Timmy elsewhereJuly 13, 2013 Tim WorstallTimmy Elsewhere11 CommentsAt the ASI. Contrasting Krugman the economist with Krugman the commentator. previousTimmy elsewherenextTimmy elsewhere 11 thoughts on “Timmy elsewhere” Van_Patten July 13, 2013 at 1:11 pm Tim That’s an excellent article- it’s bizarre to read his current output (he’s basically degenerated into a reflex Keynesian – a more sophisticated Reed/ Murphy but of the same stripe)when, as you say, in his less famous output in the 1990s he actually produced worthwhile analysis- it’s a sad decline. Charlie Suet July 13, 2013 at 6:39 pm I guess it’ll always be difficult for me to escape the feeling that Krugman is wrong when he draws on conclusions that I naturally dislike, but speaking nothing but the truth when I agree with him. dearieme July 13, 2013 at 6:39 pm “fails to register with lay intellectuals”: I get weary with the use of “intellectuals” to mean ‘dimwits’. Ian B July 13, 2013 at 8:08 pm Well, I find “Old Krugman’s” assertion baffling. He says that wages are set by the productivity of “the nation”, and Tim concurs. But what is this magic that defines the productivity of “the nation”? Why not of “the district” or of “the continent”? Let us ask, are wages in Scotch factories set by the wages elsewhere in Scotland? Or in The United Kingdom? Or in the EU? If Scotland declares independence, do all the Scotch wages suddenly adjust overnight to the new border? How do they know to do that? /mystified Tim adds: Decent point. It’s not actually the “nation”. It’s the “economy”. Which depends on the freedom of movement of the labour of course. But very much not solely. Wages in the N of England are indeed lower than in the South. The average productivity of the Northern economy is lower than that in the South…..we just normally use “nation” here because, well, we just do. Pat July 13, 2013 at 8:36 pm Presumably, Ian B, it depends on whether the Scots decide to make their borders more or less open and to whom. Tim Newman July 14, 2013 at 7:23 am It might be the case that he knows what he writes now is crap, but it’s what his paymasters want to hear and the cheques keep rolling in. JamesV July 14, 2013 at 9:16 am If Bangladeshi textile factories only achieve “close-to half” the labour productivity of US textile workers why is there a Bangladeshi textile industry? I thought it was all in Bangladesh for the cheap labour (high labour productivity) rather than the not-cheap capital? Tim adds: They’re measuring productivity there as hours of labour per unit produced, not cost of labour per unit produced. Given that Bangladeshi wages are $40 a month that’s why there is a Bangladeshi industry. Surreptitious Evil July 14, 2013 at 9:21 am Labour productivity isn’t quite the same as “cost of labour” productivity. Think of what Krugman is measuring. An expensive-ish (in world terms, at least) American using expensive equipment can produce twice the amount as a cheap Bangladeshi using a local copy of a 100-year-old Singer. Mind you, the Bangladeshi probably has much longer working hours and limited meal and rest breaks compared to their US counterpart. So that “nearly half” isn’t quite as impressive as it might seem given the capital investment differences. PaulB July 14, 2013 at 10:05 am Krugman’s 1996 paper says that wages (in a “national labour market”) are determined by competition for labour: his 2013 article says that commissioners of clothing manufacture will compare prices in deciding where to do business. There’s no contradiction there. Krugman96 implies that, in an individual factory, wages are not determined by operating costs (which might be increased by making plant safer) nor productivity (which might be reduced by safer working practices). Sumner’s reservations about the effectiveness of Bangladeshi government regulations do not address what Krugman advocates – Krugman wants us to “demand higher standards for all countries”, which, according to the news story he links to, are to be imposed independently. wearieme: Krugman96 explains in his second paragraph precisely what he means by “intellectuals”. JamesV July 14, 2013 at 11:56 am Isn’t the observation that people think of textile workers vs. steel workers vs. whatever type of worker indicative of a real-world restriction on labour mobility (between types of work) though? Not only because it takes time and training to turn one into the other but also, well you can just imagine the stereotypical (unemployed) Yorkshire miner saying “spent me ole life down’t pit, ain’t no bloody way I’s becoming an aromatherapist.” And while free-market liberal economics does a good job at explaining why people tend to do certain things, it can equally have a huge blind spot for real-world restraints that don’t fit the ideological model – those things that Krugman’s “lay intellectuals” think, believe, and most importantly act upon; that rather changes the game. The whole Smithian thing needs a big update. In a lot of parts of the economy (generally the ones that make people stupendously rich, or at least stupendously richer than they were previously) we don’t have national economies any more. The nation state is reaching the end of its service life in most of the world, it’s a bankrupt (literally) model, and we’re not quite sure what we will have once the lease is up. Ian B July 14, 2013 at 3:30 pm JamesV- This is why Libertarian (Austrian) liberal free market economics isn’t Smithian. In particular, it doesn’t treat “labour” as a commodity, unlike Smith who treats it as a sort of homogenised spudge. Smith’s “division of labour” makes Smithians believe that it is simply dividing up jobs that improves productivity, whereas an Austrian sees people with particular skills and preferences seeking to deploy themselves as best they can in response to the economic environment. Very different paradigm. Smith tends to be highly regarded among pro-business types, rather than genuine free marketeers, the latter of whom are more open to recognising the major failings of his tepidly free market writings. Why? Well I think one reason is that Smith was very fond of the idea of two classes, one of whom directs labour and one of whom is labour, the former of those being individuals and the latter being the aforementioned spudge. This kind of encourages the odd thinking you get in the current world in which teh upper class deserve high incomes “to attract the best people” while the lower class deserve low incomes “for the good of the economy”, after all they all look alike anyway, can’t tell them apart, me, one labour unit is the same as another. Kind of thing. Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.