Good Paul, Bad Paul

Some of my friends say I was a bit harsh on this year’s winner of the Sveriges Riksbank Prize.

Another free market economist was a bit more positive about the work of Paul Krugman — at least his recent academic stuff. David Henderson (of Hoover and the Naval Postgraduate School) wrote in the Wall Street Journal:

In his popular writing, Paul Krugman is at his best when defending free trade. My favorite is example is his "Ricardo's Difficult Idea," published in the mid-1990s, in which he shares a frustration many of us economists have felt — that the vast majority of noneconomist intellectuals don't understand David Ricardo's famous insight about free trade almost 200 years ago.

Ricardo grasped that people will specialize in producing the goods and services in which they have a comparative advantage. The result is that we never need to worry about low-wage countries competing us out of jobs; the most they can do is change those goods and services in which we have a comparative advantage. For example, though you can rake leaves faster than the teenager next door, it still makes sense to hire him because you have a comparative advantage in writing software programs. Mr. Krugman points out that most noneconomist intellectuals are unwilling to take even 10 minutes to understand this. But that doesn't stop them from writing about trade as if they're informed.

In teaching international business, I’ve found that if students understand Ricardo, then they understand the positive-sum benefits of free trade that promoted the unprecedented rapid worldwide economic growth of the postwar era.

On the other hand, if people don’t get Ricardo, then they’re likely to view trade as a zero-sum contest and seek to block free trade agreements — as been increasingly common in Washington over the past couple of years (cf. the defunct US-Columbia Free Trade Agreement). As Henderson notes, there is no requirement for economic literacy to write about trade (or make trade policy).

While Henderson praises Good Paul, he seems to have a similar view of Bad Paul:

Another strong point Mr. Krugman made in his Ricardo article (and elsewhere): If labor's share of national income is relatively constant (as it has been for about the last 80 years), then increases in productivity must cause real wages to increase. (Wages, as he noted, also include benefits.)

That kind of common-sense clarity seems noticeably absent in his New York Times columns, in which he often attacks the motives of people who disagree with him and even calls them "liars." This deserving Nobel recipient could set a better example when it comes to academic -- indeed basic human -- courtesy.