Advancing a Free Society

A Caveat for Krugman

Monday, April 16, 2012

Critics of my blog post How Krugman Would Ru(i)n Steve Jobs’ Apple point out that Paul Krugman has a Nobel prize in economics and I do not. I should shut up in the face of a superior authority. If Krugman were writing about his specialty, international trade theory, I might indeed shut up. When Krugman puts on his political hat, he is fair game.

In his Jobs, Jobs, and Cars, Krugman uses bad economics that would shame an introductory economics lecturer. He criticizes Apple because its labor force is too productive. (His figures show that Apple has about the same sales revenue as GM but has one fifth the work force).  By being so productive, Apple creates too few jobs! Let economists chew that one over. Krugman would be in agreement with Marx’s discredited technological unemployment.  I guess the solution is for Apple employees to become as unproductive as GM workers.

In the same article, Krugman criticizes Apple for outsourcing routine manufacturing operations to Asia. Isn’t this what trade economists call the international division of labor? How can a trade theorist be against this practice? I guess he thinks Apple should keep routine manufacturing jobs at home even if it means higher consumer prices, loss of market share and profits.

Krugman seems to hold the strange opinion that the business of business is to create as many jobs as possible. Last time I looked at a principles of economics text, I learned that business are there to produce products that people want as cost-effectively as possible, in the course of which the business earns profits for its owners. I guess we need to recall all economics texts.

Krugman’s gratuitous characterization of Obama’s Detroit bailout as  “the single most successful policy initiative of recent years”  is designed to provide red meat for the President’s reelection campaign, from an economics Nobel laureate no less. This is not economics but a partisan politics.

The New York Times has gotten considerable mileage out of its Nobel laureate commentator. I suggest they add a warning label stating that their Nobel laureate is writing politics not economics.