I’m going to take a slightly different approach to reviewing Paul Krugman’s latest book, End This Depression Now!. Ever since writing TIA, I have found it frustrating to read a book, accurately summarize the arguments it contains, critique those arguments, and then find myself addressing various complaints about my summaries and critiques from those who readily admit they have not read the book. This is particularly annoying because the percentage of people who actually bother to read a book appears to be a small fraction of those who are interested in discussing its contents and its implications.
So, instead of writing a general review and critiquing the summarized arguments, what I’m going to with this book is systematically highlight the 16 sections that I bookmarked and identify the specific claims being made as well as any fundamental flaws I believe are thereby revealed. This approach should make it easier for people to understand exactly what Krugman has written and reduce any derailing of the discussion on the basis of the supposed inaccuracy of my summaries. One could, if one liked, also consider this a 101 level course on Krugmanomics.
In Chapter Two, Depression Economics, Krugman explains his thesis:
“The central message of all this work is that this doesn’t have to be happening. In that same essay Keynes declared that the economy was suffering from “magneto trouble,” an old-fashioned term for problems with a car’s electrical system. A more modern and arguably more accurate analogy might be that we’ve suffered a software crash. Either way, the point is that the problem isn’t with the economic engine, which is as powerful as ever. Instead, we’re talking about what is basically a technical problem, a problem of organization and coordination—a “colossal muddle,” as Keynes put it. Solve this technical problem, and the economy will roar back to life.
Now, many people find this message fundamentally implausible, even offensive. It seems only natural to suppose that large problems must have large causes, that mass unemployment must be the result of something deeper than a mere muddle. That’s why Keynes used his magneto analogy. We all know that sometimes a $100 battery replacement is all it takes to get a stalled $30,000 car back on the road, and he hoped to convince readers that a similar disproportion between cause and effect can apply to depressions. But this point was and is hard for many people, including those who believe themselves well-informed, to accept….
What I hope to do in this chapter is convince you that we do, in fact, have magneto trouble. The sources of our suffering are relatively trivial in the scheme of things, and could be fixed quickly and fairly easily if enough people in positions of power understood the realities. Moreover, for the great majority of people the process of fixing the economy would not be painful and involve sacrifices; on the contrary, ending this depression would be a feel-good experience for almost everyone except those who are politically, emotionally, and professionally invested in wrongheaded economic doctrines….
Think of it this way: suppose that your husband has, for whatever reason, refused to maintain the family car’s electrical system over the years. Now the car won’t start, but he refuses even to consider replacing the battery, in part because that would mean admitting that he was wrong before, and he insists instead that the family must learn to walk and take buses. Clearly, you have a problem, and it may even be an insoluble problem as far as you are concerned. But it’s a problem with your husband, not with the family car, which could and should be easily fixed.”
In summary, Krugman is aggressively asserting that the problems with the U.S. economy are trivial, technical, and easily solved by the economic equivalent of changing a car battery by people in positions of power. He sees no serious structural economic problems stemming from the trade deficit, the demographic changes in the population, the educational system, the financial system, the shift to a service economy, or the record levels of public and private debt. He also expects that the process of fixing it will be close to painless for nearly everyone in the country. He does not, however, claim that it will be politically easy to solve the problem, in fact, the solution is a political one and primarily concerns overcoming those who are “invested in wrongheaded economic doctrines.”
Is everyone clear on this? Does anyone see any reason to take exception to this summary or claim I am erecting a strawman? I’ll also be interested to know your opinion of whether this approach is effective or not.