Krugman on Minsky

from Lars Syll

Paul Krugman has often been criticized by people like yours truly and other Minskyites for getting things pretty wrong on  the economics of Hyman Minsky.

When Krugman has responded to the critique, by himself rather gratuitously portrayed as about “What Minsky Really Meant” or “What Keynes Really Meant,” the over all conclusion is — “Krugman Doesn’t Care.”

The reason given for this rather debonair attitude seems to be that history of economic thought may be OK, but what really counts is if reading Minsky — or Keynes — give birth to new and interesting insights and ideas. Economics is not religion, and to simply refer to authority is not an accepted way of arguing in science.

Although I have a lot of sympathy for Krugman’s view on authority, there is a somewhat disturbing and unbecoming coquetting in his attitude towards the great forerunners he is discussing  — as his rather controversial speech at Cambridge, commemorating the 75th anniversary of Keynes’ General Theory, bears evidence of.

Sometimes — and this goes not only for children — it is easier to see things if you can stand on the shoulders of elders and giants. If Krugman took his time and really studied Keynes and Minsky, I’m sure even he would learn a lot.

Krugman is a great economist, but it smacks not so little of hubris to simply say “if where you take the idea is very different from what the great man said somewhere else in his book, so what?” Physicists arguing like that when discussing Newton, Einstein, Bohr or Feynman would not be taken seriously.

Krugman’s comments on this issue is interesting also because they shed light on a kind of inconsistency in his own art of argumentation. During a couple of years Krugman has in more than one article criticized mainstream economics for using to much (bad) mathematics and axiomatics in their model-building endeavours. But when it comes to defending his own position on various issues, he usually himself ultimately falls back on the same kind of models. Models that actually, when it comes to methodology and assumptions, has a lot in common with the kind of model-building he otherwise criticizes.

On most macroeconomic policy discussions I find myself in agreement with Krugman. To me that just shows that Krugman is right in spite of and not thanks to those models he ultimately refers to. And although Krugman repeatedly says that he is a strong believer in “simple models,” these models are far from simple (at least not in any interesting meaning of the word).

There has to be better ways to optimize time than spending hours and hours working through or constructing irrelevant economic models. And whether they are simple or not, is not the nodal point.

Studying great forerunners like Minsky and Keynes may help us to construct better and more relevant economic models – models that really help us to explain and understand reality.