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Consistency is one of the touchstones used to evaluate not only arguments but also the people that put forward the arguments. In assessing the person advocating an argument, it is natural to look for coherence over time in their arguments and, secondly, whether the person offers a convincing explanation for a change of view. We apply this framework to evaluate some of Paul Krugman's macroeconomic analysis.
Froth and Bubble in 2002
In the New York Times in August 2002, Paul Krugman writes: 'To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble' (Krugman 2002).
In blog and newspaper pieces around that time Krugman is encouraging the Federal Reserve to achieve such stimulus through looser monetary policy. For example, he argues: 'It's still not clear that Mr. Greenspan has caught up with the curve - let's have at least one more rate cut, please.' (Krugman 2001). Yet half a decade later he argues: 'If there are two guys that I blame for this crisis it would be, in order, Alan Greenspan and Phil Gramm.' (Krugman 2008a)
It is reasonable enough to change one's mind. But to change one's mind without explanation, and to compound the aggravation by damning those who implemented the very policy that one favoured at the time, is extraordinary.
Not content to leave this well alone Krugman disingenuously explains in regard to his 2002 piece quoted above, that: 'It wasn't a piece of policy advocacy, it was just economic analysis.' (Krugman 2009a)
Which Paul Krugman Was Right About Policy in 2002?
The recession of 2001 was one of the shortest (March-November) and mildest in US history. The unemployment rate rose from the December 2000 low of 3.9 per cent to 5.7 per cent a year later; a rate it roughly held throughout 2002. Employment performed similarly well. Inflation reached its low of 1.1 per cent in January and February 2002, and then started rising steadily (with a small temporary dip in June/July 2002). GDP actually grew in the first and second quarters of 2002 by 1.6 per...