First, the interviewer made a statement that is an outright falsehood: that Keynes seriously advocated stimulus by building pyramids or digging holes in the ground. Kenneth Rogoff makes the same error, falsely accusing Keynes of really advocating employing people by digging holes in the ground. Krugman’s mistake was his failure to correct this rubbish right away (although I get the sense that this interview may be edited, so maybe it got cut out). Keynes, of course, did not seriously advocate this: he said that if you could find nothing else of use to do, then even these acts would still raise income and production, even though it would be of no use in itself. This comment was in fact Keynes’s way of underlining how aggregate/effective demand is what drives output and employment, and he was right. Moreover, any failed private investment is essentially in the same category as the government having people dig holes in the ground, but no one doubts that this private activity raises output and employment while it is in progress. The point is precisely that we want the government to raise output and employment by doing economically and socially productive and useful things.
In the course of the debate, Krugman made what is obviously a facetious remark, a piece of levity, invoking aliens: that, if massive government spending programs were instituted on the scale of World War II to fight off some serious threat to America, say, like an alien invasion, then this would drive the economy to full employment. Note that Krugman was at pains to point out that this kind of military spending involves negative social product spending. Note that he did not seriously advocate any such military spending. Krugman’s point, illustrated in a rather silly way, is the same as that of Keynes: merely that effective demand drives output and employment in modern capitalist economies, and that spending and employment programs on the scale of World War Two would eliminate the sluggish growth and high unemployment the US is currently experiencing.
However, as everyone else who is not an Austrian cultist knows, Krugman favours public works and social spending, not military spending.
This is very clear in the full video of the debate, which you can see below.
It is fairly amusing to see assorted libertarians and Austrians reduced to blathering idiocy as they distort Krugman’s remarks, and falsely say that he really and seriously urged government military spending to fend off an alien invasion. I guess cultist, loser ideologues also tend to have no sense of humour either.*
The haplessness of Austrians was doubly emphasised when the same hacks seized upon the following false message that someone just made up by pretending to be Krugman:
“People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.”Some links on this whole business: