Peter Schiff Takes Down Paul Krugman, Again

Whenever Paul Krugman is cornered about his inordinate worship of inflation as a tool for creating economic prosperity, he usually mentions the story of a famed (Infamous?) Capitol Hill baby-sitting co-op in which couples received coupons which they could redeem with other couples in the co-op for baby-sitting services. However, because the couples generally liked to all go out at roughly the same time, the co-op “fell into recession” because couples tended to “hoard” the coupons.

The “solution,” Krugman writes, was for the co-op directors to print more coupons, which, according to Krugman, meant that “couples became more willing to go out, opportunities to baby-sit multiplied, and everyone was happy.” However, he adds, “Eventually, of course, the co-op issued too much scrip, leading to different problems.” Krugman then applies this example to the economy, using it as “proof” that printing money will end recessions.

Austrians, and fellow-travelers, however, note that this is a ridiculous example of the supposed “good effects” of inflation. David Henderson writes a cogent criticism here, while Peter Schiff performs the final takedown on this Krugmanian nonsense, noting that by assuming every hour of babysitting had the exact same value no matter when it was performed, the co-op leaders created their own problems. The number of available coupons had nothing to do with it. But, one can expect Krugman to continue to use this specious example as “proof” that inflation is our friend.

Share

5:29 pm on December 14, 2011