Let me explain this by analogy: people do not need to say explicitly that they do not approve of the collectivization of agriculture, but after saying that the “Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth”, Paul Samuelson could be presumed to approve of the collectivization of agriculture unless he specified otherwise.

A less extreme example: when he recommends the German model, Krugman might have meant keeping the stimulus as small as possible, as the Germans have done; but he has explicitly recommended a stimulus as big as possible, so that interpretation of his words is no longer possible. He has not dissociated himself from laws against firing people, though.

The Germans have indeed enacted policies that make firing more difficult, but Krugman doesn’t recommend the same:

“So it’s time to try something different.

Just to be clear, I believe that a large enough conventional stimulus would do the trick. But since that doesn’t seem to be in the cards, we need to talk about cheaper alternatives that address the job problem directly. Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German-style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.”

I’ll grant that Krugman speaks approvingly of what the Germans have done in this area. Still, it seems to me that Landsburg should address the recommendations actually offered by Krugman, and do so in a way that doesn’t completely sidestep the argument made for them.

Paul Krugman:
Alternatively, or in addition, we could have policies that support private-sector employment. Such policies could range from labor rules that discourage firing to financial incentives for companies that either add workers or reduce hours to avoid layoffs.

And that’s what the Germans have done. Germany came into the Great Recession with strong employment protection legislation.

Dr. Krugman offers two suggestions for boosting employment, and neither involves telling employers that they can’t fire people. So Landsburg’s first point (offered after two paragraphs of cheap shots) is a straw man.

As to Landsburg’s second point, Krugman explains in his article why -in extraordinary circumstances such as the one we find ourselves- boosting employment may be desirable even without concomitant gains in productivity. Landsburg may disagree with his logic, but it would be nice if he actually addressed it instead of offering knee-jerk dogma as argument.

Their politics are diametrically opposed to Krugman’s. For those who don’t know, Chicago school = neoliberals/neoclassics/ capitalist dogmas that lead us to the recession, increased disparity of the distribution of wealth (”the rich get richer, the poor get poorer, etc. check http://en.wikipedia.org/wiki/Neoliberalism#Chicago_School

When you say that Krugman’s statements cannot be followed to a logical end, which ones are you talking about exactly ? It’s hard to guess whether you cannot follow his logic or there is just no logic in them, if you don’t provide an example…

Let’s be precise, and specific. Let’s see the example at hand.

Peremptory statement from Mr. Landsburg (and you): Krugman is oblivious to the lessons of economics that any undergrad “knows”. Which lesson exactly in this instance ? Which universal law of a hypothetical exact science called “Economics”? He does not say. Neither do you.

Consider the opening statement criticised by Mr. Landsburg. Krugman compares how countries B & C REACTED to the recession. Now consider the incredibly fuzzy “rebuttal” written by the same Landsburg 2 years ago (before recession), comparing not reactions but a static “average hours worked”. Clearly, he did not understand the point.

Second, it’d be good to tell us from where he gets those average working hours, mixing employed and unemployed people, with different scales for each country.

Third, another blunt assumption: “economics professors around the world (sic) work hard to drill out of their freshmen” … “labor rules that discourage firing and incentives for “short-time work schemes”” Wrong. Absolutely wrong. This is a policy debate, hence by definition a matter of choice. There is no universal rule that says this policy is bad, which is why countries have debated and adopted it.

Fourth: “A really really really good way to get employers to stop hiring people is to tell them they can’t fire people” ? … Where to begin ? First, if there is no choice and business is down, companies will not only fire people, they will stop hiring anyways. Logic. And, well, a really really good way to create more unemployement is to … encourage firing people and create job instability. That is logic. In Landsburg neoliberal dogma, jobs should be an adjustment variable, including for companies that are immensely profitable but want to simply lay off people at will, forgetting the human cost and the loss of productive power. As I said, it’s a matter of choice. Who should benefit from policy choices ? Shareholders or employees? There’s no right or wrong, just choices.

And last: putting people to work is not terribly useful if you’re not going to pay them a decent salary and they have to cumulate two, three or more jobs to make ends meet, thus raising the “average number of hours worked by an American”, that embodiment of modern capitalist success with a mortgage.

Best,

Cedric