequent work, Krugman combined this simple model of product differentiation and scale economies with transport costs. Scale economies push toward production in one location to minimize costs and then shipping the product to the locations where consumers are. But transport costs push toward locating production near consumers. These opposing forces give rise to large concentrations of populations such as those along the East Coast corridor of the United States.
A hallmark of Krugman's work is parsimony. His models are among the most elegant: lean and thin and transparent. They have all the required parts but no unnecessary fat. It is quite remarkable that while other scholars in the field handsomely incorporated the Krugman model into their research, perhaps the most insightful and elegant applications still came from Krugman, as a quick reading of the chapter on economies of scale in my graduate textbook (co-authored with Jagdish Bhagwati and T. N. Srinivasan) would testify.
kkddbbkkddbbBanned869 postsJoined View profileMessageBanned
bob loves krugman can you tell. and 30a is the hack? bob, you scare me
MangoMangoSoWal InsiderNew York/ Santa Rosa Beach9,699 postsJoined View profileMessageSoWal Insider
MangoSoWal InsiderNew York/ Santa Rosa Beach9,699 postsJoined View profileMessageSoWal InsiderI like Paul Krugman about as much as I like the Heritage Foundation Think Tank. I find his op-eds a bit naive and simplistic. I have found the best ideas and come from relatively unknown economists. The only "stock" economist I listen to occasionally is Nouriel Roubini, who predicted this economic mess. But even he will say what's needed or will say something outlandish to scare the bejeebers out of peeps to promote his RGE Monitor (which is excellent, BTW)
I think any economist who writes for any politically slanted venue can be deemed a partisan hack.
I think any economist who writes for any politically slanted venue can be deemed a partisan hack.
MangoMangoSoWal InsiderNew York/ Santa Rosa Beach9,699 postsJoined View profileMessageSoWal Insider
MangoSoWal InsiderNew York/ Santa Rosa Beach9,699 postsJoined View profileMessageSoWal InsiderStarting in 1979, Krugman published a series of papers that successfully tackled these and many other related questions. He postulated that consumers like variety in what they consume. For the same expenditure, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products. But the production of a new variety has setup costs. This leads to declining per-unit costs as a larger quantity of the variety is produced and places a limit on the number of varieties the market can profitably supply. A firm produces a new variety only if it can capture a large enough market to allow profitable sales.I hope he didn't win a Nobel prize for this Captain Obvious postulation. :wave:
This seemingly simple structure gives rise to a tight theory that leads to rich implications: Countries gain from trade not only because larger market allows them to better exploit scale economies, but also because consumers can access a larger variety of products. And even identical economies can gain from trade through scale economies and a larger variety of products. The theory also brought imperfect competition into a formal trade model.
/quote]
30A Skunkape30A SkunkapeSkunkyBackatown Seagrove10,329 postsJoined View profileMessageSkunky
30A SkunkapeSkunkyBackatown Seagrove10,329 postsJoined View profileMessageSkunkyWho the author is matters not. His premise is flawed, in my opinion. Krugman asserts that the government option would lead to 'greater choice in healthcare'.
In my naive, non-Pulitzer, non-Nobel winning mind this is a stretch. I find it ironic that those who most vocally endorse 'the government option' have probably spent a fair amount of time in the past bemoaning Wal-Mart's business model as 'unfair'. Wal-Mart moves into a community and is so cheap it eventually forces smaller competitors out of business. While not a perfect analogy, I think it would be much the same with health insurance. What for profit company can compete with a provider that can bleed money and simply print more? Eventually, there will be even fewer options than exist now!
Perhaps the true zombies, or at least the ones that shuffle a little slower, are those who think that despite overwhelming evidence to the contrary, somehow, some way, THIS time, the government will 'do it right'. Those zombies are alot like Charlie Brown getting ready to kick the football!
In my naive, non-Pulitzer, non-Nobel winning mind this is a stretch. I find it ironic that those who most vocally endorse 'the government option' have probably spent a fair amount of time in the past bemoaning Wal-Mart's business model as 'unfair'. Wal-Mart moves into a community and is so cheap it eventually forces smaller competitors out of business. While not a perfect analogy, I think it would be much the same with health insurance. What for profit company can compete with a provider that can bleed money and simply print more? Eventually, there will be even fewer options than exist now!
Perhaps the true zombies, or at least the ones that shuffle a little slower, are those who think that despite overwhelming evidence to the contrary, somehow, some way, THIS time, the government will 'do it right'. Those zombies are alot like Charlie Brown getting ready to kick the football!
Edited
Who the author is matters not. His premise is flawed, in my opinion. Krugman asserts that the government option would lead to 'greater choice in healthcare'.let's use the wal-mart comparison....economies of scale and they turn a profit. do you think the insurance companies are getting it right?
In my naive, non-Pulitzer, non-Nobel winning mind this is a stretch. I find it ironic that those who most vocally endorse 'the government option' have probably spent a fair amount of time in the past bemoaning Wal-Mart's business model as 'unfair'. Wal-Mart moves into a community and is so cheap it eventually forces smaller competitors out of business. While not a perfect analogy, I think it would be much the same with health insurance. What for profit company can compete with a provider that can bleed money and simply print more? Eventually, there will be even fewer options than exist now!
Perhaps the true zombies, or at least the ones that shuffle a little slower, are those who think that despite overwhelming evidence to the contrary, somehow, some way, THIS time, the government will 'do it right'. Those zombies are alot like Charlie Brown getting ready to kick the football!
bob loves krugman can you tell. and 30a is the hack? bob, you scare mestock up on bullets and look out for the islamo/government thugs....shoot to kill....pray for vicyory
Matt JMatt JSWGB24,862 postsJoined View profileMessageSWGB
Matt JSWGB24,862 postsJoined View profileMessageSWGBRevisionist theory! :lolabove:
and dont get me going on reagan. the left will never see his leadership for what it is and thats because they dont want too-period. if our current president did what reagan did we may very well be out of this recession or would at least see a light at the end of its tunnel. reagan knew like most clear thinking people that you cant spend your way out of debt.
Thanks for the well thought out and well researched response with independent sources and non-partisan rhetoric.
/sarcasm off/
30A Skunkape30A SkunkapeSkunkyBackatown Seagrove10,329 postsJoined View profileMessageSkunky
30A SkunkapeSkunkyBackatown Seagrove10,329 postsJoined View profileMessageSkunkylet's use the wal-mart comparison....economies of scale and they turn a profit. do you think the insurance companies are getting it right?
Insurance companies getting it right is a red herring. I am pointing out that Krugman's premise is flawed.
I don't disagree that reforms are needed.
Insurance companies getting it right is a red herring. I am pointing out that Krugman's premise is flawed.how else can you motivate insurance companies whose number one mission is to turn a profit?
I don't disagree that reforms are needed.
Matt JMatt JSWGB24,862 postsJoined View profileMessageSWGB
Matt JSWGB24,862 postsJoined View profileMessageSWGBhow else can you motivate insurance companies whose number one mission is to turn a profit?
By posting on sowal instead of working. 😀
poppypoppyBannedMiramar Beach2,854 postsJoined View profileMessageBanned
Real median income in the United States, 1967 - 2006. Krugman is a partisan hack.
dictators have the best of educations and many have received the nobel prize. and your point is.................
one can have the best possible resume, but are his predictions correct? and answer to that is "no" when it comes to krugman. he constantly wrong and thats simply a fact. but go ahead, take his advice....
Didn't Al Gore win one of those too??? :floor:
Median income increases have generally been constant over the last 50 years. Krugman, in all his wisdom, singles out Reagan policy and claims that it failed, even though there's no evidence of this. Average growth was the same under Carter, Reagan, Clinton, and Bush. The largest short term increases were under Reagan and Clinton! Krugman is a partisan hack.
bob loves krugman can you tell. and 30a is the hack? bob, you scare me
Now let's calm down, you are going to have to get over the fact that G.W. Bush was one of 156 candidates considered for the 2002 Peace Prize, which was awarded in October 2002 to former President Jimmy Carter.
Does anyone know if a Republican has ever won one?
kkddbbkkddbbBanned869 postsJoined View profileMessageBanned
Now let's calm down, you are going to have to get over the fact that G.W. Bush was one of 156 candidates considered for the 2002 Peace Prize, which was awarded in October 2002 to former President Jimmy Carter.
Does anyone know if a Republican has ever won one?
in the modern day nobel organization, a republican no matter what he or she does will never win. perhaps you should look at the history of this group and answer that question for yourself. but, nice bomb throw. as if it makes any sense at all, with all due respect. i guess the party of attorney's and activists are smarter, right? talk about living in a political bubble....
30ashopper30ashopperSoWal InsiderRight here!6,845 postsJoined View profileMessageSoWal Insider
30ashopperSoWal InsiderRight here!6,845 postsJoined View profileMessageSoWal InsiderThanks for the well thought out and well researched response with independent sources and non-partisan rhetoric.
/sarcasm off/
Did we really want to get into a "Did Reagan end the cold war?" discussion SWGB? I didn't. That horse has taken enough punishment. :wave: It's the kind of argument that never ends, since neither side will ever change their position. Shame on you for bringing it up in a healthcare thread. 😀
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