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Krugman and the UK

In June of this year, Paul Krugman wrote a sort of humblebrag column admitting to certain errors that have accumulated in his columns.

The tone was, "yes I've gotten things wrong, but none of these examples reflects any very deep mistakes in my assumptions, and since I'm owning up to my errors, all is good."

The most intriguing of the admissions, to me, involved the economy of the United Kingdom. Krugman has been using "austerity" as a whipping boy for years now. Every impulse toward hardening the money supply or cutting public expenditures, in any country toward which he turns his gaze, is "austerity" or the cult of the "austerians" and a bad thing.

One sometimes gets the impression that Krugman coined "austerians" to pun on "Austrians," and to try to use the failures (as he sees them) of austerity policies as arguments against Austrian economics. A silly pun, if that is what is intended.  

Anyway: the U.K. under Cameron was one of those countries that were engaged in that bad thing, and it was going to suffer accordingly.

Except that it hasn't. As he said in June [and you have to read all the way to the end of the column to get to this, it's his last example], the UK economy "is growing much faster right now than I expected."

So ... what happened? Krugman says that the U.K. turned out not to be as determined to stay austere as he had thought it was. The government "stopped tightening fiscal policy before the upturn." But he doesn't want to press that. After all, if the harm the austerity did before that reversal was so superficial it could be instantly reversed, his Cassandra act might still seem rather silly.

So he adds this, "there was a drop in private savings, which is one of those things that happens now and then."

The "one of those things" comment, aside from calling to mind a trip to the moon on gossamer wings, suggests that the amount of private savings in an economy is itself a factor outside the range of the Keynesian macroeconomic theory he says he is expounding. Which is itself just ... odd.

I suspect he has some more fundamental re-thinking to do and he just doesn't want to do it.


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