Thursday, April 15, 2010

Paul Krugman - Environmental Economics 101

How many newspapers would print a 7,770 word economics lesson in the troubled newspaper world of 2010? The New York Times recently did that. On April 5th, the NYT published this article by Nobel-prize-winning economist Paul Krugman entitled Building a Green Economy. It really is an Environmental Economics 101 class distilled to its most basic. So many Fox News parrots claim to be free market capitalists and are against environmental regulation, but every time I've talked to one of them, it seems like they don't have the slightest knowledge of the basic tenets of capitalism. When I tell them that capitalist theory of efficient production levels requires that the cost of an enterprise be internalized to that enterprise, they look at me like I just told them the aliens are coming or Obama is going to take away their guns. Don't even bother talking about the prerequisits of zero information costs, rational decision making and pareto optimality.

When I was a management student at Purdue in the 1980s, Purdue's economics department was solidly in the camp of the Univerity of Chicago supply-side mentality. You know, Milton Friedman, yada yada yada. It was hardly the bastion of liberalism. Nevertheless, even conservative economists would reject the notion that free markets can solve pollution problems without internalizing a cost to the pollution.

I find Paul Krugman refreshing because he recognizes social impacts and disparities and the public policy of making sure that all the wealth doesn't accumulate at the top. In the video lecture below, Krugman makes the case that the American middle class as we know it came into being in a little over a decade through the 1930s and 1940s, and it came about due to Roosevelt's social policy and the growth of the labor movement. Rarely will you see an economist defend unionized labor. Paul Krugman does.

Below is a video of Paul Krugman in 2006 predicting the bursting of the housing bubble.

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