Sorry to have been so silent this week; various deadlines have kept me away from this corner of the Internet. I’ll be back in force next week for sure. Meanwhile, if you’re looking for some good reading, this is the best thing I’ve seen all morning.
Edited to add: “Best all morning” was not intended as damning-by-faint-praise. It’s actually the best of many mornings.
Imagine you’ve got a drinking problem. And imagine this conversation with your spouse:
Spouse: Dear, you’ve really got to do something about your drinking. You’ve been in three auto accidents this week, you’ve lost your job, and you’ve been trying to beat the children, though you keep passing out before you can get to them. I want to help you figure out how to get this under control.
You: You’ve got a fair point there. But let me point out that it would also be a good idea to redecorate the living room.
Spouse: Well, maybe so, and it’s something we can talk about at some point. But right now, I’d really like to focus on the drinking issue.
You: Doesn’t that strike you as imbalanced? Here we’ve got two issues on the table, and you want to focus 100% on one of them and 0% on the other. Why are you being so one-sided?
Spouse: Well, but I feel like there’s some urgency about the drinking thing, and I’d like to prioritize it.
You: Apparently, you’re fanatical on this issue. I don’t see how I can continue to take you seriously.
Spouse: Well, actually I’m trying to get you to focus on a very serious issue.
You: Yes, but by focusing exclusively on that issue, you’re betraying your fanaticism. Clearly, I’m the one who’s willing to address our problems, and you’re the one who’s just out to score debating points.
Spouse: Huh?
You: Not only that, but I’ve got a Nobel-prize winning economist who agrees with me!
How does that make you feel? I feel that way a lot when I read the news lately. Arguably, our country faces a spending crisis. The Republicans claim they want to deal with that crisis. (There’s some legitimate question about how sincere they are, but they at least say they want to deal with it.) The Democrats say: Okay, but let’s also talk about raising taxes. Maybe they’d also like to talk about redecorating the Rotunda; this seems roughly as pertinent. In other words, the Democrats attempt to deflect attention from the crisis (or the alleged crisis) by insisting that we talk about some other thing at the same time — and then they insist that the Republicans, by insisting that we focus on the issue at hand, are “betraying their fanaticism”. And they’ve managed to find a Nobel-prize winning economist willing to parrot this nonsense almost daily on the pages and webpages of the New York Times.
Paul Krugman is at it again, bemoaning the mendacity of politicians who, for “careerist reasons”, will never admit their mistakes and therefore lock themselves into bad policies. He even quotes Ralph Waldo Emerson:
A foolish consistency is the hobgoblin of little minds,
adored by little statesmen and philosophers and divines.
And Krugman’s solution to this problem? More power for the politicians, of course.
The usual case against the minimum wage has three components:
The problems with this case are that
Minimum wages are bad policy, though — but for entirely different reasons.
I’ll get to those reasons shortly, but first let’s examine the traditional argument a little more closely. I’ll number my paragraphs to make it easier for commenters to respond.
Paul Krugman, apparently relying on the stupidity of his readers, opens with this quote:
“At some point, Washington has to deal with its spending problem,” Speaker John A. Boehner of Ohio said Wednesday. “I’ve watched them kick this can down the road for 22 years since I’ve been here. I’ve had enough of it. It’s time to act.”
Then Krugman comments as follows:
22 years, huh? Indeed, Boehner was elected in 1990, and entered the House at the beginning of 1991. So what kind of can-kicking was going on during his first, say, decade in office? Here’s the picture:
Hmm — it sort of looks as if the US was sharply reducing its debt during the presidency of a guy named, I don’t know, Bill something or other.
See what he did there? Boehner says something about spending; Krugman responds with an irrelevant chart depicting debt, and hopes you won’t notice he’s completely changed the subject.
Paul Krugman offers a nice thought experiment to illustrate why government debt, in and of itself, does not make the country as a whole any poorer:
Suppose that … President Santorum passes a constitutional amendment requiring that from now on, each American whose name begins with the letters A through K will receive $5,000 a year from the federal government, with the money to be raised through extra taxes. Does this make America as a whole poorer?
The obvious answer is not, at least not in any direct sense. We’re just making a transfer from one group (the L through Zs) to another; total income isn’t changed. Now, you could argue that there are indirect costs because raising taxes distorts incentives. But that’s a very different story.
OK, you can see what’s coming: a debt inherited from the past is, in effect, simply a rule requiring that one group of people — the people who didn’t inherit bonds from their parents — make a transfer to another group, the people who did. It has distributional effects, but it does not in any direct sense make the country poorer.
Two comments:
Paul Krugman gets this one exactly right; among the 47% of Americans who pay no federal income tax in a given year, most do pay federal income tax at some point in their lives — and thus have at least some stake in the tax system.
But even putting that aside, what’s particularly distressing about Mitt Romney’s “47%” speech is the failure to recognize at least one of the following two propositions:
a) Even people who never pay federal income tax have a substantial personal stake in a healthy, thriving economy, and therefore have a stake in federal tax policy. In particular, wages are determined by productivity, and productivity depends to a substantial extent on the accumulation of capital, which can be directly influenced by tax policy.
b) It is possible for a skilled candidate to explain the above, and to sell pro-growth tax policies as pro-wage-earner tax policies.
Yes, the candidate who tries to make such a reasoned case will be the victim of a certain amount of demagoguery about “trickle-down economics”, but the candidate who allows himself to be paralyzed by such threats should not be running for president.
Paul Krugman, defending the IS-LM (a/k/a “old Keynesian”) model of the macroeconomy as a non-rigorous but useful “scratchpad”, misses the point by a mile:
It’s a simplified model that more or less gets at what you think are the essentials of an issue, and is easy to work with, so you can use it to reach quick first-pass judgments about policy or whatever.
………
But IS-LM isn’t the prime example of a scratchpad. What is?
The answer is, supply and demand.
It is not easy to derive supply and demand curves for an individual good from general equilibrium with rational consumers blah blah. And it’s definitely not easy to justify consumer and producer surplus as measures of welfare. And there have always been some purists who condemn any use of the S and D curves we all grew up with, the use of triangles to measure welfare loss, and all that.
But for the most part nobody pays attention. The supply-and-demand framework is so convenient, while pretty much getting at what you want to get at, that it’s what almost everyone uses to get a first-pass analysis of economic issues.
Okay, look. Supply and demand (and, especially, triangles of welfare loss, etc) are not entirely rigorous, but they’re good useful simplifications that actually give useful (though approximate) answers to important policy questions. Sort of like Ohm’s Law for electrical circuits.
But IS-LM is not like that at all, because IS-LM does not even address the key policy questions in macroecomics. IS-LM can tell you, perhaps, how to fight a recession, but it can’t tell you whether the recession is worth fighting — not even loosely, because the model contains no individual utility functions and no social welfare function. It therefore does not allow you even to formulate the question of whether a given policy is worth its costs, because it provides no framework for weighing costs against benefits.
Ezra Klein, quoted with approval by Paul Krugman, offers this chart of how the Obama and Romney tax proposals will change rates for taxpayers in various quintiles:
What we’re supposed to infer, according to Krugman, is that
we have an election in which one candidate is proposing a redistribution from the top … downward, mainly to lower-income workers, while the other is proposing a large redistribution from the poor and the middle class to the top.
But no such thing is remotely true. What we actually have is an election in which both candidates are proposing massive redistributions from the top downward, one slightly less so than the other. You’d never know this from looking at Klein’s chart because it illustrates changes in rates, whereas what actually matters is the rates themselves. It makes no sense to ask whether any particular group ought to be paying more or less without reference to how much they’re already paying.
Indeed, this is a classic example of what I once called the “Grandfather Fallacy” — by focusing on changes instead of absolutes, Klein’s chart conceals any existing inequities and hence treats them as “grandfathered in”.
Fortunately, Greg Mankiw has provided the numbers that allow us to make the requisite correction. Here, according to Mankiw, are the current tax burdens on various income groups (counting transfers as negative taxes, as of course one should):
Bottom quintile: -301 percent
Second quintile: -42 percent
Middle quintile: -5 percent
Fourth quintile: 10 percent
Highest quintile: 22 percentTop one percent: 28 percent
That “-301 percent” means, for example, that a typical family in the bottom quintile receives $3.01 in net transfers for every $1 that it earns.
By adding these numbers to the numbers in Klein’s graph, we can construct a picture that actually depicts something interesting, namely the projected tax burdens for each group. It looks like this (the vertical axis represents percentage of income):
Note, for example, that, contrary to the impression you might have gotten from Klein’s and Krugman’s posts, both plans place the highest percentage burden on the top 1%, and both plans place a negative burden on the middle quintile — though Obama’s does both of these things to an ever-so-slightly greater extent than Romney’s does. There’s room for disagreement about which plan is fairer, but no room, I think, for disagreement about which chart is relevant.
(Click here to watch on YouTube.)
Sixteen years ago, Slate Magazine was launched, with Paul Krugman and me as the alternating economics columnists. At the time, Paul was fond of observing (with considerable dismay) that most of the time, highly educated and intelligent non-economists appear to be completely incapable of distinguishing between compelling arguments and utter nonsense in the field of economics. His essay on “Pop Internationalism” is a brilliant series of riffs on this theme — a guided tour of sheer balderdash that gets a respectable hearing even though no economist could possibly take it seriously. “Pop Internationalism” (the lead essay in the book of the same name) is high on my recommended reading list.
The lesson I took from this observation was that we (Krugman, I, and economic commentators in general) had a responsibility to explain not just what economists believe, but why we believe it — to help readers understand that there’s a rigorous underlying logic to the discipline, and that there are good reasons for insisting that people adhere to that logic. Nowadays, when he’s at his most obstreperous, I sometimes suspect Krugman of having drawn a very different lesson — that because nobody understands the real logic of economics, we can get away with saying any damned thing we want to. It’s a frustrating thing to watch, because when he’s good, he’s very very good. But when he is bad he is horrid. I won’t list examples here, but you can find quite a few by browsing my Paul Krugman archive.
Paul Krugman on last week’s Supreme Court arguments:
I was struck, in particular, by the argument over whether requiring that state governments participate in an expansion of Medicaid … constituted unacceptable “coercion.” One would have thought that this claim was self-evidently absurd. After all, states are free to opt out of Medicaid if they choose; Medicaid’s “coercive” power comes only from the fact that the federal government provides aid to states that are willing to follow the program’s guidelines. If you offer to give me a lot of money, but only if I perform certain tasks, is that servitude?
Wrong question. The right question is:
If you take a lot of money from me and then offer to give it back, but only if I perform certain tasks, is that servitude?
Because, you see, the federal government is not handing out its own money to state governments — it’s handing out money that it takes from the citizens of those very states for the purpose of (conditionally) handing it back. (Of course “handing it back” isn’t exactly right either, because the payments go not to taxpayers but to their state governments — but it’s a lot closer to right than Krugman’s formulation.)
Okay, this one’s almost too bizarre for words. First, Paul Krugman makes an argument that ignores the existence of corporate dividends. Then, pretty much everybody in the world points out his error. Then, he admits his error, but, true to form, takes an irrelevant swipe at his critics. But in this case, the irrelevant swipe is: “Aha! You’ve just admitted that corporations pay dividends! So much for your past claims that corporations pay wages!”
Umm…Paul? They pay both. I’d lift Krugman’s own favorite dismissive phrase and say “That’s Economics 101″, but actually it’s probably standard knowledge among middle schoolers.
To review the details:
First, Krugman reposted (from the website of a left-wing advocacy group) a highly misleading chart purporting to illustrate the federal tax burdens borne by various income groups. The chart accounts for payroll and income taxes, but omits corporate taxes, thereby making the burden on high-income tax payers appear substantially smaller than it is, because corporate taxes reduce dividends which are disporportionately paid to high-income taxpayers.
Next, he got called on it by lots and lots of people, including, for example, Greg Mankiw.
Next, Krugman acknowledged his error. But, as always, he did so with the least possible grace, suggesting that his critics, by virtue of pointing out Krugman’s mistake, have somehow undermined their own principles.
In particular, his position is that by acknowledging that corporate profits benefit shareholders, “conservatives” have undermined their own ability to claim that corporations benefit anyone other than shareholders (e.g. workers). He relies, in other words, on the cockamamie notion that if something is good for group A, it can’t possibly also be good for group B.
Continue reading ‘In Which Paul Krugman Leaves Me At a Loss for Words’
Paul Krugman argues that success in business is not, by itself, a qualification for making wise economic policy, and I agree. But then he goes all looney-tunes on us:
A businessman can slash his workforce in half, produce about the same as before, and be considered a big success; an economy that does the same plunges into depression, and ends up not being able to sell its goods.
So according to Krugman, it’s better for you and your spouse to earn $40,000 each than for one of you to earn $80,000 while the other stays home with the kids. I wonder how many two-earner families would agree with him.
Nick Rowe, applauded by such luminaries as Don Boudreaux and Bob Murphy, argues that, contrary to folks like Paul Krugman and yours truly, government debt is too a burden on our grandchildren, unless you believe in Ricardian Equivalence.
I want to explain what that means, and why it’s wrong.
To make sure we’re all talking about the same thing, I’m going to adopt all of Nick’s assumptions, most critically that all taxes are lump sum. I’ll come back at the end and say a little more about why this obviously false assumption is the right assumption to make.
Now: Suppose the government borrows money to finance a tax cut. That makes us feel richer. We therefore buy and consume more stuff, which leaves less stuff for our grandchildren to consume. (Nick tells a very nice detailed story about how this might play out across generations; I applaud that kind of detail, but it’s not important for this response.) Government debt is therefore a burden to our grandchildren.
Unless! If we — the current generation — foresee all this, and care about our grandchildren, we’ll choose to (in effect) undo what the government has done by saving our tax cuts and giving them as gifts to our grandchildren (presumably as part of their inheritance). This restores every generation’s consumption to the original status quo.
Ricardian Equivalence is the economist’s jargon for the assertion that we will foresee all of this, and will care about our grandchildren, and therefore will give them our tax cuts as gifts. Nick Rowe’s claim is that unless you make the very strong assumption that Ricardian equivalence holds, government debt enriches us at the expense of our grandchildren.
Here’s why that’s wrong: Continue reading ‘You, Your Grandchildren, and the Public Debt’
Paul Krugman has a very good column on government debt and why it doesn’t matter nearly as much as many people believe. There’s just one spot in the column where I think Krugman misses the point, and therefore makes a weaker case than he could have made. He writes:
U.S. debt is, to a large extent, money we owe to ourselves.
…
It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.
All true, but all beside the point. Even if 100% of U.S. debt were held by foreigners, and even if Americans had no offsetting claims on foreigners whatsoever, the U.S. debt would still be money we owe to ourselves.
By way of background: Obama says that Republicans favor dirtier air and water. Paul Ryan calls that a petty characterization of an honest policy disagreement. Paul Krugman says that some Republican policies would lead to dirtier air and water (presumably in exchange for some offsetting benefits) and Ryan ought to be man enough to say so.
This is a fair point, I think. There is nothing dishonorable about believing that under current regulations we overclean our air and water, and if that’s Ryan’s view he should own it. Though perhaps Ryan would prefer to respond — also fairly — that he and/or the GOP favors different kinds of regulation that might not leave the air and water dirtier after all.
In any event, Krugman can never be fair for long. Here he is complaining about Ryan’s rhetorical style and defending his own:
If I say that Paul Ryan’s mother was a hamster and his father smelt of elderberries, that’s ad hominem. If I say that his plan would hurt millions of people and that he’s not being honest about the numbers, that’s harsh, but not ad hominem.
And you really have to be somewhat awed when people who routinely accuse Obama of being a socialist get all weepy over him saying that eliminating protections against pollution would lead to more pollution.
Except that, you see, at least as far as I can tell (and do correct me if I’m wrong) Paul Ryan (whose “weepiness” is the primary subject of Krugman’s blogpost) has never accused Obama of being a socialist. So (unless I’m mistaken) what Krugman’s engaging in here is best characterized as neither harsh nor ad hominem but, well, lying.
Two points:
Incidentally, Paul Krugman made an incisive point last week when he wrote:
Here’s a question I haven’t seen asked: If fear of future regulations and taxes is holding business back, as everyone on the right asserts, why didn’t the Republican victory in the midterms set off a surge in employment?
After all, if you really believed that fears of Obamanite socialism were the key factor depressing employment, the GOP victory — with the clear possibility that the party will take the Senate and maybe the White House next year — should greatly reduce those fears. So, where’s the hiring surge?
I even set out to write a blogpost citing this argument with approval — but around the time I was composing it, Krugman followed up with this bit of idiocy, to which a response seemed more urgent.
Now that that’s out of the way, I can come back to the bit about the missing Boehner Boom. It’s a more-than-fair question. How would you respond to it?
Paul Krugman’s latest venture into self-parody starts with a recent paper on the cost of air pollution, which finds that said costs are big and heavily concentrated in a few industries. Krugman then links to a New York Times article surveying Rick Perry’s past clashes with the EPA. With no further argument, he concludes that
Today’s American right doesn’t believe in externalities, or correcting market failures; it believes that there are no market failures, that capitalism unregulated is always right. Faced with evidence that market prices are in fact wrong, they simply attack the science.
Where to begin?
One thing I like about the study of economics is that it fosters compassion. When part of your job is to predict human behavior, you quickly learn the value of understanding other people’s problems. When the other part of your job is ferreting out the unseen global consequences of our choices, you’ve taken the first step toward caring about those consequences.
For example: Suppose a guy with no health insurance and no assets shows up at a hospital emergency room with an urgent life-threatening condition. Should you let him die? Ordinary compassion says no. The heightened compassion of the economist says, at the very least, maybe.
First, a policy of providing emergency health care to everyone is pretty much the same thing as a policy of providing emergency health insurance to everyone. It was specified here that this was a guy who didn’t want health insurance. So let’s recognize for starters that such a policy runs counter to — I am tempted to say runs roughshod over — the guy’s own revealed preference. It’s an odd sort of compassion that forces people to buy things they don’t want.
Now you might object that nobody’s forcing this guy to buy emergency health care; we’re trying to give him emergency health care. Not so fast. Here’s the first place where a little economic training goes to hone one’s sense of compassion: The emergency health insurance we’re foisting on this guy has a cost. We can spend that money on emergency rooms or we can spend it on a myriad of other things the guy might prefer. How is it compassionate to give him one thing when he prefers another?
This is particularly true if the guy happens to be very poor. Poor people have a lot of problems, and emergency health care is only one of them. They need better education, they need better transportation, and they need a little help buying groceries.
There is room for lots of debate and lots of disagreement about how much we as a society should be spending to help poor people. That’s not the issue here. The issue here is: Given that you’ve decided to spend an extra such-and-such many dollars a year helping poor people, why would you spend it in this particular way rather than one of the many other ways they could use it? For God’s sake, why not at least ask them if they’d rather have the cash?
Some commenters still seem confused about the locus of disagreement in this week’s back-and-forth with Paul Krugman. I post today not to beat a dead horse, but to clarify the issues for those who are interested in understanding them. Please keep any discussion both civil and on-topic. I’ve numbered the points below for easy reference.
What I like about people in academics is that when we disagree, we actually care about figuring out who’s right — and therefore we have a tendency to reach consensus, though it can take a while.
Anybody who blogs often enough (very much not excluding yours truly) is occasionally going to post something that, at least as written if not as intended, is objectively plain flat out wrong. Paul Krugman did that a couple of days ago, I responded, he’s responded to my response, and at least 4/5 of our disagreement is now resolved. That’s exactly as it should be.
In a radical departure from his previous expressions of dissillusionment, Paul Krugman has implicitly declared in his latest blog post that we are now living under the best of all policy regimes. I presume he will now be able to retire with satisfaction from his career as a gadfly.
The context is Eric Cantor’s demand that any federal disaster relief in the wake of Irene be offset by spending cuts elsewhere. Krugman thinks this is silly, and proves his point with an appeal to the standard Ricardian theory of public finance. According to that theory, which all economists understand and accept, if you’ve got to bear a cost, it’s best to spread that cost out over as many activities as possible. So ideally, you’d pay for disaster relief partly through spending cuts, partly through (current) tax increases, and partly through an increase in the deficit. Therefore says Krugman, “the bottom line is that basic, regular economics says that Cantor isn’t making sense.”
Since Krugman has carelessly neglected to spell out an important detail of his argument, let me fill in the gap for him: The Ricardian conclusion does not come from thin air; instead it follows logically from certain premises, key among which is that you’re starting from an ideal policy regime.
Paul Krugman wisely reminds us that:
The odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.
Yes, a terrifying prospect — and an excellent reason to limit the powers of ruling parties, though Paul never seems to notice this.
One of Paul Krugman’s favorite tactics is to assert that all he’s doing is channeling the time-honored lessons of Economics 101 — pre-empting dissent with the implication that any dissenter must be either an ignoramus or a radical. (Journalistic honesty compels me to acknowledge that I might have employed this rhetorical tactic once or twice myself over the years.)
It’s interesting, then, to take note of how very far his central arguments actually deviate from Economics 101. Here’s what he said last week on his blog:
Mulligan and others keep emphasizing examples of individual groups that have managed to gain jobs by cutting wages or offering other attractions to would-be employers. They then assert that these examples tell us what would be needed to expand overall employment.
The point, of course, is that all such arguments amount to committing the fallacy of composition…The essence of macroeconomics is understanding why such things are a fallacy, why what happens if one group does something is not at all what happens when everyone does it.
But you see, here’s the thing: According to the standard Economics 101 version of the sticky-wage Keynesian model, this is a case where what happens if one group does something is exactly the same as what happens when everyone does it. According to that model, as long as wages continue to fall, firms will continue to move along their labor demand curves until we reach full employment.
Paul Krugman, economist:
This insight illustrates a general principle of the economics of taxation: the incidence of a tax — who really bears the burden of the tax — is typically not a question you can answer by asking who writes the check to the government.
Paul Krugman, blogger, remarking on a straightforward application of that principle:
There are multiple things wrong with this claim, but the most fundamental, I think, is that it represents a remarkable misunderstanding of the reasons why we have taxes in the first place.
(Edited to add: My response to Krugman is here.)
Paul Krugman, getting less serious by the minute, on the budget deal:
It’s worth noting that this follows just a few months after another big concession, in which [Obama] gave in to Republican demands for tax cuts. The net effect of these two sets of concessions is, of course, a substantial increase in the deficit.
Well, no, actually. The net effect of these concessions is a (small but not insignificant) cut in spending coupled with a (somewhat larger) set of tax cuts.
To sum that up by saying that the “net effect” is an increase in the deficit is like saying that if a woman gives birth to twins and then murders her husband, the “net effect” is to increase the population. We’re entitled to care about more than just the bottom line.
Paul Krugman on the Ryan budget proposal:
And then there’s the much-ballyhooed proposal to abolish Medicare and replace it with vouchers that can be used to buy private health insurance….
…The House plan assumes that we can cut health-care spending as a percentage of G.D.P. despite an aging population and rising health care costs.
The only way that can happen is if those vouchers are worth much less than the cost of health insurance.
Well, this is just plain illiterate. In fact, the only way that can happen is if the voucher system affects people’s health care choices. Which is, you know, the whole point.
(Larger and more easily viewable version here.)
(My daughter is far more advanced and more graceful than I am. I hope soon to post video proof.)
Paul Krugman’s latest gets my vote for his most incoherent column ever. As I understand his argument, it goes like this:
Say what?. The basic thesis — that there’s no point in learning to do something difficult if a computer can do it better, and that this is significantly affecting the returns to certain kinds of education — is an interesting one. The moral, of course, is that you can’t imitate your way to prosperity. If we want to be rich, we have to innovate.
So to encourage innovation, you want to strengthen the unions? To encourage innovation, you want to reduce the relative reward to innovation, by insuring that everyone gets the same health care regardless of their social contributions?
Now, you might suppose that Krugman was thinking something along the following lines: Large swaths of American workers are being rendered unproductive by computers. Somehow or another, we have to support those people even though they’re not producing much. Unions and universal health care will keep them afloat.
But that can’t be what Krugman was thinking. I’m sure of this, because I happen to know that Krugman has a Ph.D. in economics. Therefore he must surely be aware that you can’t divorce incomes from productivity. Sure, you can redistribute, but you can’t redistribute more than what gets produced. If the problem is that our old skills are no longer productive, then our incomes must fall unless and until we acquire different — and less computer-replaceable — skills.
In 1999, the journalist James K. Glassman co-authored a book called Dow 36,000. The eponymous prediction did not pan out. A couple of days ago, Glassman popped up in the Wall Street Journal, trying to explain where he went wrong. “The world changed”, explains Glassman. The relative economic standing of the U.S. is declining. Plus terrorists and economic instability made the world a riskier place.
But there’s a better explanation. Glassman’s story never made sense in the first place, for reasons Paul Krugman explained when the book first came out.
Glassman has a substantial history of confusion about how financial markets work. Ten years before he wrote Dow 36,000, he was explaining in The New Republic that stocks are better investments than real estate:
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