Monday, August 6, 2012

Estonians Teach Krugman a Lesson in Economics

Another day, another Krugman crapweasel trick uncovered...
Should the government have borrowed money to keep unemployment low? “No,” he says. “We don’t want to be like Greece.” (Estonian quoted in Bloomberg)
The country of Estonia saw what was happening with Ireland and Greece, and its people were determined not to go down that road.
In May 2009, months after the passage of a $787 billion stimulus package in the U.S., Estonia’s government took the opposite tack: the hard line. It did not dip into the country’s reserves or borrow money. (Krugmenistan)
Paul Krugman excoriated their fiscal rectitude...
On June 6, in a blog post titled “Estonian Rhapsody,” Krugman took on what he called “the poster child for austerity defenders.” In his post, he graphed real GDP from the height of the boom to the first quarter of this year to show that, even after a recovery, Estonia’s economy is still almost 10 percent below its peak in 2007. “This,” he wrote, “is what passes for economic triumph?” (Krugmenistan)
That earned some pushback from the nation's president, but their economic recovery is what really got them the last laugh over the Pontificator of Princeton.

This chart exposes a classic Krugman crapweasel trick: Take a little slice of data, in this case only the blue line, and use it to show that Estonia's GDP sank after their austerity. The author of Krumenistan plotted it out further, showing that they experienced a bubble, as everyone did, right before the crash. Because they acted responsibly, they are growing again, and faster than their European cousins who are blowing money like there's no tomorrow.


In his blog post, Krugman started his graph—and his logic—when Estonia’s GDP had reached its peak, in 2007. Wages were high, and unemployment was low. Good for most citizens, and for most citizens now things are still worse than they were then.
But if you move Krugman’s graph all the way back to 2000, you see slow, steady growth in GDP, then a short boom, then a hard crash, and now growth leveling back off to where it would have been without the boom.
In the boom years, says Varblane, “GDP growth was not real. It was artificial,” fueled by cheap debt from abroad. The peak, Krugman’s point of comparison, was not “real,” he says. That Estonia has not reached it again is a good thing, Varblane and Ligi say. It never should have been there in the first place. (Krugmenistan vs Estonia)
Take away the cheap tricks, and Krugman's Keynesian arguments collapse. The austere Estonians are out of the woods, while the rest of us are still lost, foolishly trying to spend our way to prosperity.

31 comments:

Ducky's here said...

Seems like a mixed bag. They have about the lowest income in the Eurozone an 13% unemployment.

Pick your poison.

Shaw Kenawe said...

Estonia's population of 1.29 million is comparable to the population of San Diego, Calif.

Here are some other interesting data:

"Upon giving birth, the Estonian government grants one of the parents 100% of their former salary for 18 months, plus 320 euros of one-time support per child. After 18 months, the parent has the right to resume her/his former position.

In addition, the parent and child receive free healthcare.

Parents who did not work before giving birth (unemployed, students, etc.) receive 278 euros a month; the top salary is capped at 2157 euros a month.

Try that on a country with a population of 300+ million.

conservativesonfire said...

Living bone's means is fun until the money runs out. who bought that Nobel prize for Krugman?

Silverfiddle said...

Shaw: I don't understand what your point is?

Ducky: Actually, Estonian unemployment is at 11.5%, the Eurozone average.

More importantly, they've avoided the fate of the PIGs, whose unemployment is over 20%, and they also don't have the debt overhang, so I'd say they picked the right "poison."

http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&met_y=unemployment_rate&idim=country:ee&fdim_y=seasonality:sa&dl=en&hl=en&q=estonia+unemployment#!ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country:ee:el:ie:it&ifdim=country_group&hl=en_US&dl=en&ind=false

http://www.sacbee.com/2012/07/30/4673424/europes-economic-confidence-slides.html

Ducky's here said...

And they ae an export economy which will suffer greatly if the Eurozone sees any further slowdown.

At that point they will use their low debt position to shake hands with Krugman.

Robert Sinclair said...

I was aware of the fact that Krugman is a professor, a writer, and chairman of the Paul Krugman Admiration Society, but I didn’t know he was actually an economist. I mean, when a man claims to have some economic expertise, yet have never worked in the field of financial management, then we have to assume that most of his arguments are merely theoretical and based upon whatever principal de jure will earn him the most instant gratification. Given his biography, it is hard to imagine why anyone cares what Krugman thinks.

Silverfiddle said...

"And they ae an export economy which will suffer greatly if the Eurozone sees any further slowdown."

As will Germany, who exports mostly to other Eurozone members, which is all that is keeping them in the game.

Macroeconomics is not a science, as Jez pointed out the other day. Krugman was wrong to excoriate them, and he kind of admitted as much, overinflated pompous ass that he is.

Bottom line: Estonia rejected his advice and they are better off for it when compared to the PIIGs.

Silverfiddle said...

Robert: Krugman does have real-world experience, albeit more as a mad scientist than a business economist.

He devised the scam strategy for Enron, but somehow escaped prosecution for his economic crimes.

Ducky's here said...

How's it working out in Britain.

What are you goals, Silverfiddle? Just increase GDP and all is well?

Like Shaw says, you take a small snapshot of a small country and then declare something (unstated) has been proven.

Not to be dismissed out of hand band also very incomplete and not particularly convincing.

Jersey McJones said...

GDP only tells you so much. We've had rising GDP in this country for most of the past 30 years, yet over that time, most Americans' wages were flat, while inflation, though on the macro was low, of the price of the goods and services most Americans require was high.

Silver's playing the same GDP game he's accusing Krugman of playing.

JMJ

Sam Huntington said...

To further the theme, “… it is hard to imagine why anyone cares what Krugman thinks,” here is something L’il Paulie wrote back in January 2011:

"One side of American politics considers the modern welfare state...morally superior to the capitalism...we had before the New Deal. It's only right, this side believes, for the affluent to help the less fortunate. The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft...There's no middle ground between these views.

Any suggestion that people DO NOT have the right to keep their earnings is nothing less than astounding. This madness is further compounded by the fact that no one on the right ever suggested that we shouldn’t help the needy. What the right have suggested is that private charity is far more efficient than is the government, and in an environment where 50% of the American people do not pay taxes, the rich have already paid more than their fair share.

The question remains valid: why should anyone care what Krugman thinks? He’s a mental dwarf.

Silverfiddle said...

@ Jersey: Silver's playing the same GDP game he's accusing Krugman of playing.

Bingo! (almost) The author I cited used a broader range than Krudman.

I am encouraged to see that the two leftys here understand his numbers game.

Now, the fact still remains that Krudman ridiculed them for their strategy and predicted doom. He was wrong, and he was a caddish ass as well.

FreeThinke said...

We can play games of deception and obfuscation with numbers all we like, but it solves nothing. As Silver's augmented graph proves, omitting data to "prove" an ideological point of view is just as dishonest and valueless as making it up data of whole cloth.

But why do we need numbers at all, when we know positively that the freely APPLIED PRINCIPLES of Capitalism produce much better results than the AIRY, EMPTY-HEADED THEORIES of Marxian dialectics?

We don't need to ARGUE with Marxists, we need to SMASH them to pieces, stomp on them, grind them under heel, sweep the fetid remains into a heap and set it ablaze and be DONE with it.

Marxism is a MONSTER. You don't try to REASON with a monitor lizard when it's coming at you full tilt. If you are smart and properly equipped, you take out your AK47 (or whatever - I don't know beans about guns, I admit) and do everything possible to KILL it before it can get to you.

This notion that Marxists and their theories ought to be treated politely as "just an alternative approach to governance" is BUNK.

We don't need anymore THEORY, what we need is decisive OFFENSIVE ACTION.

The Founders came to that conclusion in 1776, and look what THEY were able to accomplish. Of course there were no Ivory Tower Marxists firmly ensconced at Harvard, Princeton and Yale in those days and no malicious media moguls manipulating pubic opinion via TV and the internet. I'm sure THAT helped enormously.

The cliche runs true yet again. We are suffering from a near terminal case of Analysis Paralysis.

It's time for THIS demented government to be "altered or abolished" -- preferably the latter -- and for educated imbeciles like putrid Paul Krugman to be strung up by their thumbs or hung by their heels in the public square, and pelted with rotten vegetables and freshly laid turds till they RECANT.

Strap Krugman to the Judas Cradle, and see how long he lasts. Heh heh heh! };-)>

~ FreeThinke

Ducky's here said...

Strap Freethinker to the Judas Cradle and pipe in nothing but Snoop Dog and see how long he lasts. Heh heh heh!

Silverfiddle said...

Ducky: We always suspected you had a sadistic streak ;)

Ducky's here said...

Admit it, you also chuckled at the image.

Jersey McJones said...

Silver, you can't prove Krugman was wrong any more than you could prove he was right. It's what he was wrong or right about that matters, and you're focused solely the GDP angle of the argument.

What does austerity really accomplish? What society, historically, ever benefited in the long run from austerity? Austerity is essentially, in a developed society, a regressive, recessive policy. It is intentional recession.

JMJ

Z said...

"sadistic Streak"...Ducky? The guy who said he wished Breitbart was in a body bag a year before Andrew died?
naaa

At the image of FT and that music, I do have to admit to laughing.
Strap me down to Easy LIstening...no, kill me instead :-)

Silverfiddle said...

Krugman predicted disaster for Estonia, and his argument was based upon GDP. He was wrong.

Your austerity argument presupposes government spending drives economic growth---it does not.

Finntann said...

@you can't prove Krugman was wrong

I don't need to prove him wrong, his statistical sample is absurd.

It's like looking at June to decide how the whole year is going.

It was 68 degrees here today... LOOK, proof of global cooling!!!

@in a developed society, a regressive, recessive policy

What? like 16 Trill in debt?

Yeah, you got the answer, tax more-spend more.

Ask Greece how that worked out, eh?

Cheers!

jez said...

"We don't need to ARGUE with Marxists, we need to SMASH them to pieces"

Don't you think you ought to be more careful about defining Marxism then? As things stand, you use the word for pretty much anything you don't like.

FreeThinke said...

Well, while we're at it, let's strap Canardo onto the Judas Cradle and make him watch reruns of Ozzie and Harriet and Leave it to Beaver while listening to Lawrence Welk -- or maybe subject him to all the movies made by Jeanette MacDonald and Nelson Eddy -- with special emphasis on I Married an Angel. ;-)

~ FT

FreeThinke said...

Marxism is like pornography, Jez. There may be no definition Ivory Tower intellectuals, post-modern scholars, and tortuous legal minds find adequate, but everyone knows it when they see it, except for those sad, disaffected, perpetually enraged souls and would-be despots who wish to fob it off as a respectable alternative to Capitalism.

~ FT

FreeThinke said...

Z, we'll go easy on you, and merely confine you to a luxurious apartment in Paris with a well-stocked larder and full maid service where you will be surrounded in every room by the finest available recorded performances of the Complete Organ Works of Dietrich Buxtehude, Johann Sebastian Bach, George Frederick Handel, Claude Daquin, César Franck, Johannes Brahms, Louis Vierne, Charles Marie Widor, Maurice Duruflé, Francis Poulenc, Siegfried Karg-Elert, Flor Peeters, and Olivier Messiaen -- along with every art song written by Mozart, Franz Schubert, Robert Schumann, Johannes Brahms, Gabriel Fauré, Claude Debussy, Maurice Ravel, and Hugo Wolf. ;-)

~ FT

FreeThinke said...

The quibbling at the top of the thread about the SIZE of Estonia reminds me of an ancient riddle my father introduced me to at age four:

What weighs more -- a pound of feathers or a pound of iron?

~ FreeThinke

jez said...

"everyone knows it when they see it, except for those... [people whom I don't like]"

Them and us, Freethinke. Purely.

Robert Sinclair said...

Who doesn't think Marxist ideology an abomination and a blight upon mankind? Has any other system in the history of mankind done so much harm? Why would anyone defend it?

FreeThinke said...

"... everyone knows it when they see it, except for those... [people whom I don't like]"

Them and us, Freethinke. Purely."


Not so, Jez. It has nothing to do with likability. Most of the people I've loved most have been opposed to my politics and I to theirs. It makes no difference in our personal relationships, because we don't talk about politics when we're together.

What I said about the similarity between Marxism and Pornography, was, is, and will remain true no matter how much "revisionist" claptrap and obfuscatory rhetoric young minds will be subjected to.

The Truth is the Truth. Whether anyone ACCEPTS it or BELIEVES it irrelevant.

~ FT

jez said...

You count sad, disaffected, perpetually enraged souls and would-be despots among your friends? Or did you get carried away with your invective (again)?

FreeThinke said...

I'm ready, willing and able to love just about everybody, Jez, -- even you ;-) -- but I don't have to embrace or endorse the attitudes that accompany them in order to do so.

Unlike most people, I do no believe a person can be properly defined or evaluated purely by his religious, philosophical or political beliefs.

Believe it -- or not.

Cheerio!

~ FreeThinke

jez said...

You're ready to love even those you accuse "of the petty, spiteful, envious, captious, uncharitable aspects of human nature at its worst?" -- I wonder what there is left to say about those you're ready to hate!