Krugman's Money for Nothing

Krugman’s Money for Nothing and the Dire Straits of Climate Change

Krugman Money for NothingMy previous post juxtaposed a BBC post on Keynes with Krugman on climate change, waiting for the Keynesian Krugman to put the pieces together and advocate a borrowing that would reduce resource use: What would Keynes do as Krugman loads climate dice?

But Krugman has now himself juxtaposed the issues in two adjacent columns, Money for Nothing (26 July 2012) and just below it Loading the Climate Dice (22 July 2012). The posts are so clearly right next to each other on the Paul Krugman colunist page, but they are quite intellectually disjointed. As I commented previously, Krugman on climate change is an almost entirely political barb, whereas Krugman a few days later is all about economics, shifting back to emphasizing “Money for Nothing” as growth:

It’s simply crazy to be laying off schoolteachers and canceling infrastructure projects at a time when investors are offering zero- or negative-interest financing.

You don’t even have to make a Keynesian argument about jobs to see that. All you have to do is note that when money is cheap, that’s a good time to invest. And both education and infrastructure are investments in America’s future; we’ll eventually pay a large and completely gratuitous price for the way they’re being savaged. . . .

So it’s time to stop paying attention to the alleged wise men who hijacked our policy discussion and made the deficit the center of conversation. They’ve been wrong about everything — and these days even the financial markets are telling us that we should be focused on jobs and growth.

Krugman is correct. It is crazy to be laying off schoolteachers and closing schools. We are paying a huge price, and will be paying more. However, we cannot just promote economic growth or infrastructure in the abstract, because that leads straight to the kinds of resource problems my economist colleague Karl Seeley details so well on The Dance of the Hippo: Economics as if the physical world really existed. Instead, we need to focus the spending on projects that will reduce resource use.

And I know it’s a terrible pun, but if we spend Krugman’s “Money for Nothing” the wrong way, we’re going to be in real Dire Straits when it comes to climate change. We got to install these EnergyStar refrigerators. We got to move to LED TVs.

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