Our Most Widely Ignored Public Intellectuals

A prophet, says the Bible, is not without honor save in his own country. As the most prestigious economic dissenters of this era, Joseph Stiglitz and Paul Krugman form a category of two: astonishingly prescient, widely read, and largely ignored by those in power.

Both won Nobel Prizes for their early virtuoso technical economic work. Stiglitz’s research, starting in the late 1960s, showed that markets do not follow the standard economic model of efficient competition, because a buyer or seller often has access to privileged information. Stiglitz enriched the well-established idea that transactions have hidden costs or benefits to the wider society. These “externalities,” he demonstrated, are not exceptional but pervasive. This insight applied particularly to the environment, where transactions are so often free to the polluter and costly to the planet. 

Krugman, in the late 1970s, did pioneering research challenging the orthodox conception of international trade. Where most economists dating back to David Ricardo in 1817 had viewed trade patterns as based on the natural comparative advantage of nations, Krugman demonstrated that governments could create competitive advantages through strategic measures to develop export industries. Still, Krugman was more sanguine about markets then, and he distanced himself from those advocating that the U.S. embrace explicit industrial policies to promote manufacturing.

Both Stiglitz and Krugman are, in the somewhat overused term, public intellectuals. Both received their Nobels during the George W. Bush era for work done decades earlier, in part because the Swedish Nobel Committee wanted to empower critics of American conservatism. The Nobels gave them additional luster and made them harder to dismiss. With views on the edge of respectability, both are scrupulously careful to avoid error. 

Each still spends substantial time teaching, Krugman at Princeton and Stiglitz at Columbia. Krugman, of course, devotes most of his non-academic efforts to writing a twice-weekly column as well as a blog for The New York Times. Stiglitz’s main extracurricular activity is trying to change the world via globe-trotting meetings with national leaders, conferences and projects at an institute he founded at Columbia and in collaboration with other progressive think tanks, and work taken on for various agencies of the United Nations. 

Of the two, Stiglitz has been the more unorthodox throughout his career. His radicalizing experience was working in the Clinton administration, where he regularly crossed swords with economic policy czar and later Treasury Secretary Robert Rubin and Rubin’s protégé Lawrence Summers on everything from environmental issues to banking regulation. He was appointed in 1993 to the Clinton Council of Economic Advisers, where a key patron and ally was Vice President Al Gore, who admired Stiglitz’s environmental work. Elevated to council chair in 1995, Stiglitz in 1997 became chief economist of the World Bank, a position typically filled at the pleasure of the U.S. government. There, he did not hesitate to criticize U.S. policies on Third World debt and development. He had several public disagreements with Summers, and his position became untenable.

By contrast, Krugman’s only work in government was a sabbatical at the Council as a professional staffer in the Reagan years. In the mid-1990s, while still mainly a technical economist at MIT, Krugman concluded that Americans just didn’t understand economics. It annoyed him that non-economist crackpots of the right and left were gaining a hearing as serious thinkers. So he systematically set out to write for a broad audience. He proved to be good at it, contributing to The New York Times, The Washington Post, Harper’s, Slate, and The American Prospect as well as writing popular books.

When the Times offered Krugman a job as a staff columnist in 1999, the editors were expecting an articulate, moderately liberal economist expert at translating economic topics to a general readership. What they got was America’s pre-eminent progressive polemicist. Krugman’s radicalizing experience was George W. Bush. His choice not to pull punches has caused some detractors to criticize him as shrill. In a 2005 farewell column, then–Times Public Editor Daniel Okrent wrote that Krugman has “the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.” Okrent provided no documentation for the assertion. It’s not clear that a more circumspect Krugman would have more direct impact on national policy: He is marginalized for the content, not the tone.

Yet influence can be exerted in more than one way. Krugman is closely read at the White House, and I’d like to believe that his views give ammunition to the administration’s budget doves and regulatory hawks. Both men have prior relationships with several senior officials. Former budget chief Peter Orszag was a student of Stiglitz’s. Ben Bernanke, Federal Reserve chair, and Alan Krueger, chair of the Council of Economic Advisers, are former Krugman colleagues at Princeton. Stiglitz has immense impact on thinking about economic development, though mostly outside the United States; his influence at home operates circuitously, through the actions and diplomatic demands of foreign governments. The two, though not close, respect each other’s work. Both men, with large audiences, influence the broad public’s grasp of economics, though that has yet to translate into policy.

Taken together, Stiglitz and Krugman occupy something like the indispensable role that John Maynard Keynes played in the period between 1919 and his death in 1946. Keynes’s sheer intellect and deftness at translating abstruse economics into wry English won him a wide readership. In a time like our own, when austerity was peddled as the cure for depression, his was the voice in the wilderness whose theoretical insights about the need for public outlays to maintain demand kept being vindicated by events. 

Yet except for the accident of massive wartime deficit spending and a burst of practical influence late in life, when Keynes designed a new international monetary system for the postwar era, his ideas were purged of their radicalism by governments and economists alike. In recent decades, mainstream economics has turned his broad theories of the instability of capitalism into a cookbook on the occasional usefulness of deficits, while too many policymakers have reverted to a pre-Keynesian obsession with budget balance. 

In this orthodox climate, Stiglitz and Krugman are excluded much as Keynes was. The practical reforms that logically flow from their ideas would include drastically increasing regulation of finance, creating a medley of measures to promote equality, and massively increasing public spending. None of this has been on the table for a Democratic president since Lyndon Johnson.


In their new books, Krugman and Stiglitz both argue that the income distribution in America is outrageous, with economic as well as social consequen-ces. Krugman, in End This Depression Now!, a primer on how Keynesian economics applies to today’s circumstances, offers a smart explanation of why the dynamics of this slump are reminiscent of the 1930s, with a downward spiral of depressed purchasing power reinforced by debt overhangs, especially in housing. In fact, Krugman first warned of the risk of “the return of depression economics” in his 1999 book by that title, which dealt in part with Japan’s deflationary slump. Here he unpacks the central role of deregulated finance and exotic speculation in the current crash, drawing on the late economist Hyman Minsky’s work on the fragility of financial systems. Krugman argues that a moderate dose of inflation would be preferable to prolonged depression, and he’s right. 

Stiglitz, delivering on his title, The Price of Inequality, catalogs the economic inefficiencies caused by an extreme income distribution. The mega-rich can’t spend all of their income; depressed aggregate demand causes high unemployment; human potential is wasted; corporations rig competitive markets to reap monopoly profits; the immensely wealthy engage in speculation rather than productive investment. As the political system mirrors the economy’s inequality, financial elites keep their thumbs on the scale of policy. The result, writes Stiglitz, is “our under-investment in the common good.” 

Though similar in their basic views, Stiglitz and Krugman are not interchangeable. Stiglitz’s particular interest these days is in global poverty, debt relief, and Third World development. Krugman, as a close student of strategic trade, is more inclined to criticize China as a violator of trade rules, whereas Stiglitz tends to view the Chinese as a largely successful and deserving case of reduced Third World poverty. Stiglitz also has more of an environmental focus than Krugman. There’s little in either of these books that the other author wouldn’t endorse, but each adds his own value. 

Curiously, temperate economists of the sort appointed to serve in Democratic administrations agree with most of this critique at the level of economic theory. None would deny that the income distribution is a disgrace with macroeconomic consequences. There is little doubt that unregulated financial markets set off calamitous crashes, or that the economy is filled with Stiglitz’s “asymmetries” of information, leading to inefficient outcomes. As Stiglitz observes, “No large nation has ever used austerity as a strategy of economic recovery.” Most moderately liberal economists accept that truth, too. Even Larry Summers has been writing op-eds on it. 

If these eminent thinkers are at the edge of economic orthodoxy, why are they marginalized within the corridors of power? One reason is that politics, not surprisingly, tends to get personal. Both Stiglitz and Krugman have decided to air their views in public rather than operating as discreet outside members of a kitchen cabinet, as former Federal Reserve Chair Paul Volcker has. (Despite Volcker’s greater discretion, his views are mostly honored in the breach, too.) Stiglitz, even more than Krugman, has not been shy about criticizing Summers and Treasury Secretary Timothy Geithner by name, and the disfavor has been richly returned. Though Krugman’s column praises the Obama administration when the president gives Krugman half a reason to do so, the White House accurately perceives him and Stiglitz as off-message and part of the opposition. 

More fundamental to their marginalization is the relative radicalism of what Krugman and Stiglitz are advocating in our conservative era, one in which even Democratic presidents have done little to reverse unconstrained finance, shrunken government, and deepening inequality. To embrace their wisdom would require something close to a political revolution. So two of our most lauded economists remain prophets with little power to change events. America would be a far healthier country if they broke through.


One area you did not cover in this piece is how accurate a forecaster Krugman in particular has been. I think many Democrats and liberals have felt uncomfortable with his alarmist and sometimes bombastic columns during the Bush administration and early Obama years. But he has turned out to be pretty much right on most matters, especially the housing bubble, insufficient size of the stimulus package, and the myth that cutting government spending would instill confidence and initiate economic recovery.

Perhaps some research that "scored" how these two economists have done at predicting the effects of recent economic policies vs. a selection of more mainstream economists is in order to demonstrate their track record.

Krugman's pleas for additional stimulus and debt are falling on deaf ears because Europe is providing the example of where we are headed if we keep up the "broken window" spending.

Henry Hazlitt, who discredited Keynes thoroughly in the 1950's, explained through his broken window allegory that funds diverted to projects which are not selected by free markets are a net loss to the economy.

Krugman's Keynesian dogma is not only unintuitive, it's been proven wrong many times by many solid studies. It's so wrong that one can't help but think it's a deliberate attempt to cause a general collapse of the banking system so that government has an emergency pretext for taking control of all major industries, as was attempted by Obama in the wake of the 2008 collapse. "Never let a crisis go to waste" as Rahm Emmanuel famously said.

Krugman is a Fabian socialist who is salivating over the possibility of causing this fiscal crisis and getting closer to his utopian paradise of egalitarian tyranny. The problem is that too many people are alive today who saw what happened in the Soviet empire and Maoist China: 100 million dead by mass execution, enslavement, or deliberate starvation. That is the result of killing free markets, but Krugman and many other Fabians still somehow believe there is a way to equalize without genocide. This fantasy needs to be killed before millions of real people are.

I think his ideas are terrorizing him. We need to save him. We need to hire a Psychic Seal Team to hypnotize him, go into his subconscious during the night, shoot all his collectivist ideas dead, and bury them in a philosophical unmarked grave.

@coachpanto: oh my. Europe is in fact providing ample proof that Krugman and Stiglitz are absolutely correct and that people like you are totally and completely wrong. With the exception of Greece, who really was irresponsible, is not a story of government profligacy. In fact, the countries suffering most (Spain and Ireland) are the ones who were paragons of virtue prior to the crisis. In fact, they were better even than the Germans! What's happening in Europe is really quite simple: Spain, Ireland, Portugal, Italy, etc. all imported German (and to some extent French) monetary policy when the euro come into being. Too easy money inflated gigantic housing bubbles. The private sector took on huge debts to finance future returns that would never materialize because along came the 2008 financial crisis and the bubble burst. Now debtors are trying to pay down debts, and of course not everyone can do that. It''s not a family, it's an economy. My spending is your income, and vice versa. It just makes us all poorer. On top of it, by being stuck on the euro the periphery has no means to adjust. except through grinding deflation and 30%+ unemployment as far as the eye can see.

The solution is simple: the public sector must step into the breach and fill the hole in demand left by the private sector. They must do this until full employment is restored and there is inflationary pressure again. When that happens, THEN the public sector can pull back . In the case of Europe, there is an additional requirement for the some kind of fiscal union. Basically German taxpayers are going to have to pay for unemployed Spanish workers benefits.

If they don't do these things the euro will come crashing down on itself, and if that happens, God help us all. It'll make Lehman look like a walk in the park, and I for one am not at all sanguine about the Feds ability to save the world under those circumstances.

1. Agree that financial crisis and easy money accelerated Ireland and Spain's failures. And even assuming that the govts didn't give implicit backing to the bad loans, is bailing them out going to solve the problem? Is printing Euros gong to solve it? No, at best it will stagnate the economy with distorted prices and zombie banks that only loan to cronies like it has here and in Japan for many more years than necessary. Can you say "lost 3 decades"?
2. "It''s not a family, it's an economy. My spending is your income, and vice versa. It just makes us all poorer." This is Kindergarten Zero-Sum Econ. It's true that more save in a recession, but some defect from that fear and spend when prices deflate. Your math can only work if you assume zero wealth is created in any trade. This zero sum fallacy is the number one propaganda tool of the Collectivist Left. Check out your TV. In Wisconsin, the public union jig is up.
3. "the public sector must step into the breach and fill the hole in demand left by the private sector. They must do this until full employment is restored and there is inflationary pressure again. When that happens, THEN the public sector can pull back". This is not only broken window spending writ large, it implies you want then to print Euro's and spam them all over the place. This is criminal counterfeiting, which will create more price distortion and deter more investment and entrench more oligarchs. Can't wait to kiss the ring of Jeffrey Immelt.
4. "Basically German taxpayers are going to have to pay for unemployed Spanish workers benefits." This is not just silly collectivist altruism, it's national suicide. Can we agree that being your brother's keeper can end when your brother drains your bank account and shags your wife?
5. "the euro will come crashing down,...I for one am not at all sanguine about the Feds ability to save the world under those circumstances." Good and good. Taking the bad medicine now is better than waiting until there is a simultaneous and complete collapse of the inflated Euro and the inflated Dollar simultaneously. That is where Keynesian spending and borrowing and printing leads. Then we will have millions dead as law and military people will not be paid, and warlords will set up perimenters and run checkpoints and carryout massacres to raid whatever foodstuffs are left. Other than that, Keynesianism is a pretty good idea with beautiful egalitarian intentions. Two stars for happy thoughts!

coachpanto wrote,
2."Your math can only work if you assume zero wealth is created in any trade. This zero sum fallacy is the number one propaganda tool of the Collectivist Left."

You follow the classical, neoclassical and Austrian error of conflating "wealth" with "money". Nobody is denying that value or wealth is usually created in trades. I pay you $10 for your used lamp. You "value" the $10 more than you value the lamp, so you gain in "wealth". I value the lamp more than I value the $10, so I gain in wealth. Our trade has made us both wealthier. BUT THERE IS STILL ONLY $10 OF "MONEY" IN THE EQUATION.

Debts are not denominated in "wealth". They are denominated in "money". If I borrowed $10 to buy the lamp, I cannot repay that $10 of money with the additional "wealth" I feel I made in the trade. I have to pay with money. And if the money value of the lamp is only $10 to a buyer who is willing to part with his money, then the only way I can repay my debt is to sell the lamp for $10 and LOSE the additional "wealth" that I felt I'd gained in the transaction.

Money is numbers, and numbers obey the rules of arithmetic. Addition and subtraction is a zero sum function. In our trade you gained $10 of money only because I lost $10 of money. My spending of $10 becomes your income of $10. The economy had that $10 of money before we did our deal, and the economy still has the same $10 of money after our deal is completed and the money has changed hands. There is no additional money created by our trade, even though each of us feels we have increased our wealth.

Your economic logic assumes we are bartering goods values. In fact we are doing no such thing. I did not "trade" $10 "worth of" potatos for your lamp. I "paid" $10 of money. We were not "bartering" over how many potatos the lamp is "worth". By producing potatos I added exactly zero "money" into our economy, though I did add "wealth", and if we don't use money then I can trade my wealth for your wealth and we can both feel better off from the trade.

But in fact we are not trading. We are buying and selling stuff "for money". Producing real wealth like potatos and lamps produces no "money". Money is created by the institution called "banking", in a process that is entirely separate from what goes on in a farmer's field or a lamp factory. Outside of the banks where money is created as loans of newly minted bank deposit balances, money does not multiply itself. Money is added to the seller equally as it is subtracted from the buyer. It is a zero sum equation. Krugman is finally beginning to understand that a real world money economy works by zero sum arithmetic, my spending is your income, whereas a classical or neoclassical or Austrian imaginary barter economy works by "creating value". Welcome to the real world of monetary arithmetic.

I would agree with most of this assessment, including the relationship of our two Nobels to this administration. Yet there is something missing and a recent Krugman column in May of 2012 helps explain what it is. I include a passage from the last section of my essay "The Costs of 'Creative Destruction': Wendell Berry vs. Gene Sperling." A good part of this essay, which is a small book of 110 pages, is also devoted to the underestimation of "automation" by mainstream economists, and on this topic I would include Krugman, but can't speak about Stiglitz on that issue.

"It may help to clarify where most of these “progressive economists” stand, and how accepting they are of most of the dominant features of the economic system, by understanding what the phrase “structural problem” has come to mean in today’s economic discussions. Paul Krugman’s column of May 11, 2012, “Easy Useless Economics,” offers a pretty good illustration of the problem here at
It begins with a discussion of a paper claiming that America’s high unemployment rate “had deep structural roots in the economy and wasn’t amenable to any quick solution. The author’s diagnosis was that the U.S. economy wasn’t flexible enough to cope with rapid technological change.” It turns out the paper was from 1939, and the complaining economist was against unemployment insurance and thus the term structural problem had already taken on its current usage in economics: that labor markets and workers weren’t being flexible enough; the economy needs skill “X” but workers have skill “Y.” Krugman goes on to shred the idea that there are structural unemployment problems of this type in his usual way, by stating that if this were true, we would expect to see “a, b and c” - but we don’t - steering his column to the grand refutation that there weren’t structural problems either in 1939 or 2012, because the old ones, like the alleged current ones, were symptoms of inadequate demand, and were rapidly cured – in two years – by the proper, massive scope of Keynesian demand creation, the military preparations for World War II.

But what Krugman doesn’t tell his readers about is the historical shift of the context surrounding the term “structural problem.” Once the term was central to the vocabulary mainly of progressive critics of capitalism, even here in the U.S.: the populists of the late 19th century and the progressives of the first decades of the 20th. It’s close to the heart of the message of Alan Brinkley’s book about The End of Reform: New Deal Liberalism in Recession and War (1995). Brinkley is drawing a contrast between the ideas circulating in the early New Deal, and a major shift that emerged after the recession of 1937-38, which turned into a more resigned attitude to the flaws of capitalism, and which sought to contain them by working the levers of fiscal policy rather than intervening directly in its structures. Here’s what the original meaning was:

"One broad assumption was particularly important to the early New Deal notion of reform, just as it had been of special importance to most American reformers since early in the twentieth century: the assumption that the nation’s greatest problems were rooted in the structure of modern industrial capitalism and that it was the mission of government to deal somehow with the flaws in that structure."

Chief among liberal and progressive complaints about the flawed structures of capitalism were its strong tendencies to oligopoly and monopoly, its overproduction and imbalances between demand and supply (almost always too little demand) and imbalances between sectors, as I have been stressing in this paper, and the sheer chaos released by creative destruction and technological change, to be countered by planning and co-operative structures – and public employment programs like the CCC and WPA, and whole regions where these efforts were pulled together in vast public works programs, mainly in the South and West, like TVA and the rural electric co-operatives.

I have argued in this essay, implicitly at least, that we ought to consider the impacts of technological change, including automation and its displacement of the work force, and its psychological demands and stresses upon individuals and communities, as one of the main structural faults of capitalism, walking just on the other side of the street named “abundance” from the positive effects of greater efficiency and new technologies. I believe that most mainstream economists, including many of the progressives I have listed just above, underestimate it scope and impact, hoping, and believing, that sufficient demand can overcome its effects without the type of interventions that the early New Deal offered, or the sweeping change in processes, scales and goals being called for by Klein, Berry, Daly, and before them Christopher Lasch (See his The True and Only Heaven: Progress and Its Critics, 1991). In several ways, then, these progressive left economists could benefit from the insights and questions raised by the most sophisticated Marxist analysts, like Harvey, who can see structural problems in the very glories of capitalism’s most sacred interior processes."(That's David Harvey, author of The Enigma of Capitalism, The Condition of Postmodernity, the two I cover the most extensively in my essay; but he has written much else.) But I have to wonder if Robert Kuttner can cross that line to consider him seriously. I include him not for his Marxism , but rather for his breadth of scope.

A fuller discussion of the "economic left" and its economists is contained in Part IV of the Essay, subtitled "The American Left in the 2nd Great Crisis of Capitalism, 2008...????

I'd comment on your thoughts if they weren't in the form of an unstructured, run-on sentence mess. Write more concisely please.

Yes sir Mr. londrege, Sir. First thing in the morning I'll be posting samples to try to make your grade. Just let me know when you're ready to come down from the mountain, Sir.

I should make explicit, what is only implicit in the title of my essay just above, "The Costs of Creative Destruction": Wendell Berry vs. Gene Sperling," that Wendell Berry could fit into Mr. Kuttner's title and theme very well.

What's that you say, wasn't Berry awarded the nation's hightest award in the humanities, the invitation to deliver the Jefferson Lecture at the Kennedy Center on April 23rd, 2012, which he did? Yes, now try Googling "Wendell Berry, Jefferson Lecture, 2012," and see how many serious journals or newspapers covered him. The food editor at the NY Times did; First Things in Princeton did; The American Spectator did...and who else? Good luck with that.

And Berry's lecture was about the economy, and not just the rural one which has been the focus of so much of his lifetime's work; he's bumped the generalization level up to the point where he says that "the nation and its economy will conquer and destroy the country." Now what in the world does he mean by that? Doubt Krugman or Stiglitz could answer it.

The Nation and its unchecked militarism and incarcerationism are destroying the country, places far away from D.C. (where I hear money is everywhere).

Places far from D.C. are going to have to get creative.

Local Depression scrip is still traded on the internet. We could look at some of that for inspiration.

Say, did you hear about the engineering student the DEA locked up for five days and forgot? He was in kidney failure when they finally remembered about the cell they put him in. His lawyer says he will sue the feds for $20 million. He should get something for the torture, but the feds limit their liability.

If we ended all the crazy wars, incarceration schemes and subsidy-seeking, we could start to recover from our nightmares.

Krugman and Stiglitz get plenty of attention. Krugman's refrain is the same, over and over, and still he gets plenty of print. What he does not effectively address is corruption, consolidation, militarism, and the incarceration nightmare. Having the government float more lucre does not address these issues.

Warren Buffet states that significant changes have occurred in the past and in record time due to the weight of public opinion, but neglected to mention how that opinion was gathered. Being a senior I can recall fair media, that peoples champion, that conscience of nations with history of inspiring citizens to use overwhelming public opinion to force change. Maybe Warren has media plans!

An Alternative to Capitalism (if the people knew about it, they would demand it)

Several decades ago, Margaret Thatcher claimed: "There is no alternative".
She was referring to capitalism. Today, this negative attitude still persists.

I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to an essay titled: "Home of the Brave?" which was published by the Athenaeum Library of Philosophy:

John Steinsvold

“Insanity is doing the same thing over and over and expecting a different result."~ Albert Einstein

Technological change is a part of it, sending jobs overseas is another,and some members of congress intent on decreasing the number of government workers even at expense to public service is another reason.
An example of this is HR2309 and S1789 , the first bill introduced by Issa and the second by Lieberman.
After setting the USPS up for financial failure by passing the PAEA which required the USPS to fund 75 years of retiree benefits in 10 at 5.5 Billion a year, the proposed solutions of HR2309 and S1789 is to push 100,00 employees out, cut compensation for their injured workers, increase control of passage of union contracts,cut service to the public by closing smaller post offices,and slowing mail delivery by closing 200+ Distribution Centers.
It is a direct attack on workers employed by the USPS that is NOT supported by taxes, but had it's costs covered by income until 2006 when Congress passed the PAEA .
Congress caused the problem and SOME members of Congress are "working hard" to "Save and Reform the USPS" by putting it on the road to privatization
with lower paid workers and less service to the public.

I fully agree with your selection of economists, but a thousand times more beneficial and educational to Americans, nine to ninty, would be to read the works of the following: HOWARD ZINN, NOAM CHOMSKY, RICHARD DAWKINS, CHRISTOPHER HITCHENS, LAWRENCE KRASS, NINA JOBLONSKI. While there are a few others, finish the above and the TRUTH will set you free. Then all that will remain to be done is to figure out how to get all the rats out of Washington, DC and Wall Street.

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