What an ironic turn of events for the website that helped speed Dan Rather’s retirement from CBS to borrow the New York Times‘ infamous rationalization that a document was “fake but accurate,” but that certainly appears to be the case with the Paul Krugman earthquake tweet that we linked to in the “Picks” section the other day:
People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.
Quite a few people noted this passage and wondered whether this was a parody (such as the sharp folks at ZeroHedge) but the problem is that Krazy Krugman could really say something like that, so it got passed around. But now someone named Carlos who runs a blog called Campaign Fix has come forward claiming to be the author of this hoax. Except, while this particular Krugman line is made up, it is entirely consistent with Krazy Krugman’s views in the past, as Campaign Fix notes:
And yes, this does mean that the nuclear catastrophe could end up being expansionary, if not for Japan then at least for the world as a whole. If this sounds crazy, well, liquidity-trap economics is like that — remember, World War II ended the Great Depression.
Three days after the 9/11 tragedy Paul Krugman had this to say.
Nonetheless, we must ask about the economic aftershocks from Tuesday’s horror. These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.
This is a classic example of what the great Frederic Bastiat called the “broken window fallacy” that is at the heart of Keynesian thinking: when a hooligan throws a brick through the baker’s window, it is good news for the glassmaker and installer, as they get the work replacing it. Stimulus! The entire trick of economic thinking, Bastiat explained, is grasping the unseen in economic affairs, namely, the lost economic activity of the baker who didn’t spend his $100 he had to spend replacing the window on something else. You really do wonder sometimes how Krugman got his Nobel Prize in economics. Henry Hazlitt explains it cogently here.
UPDATE: See Also Katherine Mangu Ward’s good discussion of the broken window fallacy over at reason.com.