Paul Krugman vs. Paul Krugman

12 Nov, 2014 at 11:15 | Posted in Economics | 4 Comments

What we’re seeing isn’t the rise of a fairly broad class of knowledge workers. Instead, we’re seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.

Paul Krugman The Conscience of a Liberal (2011)

The factor market most of us know best is the labor market, in which workers are paid for their time. Besides labor, we can think of households as owning and selling the other factors of production to firms. For example, when a corporation pays dividends to its stockholders, who are members of households, it is in effect paying them for the use of the machines and buildings that ultimately belong to those investors. In this case, the transactions are occurring in the capital market, the market in which capital is bought and sold. As we’ll examine in detail later, factor markets ultimately determine an economy’s income distribution, how the total income created in an economy is allocated between less skilled workers, highly skilled workers, and the owners of capital and land [emphasis added].

Paul Krugman Essentials of Economics (2014)

gadget-freak_logo (Kopie)Looks a little schizophrenic, doesn’t it? Who are we to believe? Krugman the blogger or Krugman the textbook gadget modeler? Well, as you know, yours truly is not the least impressed by Krugman’s gadget interpretation of economics, so I go for the first altenative. The rising inequality we have seen for the last 30 years in both the US and elsewhere in Western societies has very little to do with neoclassical gadgets such as aggregate production functions and marginal productivity theory.

4 Comments

  1. Wow — I hope you got the “Free Exam Copy” of Krugman’s Essentials of Economics, not the $200 cloth-bound book or the $150 “Loose leaf sheets”.

  2. In my view, when it comes to issues of inequality, Krugman has not written anything particularly interesting outside of his observation that there has been a concentration of wealth. Thus, I do not see any contradiction. James Galbraith is the person who has looked at the micro and macro economic dynamics behind inequality.

  3. Hey, at least, their textbook is linked to your perennial nobel wannabe Paul Roemer’s founded aplia online course.


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