Krugman Stinks at Political Economy

Once upon a time in a faraway place known as Cambridge, Massachusetts, a young economist named Paul Krugman used to do research and analysis like other young economists. As young Krugman advanced in his career, however, he found that doing good research had its problems, the first of which is that research, when done correctly, tends to go against the grain of what the political classes and their media allies want people to believe.

Economic analysis especially is troublesome for the political and media classes because good economists insist on invoking the Law of Scarcity and Opportunity Cost, and such things are so inconvenient to the politician or journalist that has a vision of a glorious future for the rest of us, a future that we would not choose for ourselves, mind you.

Until the Progressive Era, economists often provided a needed check against the whims of “visionary” politicians, as they both understood the limits of the possible – at the present time – but also believed that human freedom was essential for economic growth and the betterment of society. Until the Progressive Era.

By 1900, American intellectuals and many economists were no longer bound to the realism of their forebears, and men like Richard T. Ely, founder of the American Economic Association, and John R. Commons, both very influential Progressive economists and firm believers both in collectivism and eugenics, moved the economics profession in a way that differed from what previous economists, both in Great Britain and on the European continent, had envisioned. Along the way, things like the Bill of Rights and individual rights became not only subjects for scorn, but also ideals to be feared, as they stood in the way of collectivism and the Good Society. Writes Malcolm Harris the The New Republic:

In the early twentieth century, progressives displayed an open contempt for individual rights. In a 1915 unsigned editorial at this magazine, the editors ridiculed the Bill of Rights as a joke. “They insist upon invoking abstract principles, instead of trying to determine for concrete cases whether social control should supersede individual initiative…how can we discuss that seriously?” The doctrine of natural rights will “prevent us from imposing a social ideal.”

There were economists that stood against this imposition of utopian collectivism, namely Ludwig von Mises and others from the Austrian School of Economics, and one can imagine the ridicule Progressives heaped upon them for their “archaic” ideas – that humans actually were bound to the Law of Scarcity, and that private entrepreneurs, private property, and free market prices were essential to building a free and prosperous future for humanity.

Paul Krugman fits squarely into the mold of his collectivist forbears, and he also discovered that if one fashions both economic and political analysis into the simplistic narratives so cherished by the political, media, and academic classes. (It does not take long to discover his main narrative – Government Good, Private Enterprise Bad – when reading his columns in the New York Times.) So, when he weighed in on the leaded water controversy in Flint, Michigan, experienced Krugman readers knew what he was going to say even before they read his column, and Krugman did not disappoint.

What we know so far is that in 2014 the city’s emergency manager — appointed by Rick Snyder, the state’s Republican governor — decided to switch to an unsafe water source, with lead contamination and more, in order to save money. And it’s becoming increasingly clear that state officials knew that they were damaging public health, putting children in particular at risk, even as they stonewalled both residents and health experts.

Already having claimed that English “conservatives” were at fault for London not having a city-wide sewer system in 1854 – Krugman says “conservatives” believed that such a system might infringe on “individual rights.” He then says that such a skinflint (no pun intended) attitude prevailed in Michigan, and because Flint is a majority-black city, racism was at the core of the alleged callousness on behalf of state officials. Krugman continues:

So are we just talking about the effects of ideology? Didn’t Flint find itself in the cross hairs of austerity because it’s a poor, mostly African-American city? Yes, that’s definitely part of what happened — it would be hard to imagine something similar happening to Grosse Pointe.

But these really aren’t separate stories. What we see in Flint is an all too typically American situation of (literally) poisonous interaction between ideology and race, in which small-government extremists are empowered by the sense of too many voters that good government is simply a giveaway to Those People.

That is the simple narrative that is echoed on the editorial pages of the New York Times and in online socialist publications like Salon and the Alternet, which claims that what happened at Flint was at best callous and at worst a deliberate attempt by white racist Republicans to poison poor black children. (Clay Bennett, the hard-left political cartoonist at the Chattanooga Times Free Press had this partisan interpretation of the crisis.) And one meme making its way through the Internet even blames libertarians for Flint’s water crisis, although not one of the people in the chain of decisions, from local officials in Flint to Rick Snyder, the governor of Michigan, is a libertarian.

Now, if Krugman were an uncredentialed political hack (OK, he IS a political hack, but he does have a Ph.D. in economics from MIT and won the Nobel Prize for economics in 2008) like a writer at the Daily Kos, then I would not be writing this commentary. Unfortunately, Krugman tries to bring in some economic analysis on “public goods” to bolster his point that so-called conservative ideology created the disaster in Flint, but apparently cannot get his analysis straight, even though one of his mentors at MIT, Paul Samuelson, was the economist who promoted the “public goods” argument for expansion of government.

First, we look at what Krugman wrote:

There should, however, be much less debate about spending on what Econ 101 calls public goods — things that benefit everyone and can’t be provided by the private sector. Yes, we can differ over exactly how big a military we need or how dense and well-maintained the road network should be, but you wouldn’t expect controversy about spending enough to provide key public goods like basic education or safe drinking water.

Yet a funny thing has happened as hard-line conservatives have taken over many U.S. state governments. Or actually, it’s not funny at all. Not surprisingly, they have sought to cut social insurance spending on the poor. In fact, many state governments dislike spending on the poor so much that they are rejecting a Medicaid expansion that wouldn’t cost them anything, because it’s federally financed. But what we also see is extreme penny pinching on public goods.

The problem here is that Krugman has not described things from Econ 101, but rather has twisted his own ideology into the definition. Traditionally, economists define public goods as those goods that are non-rivalrous in consumption and for which excluding non-paying users from consuming them is very expensive. Economists often use things like roads and bridges in their definitions, while Krugman wants to claim that water systems and schools also fit into the “public goods” category, yet both certainly have characteristics of excludability.

(As an aside, Austrian economists – and especially Walter Block, who has written extensively on public goods – are not enamored with the claim that governments provide public goods more efficiently and fairly than do private entrepreneurs. But even Austrians better understand the definition of public goods better than Krugman seems to espouse.)

So, what about the situation at Flint? Did it come about because “conservatives” do not understand or are hostile to the creation of public goods? That hardly is true, although the answers to the questions about this disaster do not fit the Krugman narrative.

Shikha Dalmia, a Detroit-area resident who actually has done research and an investigation of what happened – as opposed to depending solely upon a partisan political narrative – notes that the notion that the emergency manager of Flint, Ed Kurtz, was the driving force behind this decision is false. The real story, she notes, is more complicated and involves players.

Flint’s government already had decided to stop purchasing water from the Detroit Water and Sewage Department (DWSD) and switch to a regional water authority that is looking to draw water from nearby Lake Huron. That project, however, is not scheduled for completion for a few years, so Flint needed another water source.

The manager of DWSD, however, offered to cut Flint’s rates substantially, with a projected cost savings to the city of $26 million a year. Such an offer made more sense than rehabilitating Flint’s old water system that pulled water from the heavily-polluted Flint River. However, writes Dalmia, local officials believed that putting the old Flint River system back on line would help create jobs in Flint, or what she refers to as a “stimulus” project:

… sources close to the situation at the time tell me that it was essentially because Genesee County and Flint authorities saw the new water treatment as a public infrastructure project to create jobs in an area that has never recovered after Michigan’s auto industry fled to sunnier business climes elsewhere.

One thing led to another, and soon there was disaster, as it was clear that the water coming through the aged Flint system was contaminated with lead and other chemicals. As the horrible situation became apparent, it seems that there was a joint (but seemingly disconnected) effort from the Environmental Protection Agency, local government, and the governor’s office to pass off responsibility. As Dalmia writes:

Residents started complaining about the taste and color of the water right after the switch in April 2014. The city denied anything was wrong, but later discovered that the water contained a higher-than-recommended concentration of TTHM (trihalomethanes) — a byproduct that is generated when too much chlorine is required to disinfect the water. This, along with some other issues, prompted General Motors to quit the Flint water system after its auto parts started corroding. Yet Democratic Flint Mayor Dayne Walling was still telling residents the water was safe, even advising them that buying bottled water would be “wasting their precious money.”

Even a cursory glance at the situation demonstrates that what happened in Flint was the result of government failure at all levels, which contradicts the partisan political narrative that Krugman is trying to peddle. An academic researcher with even a smidgen of integrity would want to know what actually happened, not what the persons wishes had happened.

Compare Dalmia with Krugman. Dalmia lives in the Detroit area and has interviewed numerous people, and lets no guilty party off the hook. People like Paul Krugman and Clay Bennett, on the other hand, are not interested in knowing the truth, especially if it interferes with their partisan narratives, and I doubt seriously that either person has spoken to anyone who actually knows the real background of what happened in Flint.

Now, Bennett is paid to be outrageous and he is a partisan Democrat and makes no bones about it. Krugman, on the other hand, is an academic economist who claims he is interested in researching the facts and seeing where they lead, or at least that is what he wants others to believe. In reality, Krugman does not care. He has a political narrative, and even if it interferes with the laws of economics and factual evidence, he always will go with the narrative, and if the narrative proves false, he will just apply the narrative once more.

Yes, the water in Flint stinks. However, the odor wafting from the city’s water treatment plant does not reek nearly as much as Krugman’s claims that his use of mangled partisan narratives actually is sound economics in action.