Asymmetrical Information

Two points:

(1) "Labor." We won the war, Jane.

(2) Hasn't DeLong been writing about the relative decline in labor's share in the national income? Has there been a change recently?

It's really pretty stable. See this paper from the St Louis Fed. It fluctuates around 70% by a point or so, but that's about it.

This one is a favorite of mine. It's just sad to see what a sloppy, embittered hack he's become.

Krugman's point about "adopt[ing] the stance of rebel" is a pretty useful one when talking about economics. It reminds me of this quote from Bryan Caplan in one of his papers about what the public believes about economics:

"In the minds of the public, prices apparently go up when businesses suddenly start to feel greedier. Economists, in contrast, expect businesses to be greedy year-in, year-out; but depending on market conditions, greed may call for prices to go up, go down, or stay the same."

It's amazing how persuasive one can be when you walk through an argument and demonstrate that the economist's point of view believes that all companies are always greedy, while rejecting it requires arguing that companies are often not greedy and suddenly become more so.

An excellent essay!

The over-arching analysis of the psychology behind anti-free-trade-ism is persuasive and a great read. Krugman's encyclopedic use of economic chapter and verse to support his arguments is impressive. The analogy of economics to evolutionary theory is quite interesting.

So the next question is, what the heck happened to the professor?

Part of the answer can be found in the essay: the great zeal for debating ignorance with knowledge, the passionate desire to be right in one's beliefs and to make others understand that you (Krugman) are right.

But the scholarly and nuanced essay is otherwise so far removed from Krugman's usual opinion pieces in the New York Times, that it seems like I'm reading the work of a tag team of Dr. Jekyl and Mr. Hyde.

I don't know what's going on with Krugman. If he didn't hold such a powerful media post, I would feel sorry for him.

"Hasn't DeLong been writing about the relative decline in labor's share in the national income?"

Endlessly, as election-year sophistry.

What he and Krugman & Co. all did was ignore the *plunge* in profits during the recession while labor's share of national income actually *rose* -- and then, when profits finally recovered from an historic low, cry out: Look how profits are now rising faster than wages! Outrage!

"Has there been a change recently?"

Look at the data yourself, graphed to support various points of view.

http://www.mindspring.com/~jimglass/profitsandpay.htm

Personally I really like the first one, which DeLong posted.

By using two different scales on the same chart it makes 9% (profits) look greater than 70% (wages) -- and makes it look like the 9% is pulling up and away from 70%, instead of having profits just recover back to where they were in Clinton's good old 1996, almost.

Fun with visual representation of data!

Profits were actually highest back in the good old days after WWII and during the Ozzie and Harriet era -- which the likes of Bob Herbert today somehow fantasize were some sort of low-profit high-wage workers' nirvana.

Surely if the percentage of labor's take is constant, and national income rises, the difference in actuall dollars would be increasing. Thus, labor is falling behind the "increasing profits of greedy shareholders..."

Your images don't load, Jim.

Ah, but they do if I put your site in the trusted sites zone. Whatever office-export is doing there it's not security-friendly.....

Occam's Razor my dear fellows. If the deomonstgrated falling share of national incomes (not total compensation) that goes into the pockets of workers (e.g. c.60% in 1968 to c.52% per the STL Fed study pointed to by Jane) does not explain the widening current income gap in the US, then what does? Throwing up one's shoulders in a shrug does not count. SomeCallMeTim puts it best "We won."

If one looks only at the share of income for labor's total compensation, this includes, I am assuming health care costs, retirement, disability, (taxes?) all legitimate components, but not necessarily adding to the spending power of the middle and lower classes. While these latter costs accrue to all, they accrue at a far greater rate, I am willing to believe, to those who get paid for their labor.

And Tim, why do you suppose they call it "unearned income?" Suggest Bush&Co come up with a substitute in their national rebranding campaign. My suggestion - "Ownership Rewards."

Paul Krugman will always be my favorite Enron consultant.

Funny thing about Krugman how those on one side think him great when he attacks the other side but a hack when he attacks them.

Most of the things those on the right are now saying about Krugman sound like what those on the left said a few years ago.

GT:

I didn't know that appreciating scholarship and nuance makes me a person on the right. And I didn't know that criticizing the shrill moonbat poems that Krugman has written for the Op-Ed pages of the New York Times makes me a right person, either.

Perhaps this is really more an issue of intellectual and rhetorical standards, rather than a simple right/left partisan divide?

I don't hate Prof. Krugman, I mourn the loss of what were some of the most entertaining and illuminating economic essays in modern times. His decision to abandon his field of expertise and transition from an explicator to a polemicist was classically tragic. I only hope that he decides to make permanent his hiatus from the NYT to focus on economics rather than politics.

Thanks for posting the link to one of my all time favorite essays.

Matthew,

No, not really. Like I wrote much of what those attacking Krugman today said was said by those on the left years ago.

The fact that you would consider Krugman's NYT columns, which include the unmatched pieces on the CA energy crisis recognized by David Warsh as doing more by themselves to explain that crisis than any newspaper, as moonbat poems makes clear what side you are on.

GT-

So, by your reasoning if Jane is ridiculed by rabid fans of James Dobson and Pat Buchanon and later adopts positions quite similar to theirs and expresses them in paranoid fantasies that Hillary Clinton is trying to establish a communist dictatorship while forcing our children to watch gay porn, I don't get to criticise her because she had once been ridiculed by those same people?

You would claim that my "problem" would be merely that she doesn't agree with me now?

No GT, it is you whose comments show where you are. Those of us who have a problem with Krugman are not just in disagreement with Krugman (I disagree with Yglesias but I can read him respectfully)we decry his degeneration into a somewhat less buffoonish version of Michael Moore with apocalyptic claims about the US degenerating into a fascist state. His attacks on Bush and others he opposes include arguments which in other circumstances he has attacked as invalid. It just doesn't seem to matter to him if it harms those he opposes that he is contradicting himself.

Bush has enough to answer for without the nonsense Krugman is spewing.

I think critics of Krugman would have a bit more credibility if they showed they even understood what was being debated.

The CA energy crisis columns, my favorite example, showed how unlikely this is.

Funny thing about Krugman how those on one side think him great when he attacks the other side but a hack when he attacks them.
Most of the things those on the right are now saying about Krugman sound like what those on the left said a few years ago.

There's a clear difference, GT. "A few years ago," Krugman was doing economics, which is his area of expertise. "Now," Krugman is doing politics, which isn't.

David,

That is yet another example of what I was saying about not understanding the debate. Reread the CA crisis columns.

GT:

I don't mean to imply that all his columns are shrill moonbat poems; his op-ed pieces range from paranoid, bitter ravings to coherent, smart commentary.

The funny thing is, though, that even when he writes something good nowadays, it's hard for me to take his word on anything anymore, because he has trashed his own credibility so thoroughly.

Everybody has an off day now and then, but Professor Krugman has used his New York Times bully pulpit for spreading the worst gossip and the dumbest conspiracy theories about President Bush for several years. He has degraded the level of political discourse in this country.

I don't read Krugman often these days, but in times past I found that I could tell in 1-2 paragraphs whether he was about to present a sensible economics treatise or a raving political diatribe. The very tone of his words would shift that noticably.

Incidentally, GT, an occassional good column in a sea of harpy-spittle doth not a prophet make. You can wave the CA columns as a talisman until your arms fall off, but it doesn't particularly phase me. Krugman writes some amazing things when he sticks to economics, but for too much of his NYT tenure he's just been pathetically shrill.

GT - Every time I read Krugman talk about something I understand, he combines contempt for the facts with a total lack of perspective.

So, when Krugman moves on to a subject in his area of expertise, as to which I might be expected to learn something from him, why should I listen? To me, if I know a guy is full of it, I'm not gonna keep listening.

anonymouse

If you understood wha he said you would realize that it's beyond an occasional good column.

I'm not waving anything btw. Krugman haters will continue to do so no matter what. Facts never fazed them before.

I mention the CA energy crisis because it is such a good example. Many Krugman critics, some like our host who think themselves or are thought of as knowledgeable in economics, showed they had no clue what Krugman was saying. A year after the columns, when what KJrugman had said before almost anyone had been corropborated by several reports you still had online experts still showing they did not understand.

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