Posted on 04/26/2003 3:18:34 PM PDT by Timesink
Saturday, April 26, 2003
He posted a first "response" Thursday night on his personal website, where Andrew Sullivan says "he admits to errors in order to avoid fessing up to them in the Times itself." Now, after another shot to the forehead (blog version and National Review Online version), he's got another "response" (it's appended to the first one -- same link).
The twitching is becoming more violent -- it's getting to the point where even I am tempted to avert my eyes from the bloody mess. But it's for the cause of truth, so here goes...
The second "response" is brimming with the usual Krugman intellectual bullying -- "Only someone completely ignorant of what's in the textbooks would expect..." -- "...most forecasts presume..." -- "...few people outside the administration think..." -- "...every macroeconomic model I can think of..." -- and so on. This kind of rhetoric works if the reader buys into the multi-linked mythic chain that economics is an exact science, that Krugman is a great authority in that science, and that Krugman is unbiased. But for the rest of us, let's look at the facts.
"...the statistical model used for the projections does not include any supply-side effects under which lower tax rates would be expected to boost labor supply and further improve job creation. Corporate income tax relief would likewise be expected to lead to positive supply-side effects through improved allocation of capital across the economy and thus higher growth and job creation?again, however, this is not reflected in the numerical projections."
So a model that Krugman can't "think of" would include supply-side effects -- and it hardly matters whether or not the CEA happened to have used this model or not (perhaps Krugman should even give them some credit for not using it, and as a result adducing employment figures less flattering to their case than they might have done). The point is that such a model exists -- and, in fact, such a model is at the heart of the pro-growth rationales that supporters of the tax-cut in and out of the Bush administration have offered repeatedly (here -- January 9, January 10, January 31, March 28, April 8, April 11 -- are several of mine).
Would such a supply-side model that Krugman can't "think of" be correct? I believe it could be theoretically; and it would be in this case. All tax-cuts are not created equal -- some have supply-side pro-growth effects and some do not -- but I believe for what I hold as sound reasons that this one is very pro-growth (here's why). Of course I'm willing to admit that this conclusion is nothing but my judgment as an economist. Krugman, on the other hand, acts as though all tax-cuts operate exactly the same way on the economy, and as though it is a matter of established scientific fact that this is so.
You don't have to be an economics professor to have an opinion about this. Use your own judgment -- and don't let Paul Krugman intimidate you. Would a cut in income taxes have different long-term effects depending on whether (a) before the cut the tax rate was 99%; or (b) the tax rate was 10%? At current rates, would it make a difference depending on whether the cut applied to (a) the lowest income workers who are being taxed lightly already, and who can't really work any harder or longer in response to lower rates; or (b) the highest income workers who are being taxed heavily, and are more likely to be in a position to respond to incentives by working harder and longer? Any difference depending on whether the tax-cut applies to (a) wage income, where the incentive response is to work harder; or (b) capital income, where the response is to invest more or take more risk? Different people may have very different specific answers to these hypotheticals -- but to me it's pretty obvious that tax-cuts are subtler and more diverse things than Krugman's monolithic analysis assumes.
At the end of the day, what is most striking to me about this whole affair is what it says about the so-called "science" of economics, aside from what it says about Krugman. It shows that highly credentialed (but politically biased) economists can use their reputations as scientists to offer to the public egregious errors-cum-lies. And then they can defend themselves, when caught at it, by twisting the infinitely elastic theories of their "science" into whatever shape is required to justify the lie after the fact. In terms of its long-range impact on human well-being, the "science" of economics may well be the most dangerous fraud ever perpetrated.
Posted by Donald Luskin at 4:04 PM | link
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