The Phony Asset Return Argument

Posted by: Good Samaritan
on April 05, 2005 @ 11:11 AM EST

It was about two months ago that I wrote the article just posted, and I was going to let it go, but I decided it to publish because the silly argument that Paul Krugman made in his February 1 column (the link is to an abstract; the original column has long since vanished behind a subscriber firewall) still seems to be in circulation. I haven't yet read the paper DeLong, Krugman and (some guy named) Baker just published, but according to Don Luskin, the argument is mostly the same as Krugman's. Don Luskin answered Krugman's column here.

Brad DeLong answers the treadmill argument (higher productivity growth can't save Social Security because benefits are wage-indexed), which is part of my answer to Krugman, here. His post concludes "It's acceptable in academia to be a Democrat. It's acceptable to be a libertarian. It's simply embarrassing to be a Republican." But read his post, and you'll see that he concedes that the treadmill argument is basically true. Brad has it backwards. On Social Security, the libertarian position (click here and scroll to "Milton Friedman") is defensible. The Republican position is defensible. But I'm just embarrassed for economists who hack for the Democrats.

Here's Mankiw's response to DeLong, Krugman, and Baker.

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