Krugman’s Free Lunch Theory

Paul Krugman continues to astound from his perch at the New York Times, and I must admit that every Monday and Friday, he further discredits that “honor” called the Nobel Prize for Economic Science. In Krugman’s case, I would call it the Nobel Prize for Economic Alchemy.

Our Hero today once again excoriates Obama for listening to the political opposition and cutting out some items in the “stimulus.” According to Krugman, that means:

(eliminating) hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, (and undermining) schools….

You see, Obama is not going to borrow and print enough money for Krugman’s tastes:

Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.

Now, Krugman does not explain what happens if the government suddenly tries to borrow $2.9 trillion or whatever number he thinks is adequate. But to him, there is no such thing as “opportunity cost,” at least in the discussion of macroeconomics, unless the economy is at “full employment.”

To put it another way, this august and celebrated Princeton University economist is saying that opportunity cost can be discarded when the political situation calls for creating a phantom economic theory.

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6:38 am on February 9, 2009