Expanding on his February 9th White Paper, “Paul Krugman’s Nostalgianomics: Economic Policies, Social Norms, and Income Inequality”, Cato Vice President for Research Brink Lindsey discusses the problems with the 2008 Nobel laureate’s analysis of income inequality in today’s Cato Daily Podcast.
[Krugman] has a clear ideological incentive to portray the ‘50’s and ‘60’s as this enlightened period of governance. Liberals were in charge, it was a time of very activist government, lots of intervening in markets, and yet the economic numbers were stellar. Growth was fantastic, income growth in particular was great, and these egalitarian values of income compression were being fulfilled as well. To him, it looks like a wonderful model for liberals of today. ‘Look back at what liberals did in the 50s and 60s and we can do that again.’ But to reach that kind of ideologically satisfying, for him, conclusion I think he has to be very selective about what was actually going on back in the 50s and 60s. He has to cherry-pick policies he likes.