Sunday, 13 September 2015
Delusional Richard Murphy claims Krugman is a fan of his!
Richard Murphy is an accountant from East Anglia in the UK who at the moment seems to be the main economic advisor to Jeremy Corbyn, the new leader of the Labour Party. Tim Worstall has been taking the p*ss out of Murphy for a long time, but Murphy’s latest delusion of grandeur is that Krugman has adopted Murphy’s so called “Peoples’ QE”.
That claim is actually a very simple sleight of hand: but simple sleights of hand fool 90% of the people 90% of the time, so you can’t blame Murphy for trying it. Reasons are thus.
PQE as advocated by Murphy for the last year or so has consisted of the idea that we should have government print money and spend it on infrastructure and/or green stuff, like wind farms. If you want to confirm that, Google “Peoples’ QE”: you’ll find plenty of articles where PQE is understood by the author to consist of just that, i.e. printing money and spending it exclusively or primarily on infrastructure and/or green stuff.
Now as I’ve explained ad nausiam, there’s nothing wrong with the “print and spend” element of PQE. Indeed Keynes advocated that in the early 1930s, as did Milton Friedman about fifteen years later. What’s wrong with PQE (for the umpteenth time) is as follows.
“Print and spend” is a form of STIMULUS. But in some years, little or no stimulus is needed. Thus if P&S money is concentrated on any one area, like infrastructure, there will be a BIG CONTRACTION in that form of spending in years when little or no stimulus is needed.
Now starting to build a road for example, and then bringing the project to a halt before completion just because little stimulus for the economy as a whole is needed, does not make very much sense.
Conclusion so far: stimulus spending should be fairly widely distributed. As for infrastructure, it may well be that we need more of that, but that should be funded in the normal way, i.e. mainly via tax and/or government borrowing (with a bit of stimulus money thrown in if it happens to be a year when stimulus is called for).
Put another way, what’s wrong with PQE (as Simon Wren-Lewis pointed out on his blog) is trying to combine two policies which in themselves are perfectly acceptable, but which (contrary to the claims of Richard Murph) are not actually natural bedfellows.
Now it seems from the comments after this article of Murphy’s that he has very recently been converted to the latter “widely distributed” point. That is, he seems to have cut the “infrastructure” bit out of PQE (though it’s far from 100% clear what he is saying).
If you’re interested, search for this phrase of Murphy’s: “The work proposed has always been broadly based”.
Far from adopting PQE (along with its nonsensical infrastructure element), all Krugman is doing is saying that “print and spend on goods and services” (as advocated half a century ago by Keynes and Milton Friedman) is not a bad idea.