Paul Krugman: Story Teller

Paul Krugman: Story Teller

4 Mins
August 13, 2013

In a recent column, Paul Krugman weighed in for the nth time against free-market-oriented Republicans Rand Paul and Paul Ryan ( “Milton Friedman, Unperson” August 11, 2013 New York Times ) He took a swipe at Ayn Rand, too:

...Friedman, who used to be the ultimate avatar of conservative economics, has essentially disappeared from right-wing discourse. Oh, he gets name-checked now and then — but only for his political polemics, never for his monetary theories. Instead, Rand Paul turns to the “Austrian” view of thinkers like Friedrich Hayek — a view Friedman once described as an “atrophied and rigid caricature ” — while Paul Ryan, the G.O.P.’s de facto intellectual leader, gets his monetary economics from Ayn Rand, or more precisely from fictional characters in “Atlas Shrugged.”

How did that happen? Friedman, it turns out, was too nuanced and realist a figure for the modern right, which doesn’t do nuance and rejects reality, which has a well-known liberal bias.

Here is one cheer for Prof. Krugman: at least we can agree to use reality as the basis for truth . That's certainly the right place to start .

But here's one big raspberry for Krugman, too. While it's true that Atlas Shrugged is fiction, it concretizes a philosophical argument made within its own pages, one that is based in fact. Meanwhile, while it's true that Krugman is a famous economist, his greatest work is, essentially, fiction.

Paul Krugman won the Nobel Prize in Economics in 2008 for his work in the “New Trade Theory” of the 1980s and for work in economic geography. However, most of this work involves using simple formalized games to model stylized results—it's logical story-telling, in other words.

Krugman created his trade models in the context of the rise of the new mercantilism in Japan and South Korea and the ideological popularity of various protectionist arguments in third-world counties in the 1970s and 80s. At the time, international trade theory was based in the theory of comparative advantage and a demonstration of the gains from opening up to free trade (which were, and remain, amply confirmed in fact). Krugman's innovation was to create highly specific, brittle game models that purported to show that mercantilism could work in theory and that free trade could be harmful. These “new” theories were never general enough to apply abstractly. Nor were they confirmed in fact in any generalizable way. Indeed, Krugman's own introductory textbook in economics (created in the last decade) focuses on comparative advantage, not Krugman's own theories.

So Krugman's great accomplishments consist in offering ways we might think (or misthink) about certain, specific situations, or about the ways that towns develop. Indeed, they are open basically to the same broad inductive confirmation or disconfirmation that Rand's philosophy and Hayek's economics face.

It's odd, given his strident support of socialism in the New York Times, that Krugman's introductory text explains how government intervention mucks up markets. Equally strange is that it shows that inflating the money supply is correlated with inflation over the long run in both theory and fact. In his columns, Krugman seems unable to comprehend that people might take those truths very seriously.

More fundamentally, he seems to have confused using mathematics with having proven something in fact. True principles can be explained in fiction, and non-fiction as a genre is not particularly famous for its scrupulous truthfulness. It's the relation to the facts that matters in the end, not whether the principles were best explained in a novel or whether they were the results of game theory modeling.


Robert Bradley, Jr. “ Friedman and Liberty .” 2012 was the centenary of the birth of one of the greatest modern defenders of the free society, Milton Friedman (1912–2006). In this Atlas Summit 2012 presentation, Bradley overviews Friedman's life and ideas, documenting how this technical economist became more libertarian and “radical” through his long, distinguished career.

David Kelley “ Ayn Rand versus Friedrich Hayek .” Friedrich Hayek was one of the greatest advocates of liberty in the 20th century. Ayn Rand was another. Hayek won his fame as an economist, but his thought was based in philosophy. Rand won her fame as a novelist and social commentator, but developed her thought into the systematic philosophy of Objectivism. In this webinar, David Kelley, the founder of The Atlas Society, provides overview of the essential differences in Rand's and Hayek's views of knowledge, human nature, and ethics. He explains why these differences matter, and why Rand was right on the fundamentals.

Donald Luskin “ I am John Galt ” In this 2012 Atlas Summit presentation video, Donald Luskin discusses his conflicts with Paul Krugman, arguing that Nobel-winning economist and op-ed writer Paul Krugman is the perfect living embodiment of Ellsworth Toohey.