Tuesday, January 10, 2012

Paul Krugman, Worst Economist in the World {WEITW} Businessmen edition

Paul Krugman seems to have no bounds to creating straw men arguments and today was no exception in his latest piece entitled: Businessmen and Economics.
A brief thought on something I’ll try to expand on later. Leaving aside all the questions about what Mitt Romney did or didn’t do at Bain — and about his self-aggrandizing double standard — there’s an even broader question: why does anyone believe that success in business qualified someone to make economic policy?

For the fact is that running a business is nothing at all like making macro policy. The key point about macroeconomics is the pervasiveness of feedback loops due to the fact that workers are also consumers. No business sells a large fraction of its output to its own workers; even very small countries sell around two-thirds of their output to themselves, because that much is non-tradable services.
So are we to assume that a "community organizer" is somehow better to understand these macroeconomic concepts? The question is that when considering all other occupations, does a successful businessman or woman understand economics better than a community organizer or union leader or a school teacher or ...

It is just that all other things considered, a successful business person knows what has and does hinder his ability to create value to his/her customers. It is not likely that a community organizer understands such issues. We may not like it but what is good for free enterprises are generally good for the society at large.

A successful business person probably understands the negative feedback loop of uncertainty of economic conditions unlike other professions and possibly even ivory tower economists...

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