Paul Krugman writes on his blog:
Hmm. I’m fairly accustomed to having speaking events disrupted by Larouchies (when I was in Cambridge a while back we had a guy yelling about banana fungus, among other things, who had to be shouted down by the audience).
But last night at Baruch the problem was Austrian economics/Ron Paul people who just wouldn’t stop talking.
On the whole, I might prefer the banana fungus.
I wrote the following reply and much to my surprise, it passed NYT moderation:
Dr. Krugman, I own all your books and have quite enjoyed several of them, particularly “The Accidental Theorist”. You are an engaging writer and have done some fascinating and genuinely ground-breaking work in the area of currency attacks.
Unfortunately, you literally do not know what you are talking about whenever you attempt to discuss Austrian economics. In your 1998 Slate essay entitled “The Hangover Theory”, it is perfectly clear that you have never read any Austrian economic theory because you are demonstrably unfamiliar with both the relevant economists and Austrian terminology. (For example, Schumpeter was an Austrian national and an economist, but he was not an Austrian economist.) What you have been criticizing and belittling is nothing more a strawman of your own concoction.
When even The Economist is describing the global financial crisis and the developing Great Depression 2.0 as a failure of academic economics, it should be clear to everyone that your appeal to academic authority is nonsensical. Your refusal to learn from the school of Menger, Bohm-Bawerk, Mises, Hayek, and Rothbard is precisely why your policy prescriptions for the Japanese and U.S. economies have reliably failed for more than ten years.
The biggest problem is your theory-based inability to understand that debt not only matters, it is the single most important variable in the modern economic equation. The fact that Keynes left it out of his general theory and Samuelson subsequently left it out of his practical application has badly crippled your ability to understand the present situation. It does not behoove an intellectual to dismiss what he does not know, so therefore I encourage you to give Austrian business cycle theory a sincere shot before casually dismissing it again.
UPDATE: We have our first one-star Amazon review by someone who admits he didn’t read the book! It took longer than I thought, but one Jonathan Birge has produced a beauty that really has to be read to be believed. The astounding thing is that the guy read my criticism of Krugman’s critique of what he imagines Austrian economics might be, and somehow managed to reach this conclusion:
Styling himself an Austrian economist, a reading of his criticism against Krugman makes it clear that Vox is well out of his depth, so embarrassingly so that one need read no further. On pages 163-164, he make an ludicrous strawman rebuttal of an argument of Krugman’s. To be specific, he misreads Krugman’s statement that all income is spending (and vice versa) to mean that every dollar of one’s income one must spend. He then spends the next several paragraphs ackwardly informing us of the obvious, such as that when one doesn’t buy a factory, that doesn’t mean they must buy something else. I almost feel bad for Vox, as he gloats in his victory over an argument nobody would ever be dumb enough to make. (And I would think nobody would be dumb enough to think somebody with a Nobel Prize would make it, either.) He accuses Krugman of not understanding simple things like time-preference or the effects of debt, of essentially being a base moron.
Of course, what Krugman means is that one person’s income must come from somebody else’s spending, an obvious tautology. Sadly, I don’t think Vox was trying to pull anything. I think Vox really believes he understands this stuff enough to write about it, when it’s seems all he knows how to do is reference other works in a pseudo-academic tone and parrot the names of concepts he’s read….
(For the record, I’m not defending Krugman or Keynesian economics. I’m a libertarian myself, and subscribe to Austrian economics to the limited extent I understand it. I actually came to this book thinking I’d like it and learn a lot from it. Unfortunately, I’m compelled to review it poorly. I’ve never written a review on a book I didn’t read completely, but sometimes it’s justified when the author makes such egregious errors in the first chapter one peruses. You don’t need to finish an entire turd sandwich to know the last bite is going to taste as bad as the first.)
By “limited” Jonathan clearly means “not even a little”. Now, Five points if you can spot what the kid got hopelessly wrong about what I wrote. Ten points if you can spot what he got completely wrong about what Krugman wrote. And twenty-five points if you can spot what major aspect of a modern economy, besides debt and time-preferences, Krugman revealed his theoretical model is not taking into account.