Tag: John Maynard Keynes

Krugman Chugs Keynsian Kool-Aid

Yesterday, we joked on Twitter that Krugman would say that the earthquake wasn’t “big enough”. Sure enough, someone put up a fake Paul Krugman profile on Google+ making that argument. Krugman has distanced himself from the idea (although a number of his followers agreed with the comment). But let’s remember who we’re dealing with. Here is Krugman on September 14, 2001 arguing that 9/11 would simulate the economy, especially by eroding resistance to counter-cyclical spending. He has previously argued that World War II brought us out of the Depression (because rationing is prosperity and a massive draft creates full employment) and, as Alex noted, he made a comment about the stimulus of an alien invasion.

Really, the remarkable thing here is that he didn’t praise the earthquake for its potential stimulating effect. The broken window is classic Keynesianism. Why run away from it now?

Update: Krugman’s defense is that World War II was still simulative but that the only reason natural disasters are not is because our disaster relief spending is too small.