Remember, this is the same guy who in 2002 pleaded for Greenspan to create a "real estate bubble" (his own words) to replace the Nasdaq bubble.

I have no idea exactly what work Krugman did to be awarded a nobel prize but given his frankly lunatic writings since then one can't help but wonder if he was as worthy as Obama was of winning the peace prize.

Broken Window Economics on Steroids...

Rinson:

Just breaking Krugman's windows should be sufficient.

If it were someone else, it might have been a joke. But not from Paulie. Well, that settles it. He really has never heard of the broken window argument.

I am increasingly inclined to think that Krugman is insane. I do not mean that in the ordinary, polemical insult sense. I mean it literally, out of his mind, and incapable of rational thought. Presumably brought on by allowing hatred to eat up his soul.

NOTE: I am in Richmond VA. My wife just called upstairs, from where she's watching TV, and I quote: "The epicenter was my old High School." Stated gleefully, I might point out.

If only it had broken some (more?) windows.

I don't really see how the broken window fallacy applies to what Krugman is arguing for.

In the broken window fallacy, the money not spent on the broken window is spent on something else, presumably more useful or wanted by the spender.

But government spending now to rebuild from an earthquake would be additional deficit spending that would NOT be otherwise spent. Therefore it is additional money injected into the economy. It is not the government reallocating spending that currently exists to something not needed.

For instance, Krugman has also said that a war, or an attack from Mars, would have a stimulative effect for the same reason.

The Government borrows it. There is low demand now, so we increase demand now through debt and pay for it later when the economy is healthier.

The point is the money is spent now. What if instead of repairing a broken window, the man merely stuffs his money into his mattress. While that may be good for him personally, it does nothing to help the economy while it is sitting in the mattress.

You do not understand how money works, and I mean this in the nicest possible way.

Disasters destroy capital. Capital is wealth. Therefore, disasters destroy wealth.

Spending to replace destroyed capital depletes current or future (if borrowed) wealth in one form merely to replace the form in which it was lost. Had that capital not been destroyed in the first place, the current or future wealth used to replace it could have instead been used to create new capital and thus new wealth.

This is true whether the disaster is an earthquake, war, or alien invasion. Krugman's argument to the contrary is not only wrong in this case, but also repugnant.

Here is where you went horribly wrong:

"But government spending now to rebuild from an earthquake would be additional deficit spending that would NOT be otherwise spent."

This is an absurd statement. First of all, government has only the funds it can borrow, print or take directly from us. The American people are on the hook for that debt regardless.

Given that, you are pretending to know what the money that was given to the government would have been used for had it been retained by the citizenry. For example, I paid over 70 grand in taxes to the Federal Government last year. I can tell you I would have MOST DEFINITELY used that money. Namely to help pay down my underwater mortgage and help pay off my daughter's college loans among other things.

I would have saved some for the inevitable "rainy day" as well. However, those funds would have been invested in the stock market where it would have been used for economic expansion. Even if I put it in a savings account the bank would have turned around and lent those funds to someone else for capital formation purposes.

All funds are eventually spent, there aren't too many of us out here putting money in the mattress. The question becomes WHO BETTER to spend it? Politicians, who use the money to buy votes, or US, who use it to improve the lives of our families or perhaps start a business?

We have shoved about 10 trillion out the door since the early Bush years. 9/11, 2 wars, Katrina, the Bush stimulus, Obama's stimulus, BP oil spill, the list is endless. What do we have to show for it other than an enormous debt and a stagnant economy? If there were any merit at all to Keynesian spending we would be in robust growth right now. If the amount the government needs to spend is so enormous that it leaves future generations with enormous liabilities it really isn't worth it is it? After all, stimulus at best gives us a temporary boost. The debt and the interest paid can go on for decades.