By Ralph Benko
Professor Paul Krugman is leaving Princeton. Is he leaving in disgrace?
Not long, as these things go, before his departure was announced Krugman thoroughly was indicted and publicly eviscerated for intellectual dishonesty by Harvard’s Niall Ferguson in a hard-hitting three-part series in the Huffington Post, beginning here, and with a coda in Project Syndicate, all summarized at Forbes.com. Ferguson, on Krugman:
Where I come from … we do not fear bullies. We despise them. And we do so because we understand that what motivates their bullying is a deep sense of insecurity. Unfortunately for Krugtron the Invincible, his ultimate nightmare has just become a reality. By applying the methods of the historian – by quoting and contextualizing his own published words – I believe I have now made him what he richly deserves to be: a figure of fun, whose predictions (and proscriptions) no one should ever again take seriously.
Princeton, according to Bloomberg News, acknowledged Krugman’s departure with an extraordinarily tepid comment by a spokesperson. “He’s been a valued member of our faculty and we appreciate his 14 years at Princeton.”
Shortly after Krugman’s departure was announced no less than the revered Paul Volcker, himself a Princeton alum, made a comment — subject unnamed — sounding as if directed at Prof. Krugman. It sounded like “Don’t let the saloon doors hit you on the way out. Bub.”
To the Daily Princetonian (later reprised by the Wall Street Journal, Volcker stated with refreshing bluntness:
The responsibility of any central bank is price stability. … They ought to make sure that they are making policies that are convincing to the public and to the markets that they’re not going to tolerate inflation.
This was followed by a show-stopping statement: “This kind of stuff that you’re being taught at Princeton disturbs me.”
Taught at Princeton by … whom?
Paul Krugman, perhaps? Krugman, last year, wrote an op-ed for the New York Times entitled Not Enough Inflation. It betrayed an extremely louche, at best, attitude toward inflation’s insidious dangers. Smoking gun?
Volcker’s comment, in full context:
The responsibility of the government is to have a stable currency. This kind of stuff that you’re being taught at Princeton disturbs me. Your teachers must be telling you that if you’ve got expected inflation, then everybody adjusts and then it’s OK. Is that what they’re telling you? Where did the question come from?
Is Krugman leaving in disgrace? Krugman really is a disgrace … both to Princeton and to the principle of monetary integrity. Eighteenth century Princeton (then called the College of New Jersey)president John Witherspoon, wrote, in his Essay on Money:
Let us next consider the evil that is done by paper. This is what I would particularly request the reader to pay attention to, as it was what this essay was chiefly intended to show, and what the public seems but little aware of. The evil is this: All paper introduced into circulation, and obtaining credit as gold and silver, adds to the quantity of the medium, and thereby, as has been shown above, increases the price of industry and its fruits.
“Increases the price of industry and its fruits?” That’s what today is called “inflation.”
Inflation is a bad thing. Period. Most of all it cheats working people and those on fixed incomes who Krugman pretends to champion. Volcker comes down squarely, with Witherspoon, on the side of monetary integrity. Krugman, cloaked in undignified sanctimony, comes down, again and again, on the side of … monetary finagling.
Krugman consistently misrepresents his opponents’ positions, constructs fictive straw men, addresses marginal figures, and ignores inconvenient truths set forward by figures of probity such as the Bank of England and the Bundesbank, thoughtful work such as that by Member of Parliament (with a Cambridge Ph.D. in economic history) Kwasi Kwarteng, and, right here at home, respected thought leaders such as Steve Forbes and Lewis E. Lehrman (with whose Institute this writer has a professional affiliation).
Professor Krugman, on July 7, 2014, undertook to issue yet another of his fatwas on proponents of the classical gold standard. His New York Times op-ed, Beliefs, Facts and Money, Conservative Delusions About Inflation, was brim full of outright falsehoods and misleading statements. Krugman:
In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked “currency debasement and inflation.” Prominent politicians like Representative Paul Ryan joined the chorus.
Reality, however, declined to cooperate. Although the Fed continued on its expansionary course — its balance sheet has grown to more than $4 trillion, up fivefold since the start of the crisis — inflation stayed low.
Many on the right are hostile to any kind of government activism, seeing it as the thin edge of the wedge — if you concede that the Fed can sometimes help the economy by creating “fiat money,” the next thing you know liberals will confiscate your wealth and give it to the 47 percent. Also, let’s not forget that quite a few influential conservatives, including Mr. Ryan, draw their inspiration from Ayn Rand novels in which the gold standard takes on essentially sacred status.
And if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.
Krugman is, of course, quite correct that the “return-to-gold faction has been gaining strength.” Speculating beyond the data thereafter Krugman goes beyond studied ignorance. He traffics in shamefully deceptive statements.
Lewis E. Lehrman, protege of French monetary policy giant Jacques Rueff, Reagan Gold Commissioner, and founder and chairman of the Lehrman Institute, arguably is the most prominent contemporary advocate for the classical gold standard. Lehrman never rendered a prediction of imminent “runaway inflation.” Only a minority of classical gold standard proponents are on record with “dire” warnings, certainly not this columnist. So… who is Krugman talking about?
Of the nearly two-dozen signers of (a fairly mildly stated concern) open letter to Bernanke which Krugman cites as prime evidence, only one or two are really notable members of the “return-to-gold faction.” Perhaps a few other signers might have shown some themselves in sympathy the gold prescription. Most, however, were, and are, agnostic about, or even opposed to, the gold standard.
Indicting gold standard proponents for a claim made by gold’s agnostics and opponents is a wrong, cheap, bad faith, argument. More bad faith followed immediately. Whatever inspiration Rep. Paul Ryan draws from novelist Ayn Rand, Ryan is by no means a gold standard advocate. And very few “influential conservatives” (unnamed) “draw their inspiration” from Ayn Rand.
Nor are most proponents of the classical gold standard motivated by a fear that paper money is an entering wedge for liberals to “confiscate your wealth and give it to the 47 percent.” A commitment to gold is rooted, for most, in the correlation between the gold standard and equitable prosperity. Income inequality demonstrably has grown far more virulent under the fiduciary Federal Reserve Note regime — put in place by President Nixon — than it was, for instance, under the Bretton Woods gold+gold-convertible-dollar system.
Krugman goes wrong through and through. No wonder Ferguson wrote: “I agree with Raghuram Rajan, one of the few economists who authentically anticipated the financial crisis: Krugman’s is “the paranoid style in economics.” Krugman, perversely standing with Nixon, takes a reactionary, not progressive, position. The readers of the New York Times really deserve better.
Volcker is right. “The responsibility of any central bank is price stability.” Krugman is wrong.
Prof. Krugman was indicted and flogged publicly by Niall Ferguson. Krugman thereafter announced his departure from Princeton. On his way out Krugman, it appears, was reprimanded by Paul Volcker. Krugman has been a disgrace to Princeton. Is he leaving Princeton in quiet disgrace?