The Financial Crisis: Five Years Later

Paul Krugman Won the Crisis—and Lost the Argument


Paul Krugman Won the Crisis—and Lost the Argument

Photograph by David Levene/eyevine via Redux

April 30, 2012: Paul Krugman’s End This Depression Now! is published

A lot of people were tired of thinking about the financial crisis by 2012. Not Paul Krugman, the liberal Princeton University economist with a Nobel Prize and a New York Times op-ed column. That April he published a full-on cri de coeur called End This Depression Now! In May his attention-getting taunts of conservatives led the New York Post to call him “the nation’s most dangerous economist.” Then in June he got into a Twitter war over austerity with the president of Estonia that was so entertaining it was made into a short opera.

The Lehman crisis was a moment made for Krugman. It prompted policymakers to swallow their pride and take a second look at John Maynard Keynes, the late British theorist whose influence in academia had been fading for decades. The bearded, gnome-like Krugman, as the most famous expositor of traditional Keynesianism, rose to the occasion. As of 2013, End This Depression Now! has been translated into 25 languages. “Paul is a rock star overseas,” says Drake McFeely, president of W.W. Norton, his U.S. publisher.

There are, as the Economist’s Matthew Bishop once observed, two Krugmen: the scholar and the polemicist. The scholar sifts data for patterns. The polemicist picks fights to make points. “It kind of helps to use various people as foils,” Krugman said in an interview this year for this magazine. “If someone has said something that’s demonstrably at odds with experience or just demonstrably stupid, I use it.” He once told a National Public Radio interviewer, “There are so many fools that if you try to suffer them at any great length, there’s no time left.” Columnist George Will said of Krugman: “If certainty were oil, he’d be Saudi Arabia.”

Despite his popularity and determination, Krugman hasn’t exactly won the argument. He’s had no luck getting the Federal Reserve to raise its inflation target to 4 percent, from 2 percent. He also hasn’t managed to persuade Congress to increase spending to stimulate growth; with the sequester, lawmakers have done just the opposite. Columbia University economist Jeffrey Sachs, who calls himself a fellow progressive, says Krugman shows too little concern for wasteful government spending. “This approach is disastrous both politically and economically,” he wrote in a Huffington Post column.

Still, Krugman is happy where he stands. By taking positions outside the political mainstream, he bucks up the fighting spirit of fellow liberals. The late Joseph Overton, a libertarian, invented the notion of the Overton window to describe the range of ideas that are politically acceptable at any given time. The window has moved to the right in recent years. But it might have moved even further without Krugman.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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