Wednesday, July 7, 2010

What Type of Keynesian is Paul Krugman?

In a recent post I reviewed the three varieties of Keynesian economics (see Neoclassical Synthesis Keynesianism, New Keynesianism and Post Keynesianism: A Review). A question raised by this post is this: what kind of Keynesian is Paul Krugman?

Paul Krugman is an outstanding liberal economist and won the Nobel Memorial Prize in Economics in 2008. I admire Krugman's work very much. Krugman began his career as a New Keynesian, but he is sometimes regarded as an “Old Keynesian” (i.e., more like a post-WWII neoclassical synthesis Keynesian such as James Tobin). However, calling Krugman an “Old Keynesian” is probably misleading. Krugman in early 2009 made this comment on his blog after reading Hyman Minsky:

I really am gravitating toward a Keynes-Fisher-Minsky view of macro, although of the three I’d much rather read Keynes.

Paul Krugman, “Actually existing Minsky,” May 19, 2009, http://krugman.blogs.nytimes.com/2009/05/19/actually-existing-minsky/

However, as of October 2009, Krugman still declared himself an economist basically using New Keynesian macroeconomic foundations:

I … quarrel with designating me a “radical Keynesian.” I’m just a Keynesian, willing to follow the logic of my analysis. A perfectly standard New Keynesian model, with intertemporal optimization and all that — the kind of model that is standard in freshwater courses — says that under current conditions fiscal stimulus should be very strong, much stronger than what we’re actually doing.

Paul Krugman, “Samuel Brittan’s recipe for recovery,” October 16, 2009,
http://krugman.blogs.nytimes.com/2009/10/16/samuel-brittans-recipe-for-recovery/


Krugman rejects the idea that he is a “radical” Keynesian, and his use of a New Keynesian model supports this.

Nevertheless, Post Keynesian economists have pointed out that Krugman seems to share similarities with their macroeconomics: he apparently emphasises changes in liquidity preference as a cause of unemployment, has refuted the New Keynesian idea that price and wage stickiness is the fundamental cause of involuntary unemployment, and rejects Say’s law. If this is the case, these ideas make him much closer to Post Keynesian macroeconomics than he perhaps realises (see Felipe Rezende, Keynes’s Relevance and Krugman’s Economics, August 18, 2009, New Economic Perspectives Blog).

3 comments:

  1. Interesting post and blog.

    Keep the good work up!

    Marco

    ReplyDelete
  2. Another AnonymousJuly 15, 2010 at 11:24 PM

    Just another "keep up the good work". You have a valuable, well written blog here.

    ReplyDelete
  3. Paul Krugman accepts that liquidity preference can change, yet he accepts the neoclassical axiom that money is just a veil over barter and rejects Keynesian uncertainty? That man is a labyrinth of internal contradictions.

    ReplyDelete