For This You Get A Nobel Prize?
October 07, 2009, 05:30 AM
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Paul Krugman still can`t grasp why years of stupid investments cause inevitable recessions.

Krugman denounces Arnold Kling`s quasi-Austrian explanation of why busts occur. The reigning Nobel laureate proceeds to triumphantly zing Kling with what he thinks is a killer question:

And now as then, the whole notion falls apart when you ask why, say, a housing boom — which requires shifting resources into housing — doesn’t produce the same kind of unemployment as a housing bust that shifts resources out of housing.
Yes, that`s what Dr. Krugman wrote: Why doesn`t a housing boom cause the same kind of unemployment as a housing bust?

A commenter named Scott replies:

You don’t create unemployment by hiring people.

Seriously, Paul basically just asked “Why doesn’t hiring people create the same unemployment that firing does?”

And people take him seriously?

At much greater length, I had reviewed what was wrong with Krugman`s thinking about recessions a year ago.