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Nobel Prize winning Paul Krugman discusses the flaws in economics and policy

(Will Soltero/ Daily Collegian)

Nobel Memorial Prize-winning economist and columnist for The New York Times Paul Krugman addressed a crowd of several hundred at Mullins Center on Thursday as part of the annual Philip Gamble Memorial Lecture.

With students and community members from throughout the Pioneer Valley in attendance, the embattled writer and academic engaged the crowd on the topic of “What’s the Matter with Economics?,” the title of his lecture. Focusing on financial crises, like that of 2008, and subsequent national attempts at recoveries, Krugman said he often sees a disconnect between economists and global political leaders as being a considerable problem for global economics.

“Why has economic policy not been better?” Krugman rhetorically asked the on-looking crowd. “What does this tell us about the state of economics?”

As with many academic fields, considerable infighting and disagreement is commonplace among global economists. Markedly, Krugman pointed out, after the so-called “housing bubble” burst in 2008, many economists found common-ground in terms of developing national and international policy goals that would remedy the financial crisis that followed.

“For the first few months after the crisis, economists did appear to speak with one voice,” Krugman said. He contested that because of the relative uniformity on the part of economists, political leaders across the globe seemed more inclined to listen to them while making policy focused on recovery.

While the extent of Krugman’s political experience was as a staffer to a member of President Ronald Reagan’s Council of Economic Advisors, his prominence as a Nobel Memorial Prize-winning economist and his career as a professor for MIT, Princeton, City University of New York and the London School of Economics presents a pedigree that garners the attention of political leaders worldwide.

As an advisor and critic of international economic policy, Krugman said, half-jokingly, that for all the times he has offered advice to global leaders, he can only remember one time in which policy followed it. Speaking of an interaction he had in recent years with the Prime Minister of Japan, he said, “I did say to Prime Minister [Shinzō] Abe, ‘Don’t raise that tax rate!’ and he didn’t.” The relative candor and accompanying finger wag of the statement elicited a brief stint of laughter from the audience.

In addition to being a Nobel Laureate for his work on international trade theory, Krugman is the author or editor of 27 books and more than 200 academic papers. He is a professor at the Luxembourg Income Study Center at the City University of New York and a professor emeritus at the Woodrow Wilson School at Princeton University.

Krugman was the 21st speaker for the Gamble Lecture, whose previous lecturers include Federal Reserve System Board of Governors Chair Janet Yellen, former Secretary of Labor Robert Reich and former U.S. Ambassador to India John Kenneth Galbraith.

Though the relationship between economists and policymakers was presented throughout the lecture, Krugman touched on topics ranging from the willingness of economists to adapt as social scientists to the danger of assuming that people and countries will always act rationally. He went further, using examples of European nations adapting economic policy following the 2008 financial crisis to point out how insufficient governments can be in confronting economic downturn.

The lecture did have a note of positivity, however, founded in the idea that economists and social scientists should be hopeful that their ideas will become increasingly heard because of the growth and relevance of so-called “big data.”

“Big data is going to open the door to making perfectly sensible conclusions respectable again,” Krugman said.

University of Massachusetts Economics Department Chair Léonce Ndikumana, who introduced Krugman to the audience at the beginning of the evening, shared a similar sentiment related to the use of facts in policy debate and development.

“[With the] persecution of fact-based intellectual and policy debates, we can certainly appreciate having in our midst a true intellectual, who advocates for letting the facts speak for themselves,” said Ndikumana, “something that is apparently an endangered species today.”

Following his presentation, Krugman opened the floor to questions from the audience. A variety of students and pioneer valley community-members asked the economist his opinions on contemporary issues including a $15 minimum wage, single-payer healthcare, European economics and the recently-passed federal budget.

Matthew Ezersky, a freshman art history major at Amherst College, was among the first to step to the microphone with a question. While Krugman warned that he would not be speaking about President Donald Trump—something he is apt to do with his 3.7 million Twitter followers—Ezersky cautioned to ask, “Are there any aspects of the budget that was passed today that will help vulnerable people?”

Krugman responded that the budget will not help middle and lower-class Americans, saying, “The budgets that were just approved are ugly.”

While Krugman declined to address his views of those involved in passing the budget, Ezersky said he understood the mission Krugman wanted to serve by speaking at the Gamble Lecture.

“He did give a presentation and stick to it,” Ezersky said. “Would it have been fun to see one of the most eloquent proponents of everything that Trump disagrees with degrade Trump and tell us the specific ways in which he’s an idiot? Yeah, that would’ve been fun…But I’m pretty happy that he picked sort of a niche and interesting question and really interrogated it.”

Amherst College junior political science major Yannis Kalogiannis also stood to ask a question, offering a sort of rebuttal to Krugman’s theory of the shortcomings of European economic policies since 2008.

“I think that when he talks about Europe and other countries, he doesn’t know enough about the political situations of those countries,” Kalogiannis said. “He just sees it as more of an economics experiment than an actual policy.”

Kalogiannis disagreed with Krugman’s theory that austerity, or the cutting back of government spending, is partially to blame for slow economic recovery following the downturn. He said by his understanding and belief, austerity is an effect of economic stagnation, not the reason for it.

Before Krugman finished his lecture, he pointed to the potential the field of economics has going forward, as young minds enter the academic sphere and offer different perspectives and methods. As he sees it, students of economic history will form the backbone of a field that often proves the theory that “history repeats itself.”

With a sense of looking at future of economics to conclude the evening, Krugman asked, “Will we actually improve the way we view economics in time to be useful for the next crisis?”

 

Will Soltero can be reached at wsoltero@umass.edu and followed on Twitter at @WillSoltero.

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