I find Austrian economics interesting from a history of thought perspective and due to their prominence in current debates (thanks in large part to the internet). I also find Cantillon effects interesting, probably real, but not particularly important (and probably theorized a little backwards - a point a forthcoming paper of mine should make clear). Other than that I don't think there's much of anything useful in Austrian economics that isn't also in mainstream economics. You can say it's nice that they care about uncertainty or knowledge or that they think socialism can't work. That stuff's wonderful, but doesn't offer a compelling reason to declare oneself an Austrian. This isn't to say you can't get something out of reading Austrians. There's lots of great stuff to get out of reading Austrians. It's just to say that it makes a better literature than it does a modern school of thought. I think people who like to think of themselves as Austrians would be better off just thinking of themselves as economists that like to read Austrian literature (he might disagree with me on this, but I think of Ryan Murphy in much this way - hell, that's me to a certain extent).
So in that sense I feel like I'm not as dismissive of Austrian economics as Krugman and DeLong are, but obviously I still tick off a lot of Austrians...
...but I can see what motivates Krugman and DeLong.
Krugman is pretty much considered a monster by Austrians. There are Austrian blogs dedicated to criticizing him. Those not so designated have him as a regular feature. Peter Boettke wrote this of Krugman when he won his well-deserved Nobel: "the Swedes just made perhaps the worst decision in the history of the prize today in naming Paul Krugman the 2008 award winner...today I would say is a sad day for economics, not a day to be celebrated. Mises supposedly said during his dying days that he hoped for another Hayek, as I am picking up my jaw from the floor I am hoping for another Samuelson or Arrow to get the award rather the hackonomics that was just honored."
Steve Horwitz leaps from Krugman thinking WWII got us out of the Depression to: "In Krugman’s version of Orwell’s Newspeak, destruction creates wealth, and war, though not ideal, is morally acceptable because it produces economic growth... To argue as Krugman does is to abandon both economics and morality. Big Brother would be proud."
We are regularly told not to judge Austrian economics by the crazy "internet Austrians" - so I'm careful here to select people that are considered the upstanding citizens.
Of course, it's precisely things like this that create the crazier "internet Austrians".
It is not a very easy bunch to talk with.
It's in precisely this environment of a flame-war over Krugman that Krugman remarks on the tendencies of this small group of economists and hangers-on that appears to be obsessed with him. That's not particularly outlandish IMO. If Krugman called Boettke's work "hackonomics", I think it would be fair for Boettke to strike at the character of his accuser. As far as I know Krugman's never said that of Boettke. This would also be the case if Krugman said Horwitz abandoned morality and that Big Brother would be proud of him.
The volume of the attacks on Krugman dwarf the response. We can pretty much count Krugman's forays into Austrian economics on our hands: the Slate piece, the discussion of the sushi model, Murphy's inflation prediction, Krugman having the gall to not appreciate Hoppe saying he should be spoken to like a child, this one from yesterday, etc... In contrast, you cannot go for a single day without a big-name Austrian mentioning Krugman disparagingly. And when Krugman does respond it's more often of the "your ideas seem utterly wrong and fringe" not of the "you're a warmonger" variety.
So while I completely agree and am happy to say that Krugman doesn't really appreciate the depth and breadth of the Austrian position, I find it very hard to point the finger at him on this sort of thing.
I also want to call attention to this particularly excellent insight by Krugman about Austrian economics: "Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern"
I don't know if Austrians really understand how infuriating this is or how stupid it makes them appear. When people already think that order in human society is spontaneous and not planned, when they already see politics without romance, when they already think that capital and labor are heterogeneous, when they agree that relative prices drive behavior - getting told day after day after day that they don't think these things and they ought to forces them to either conclude (1.) the accusers don't know what they're talking about, or (2.) it's not worth talking to the accusers any more.
This accusation is very hard for "reasonable" Austrians to run from. It's one of hte major theses of Peter Boettke's new book, which has been widely celebrated.
I, like Krugman, consider the recent growth in Austrian economics to bring some real costs with it for society and for the profession (I probably see a few more benefits than Krugman does). Since I apparently have something of an audience I've found it worth confronting these views that (to use Krugman's phrase) "they have access to a truth that generations of mainstream economists have somehow failed to discern". As efforts like John Papola's and movements like the Tea Party bring more people in that seems even more important to me to address. But lately I have been leaning more heavily toward the second option: it's not worth talking to the accusers any more.
I've had lots of people email me or comment on the blog and let me know that they've dropped Austrian economics and that my blog played a role in that. That is encouraging. Good economics matters to me - that's what all this here and all my effort professionally is all about. It's not so much that Austrian economics is "bad economics" - that list of truths that Austrians think they have special access to that I had above is good economics. It's that there's also a lot of bad economics and bad faith and a willingness to dismiss good science that pervades that community.
But I don't know how many are really going to be convinced, and there are many other things I could be doing. I was thinking the other day about Boettke's mainline/mainstream distinction. I could write a whole paper on how the greatest producers of Smithian economics today are Arrow, Romer, Krugman (for the major themes of the invisible hand, growth, and trade), and Stiglitz (for the scraps - efficiency wages, credit rationing, asymmetric information, monopoly power - all originally major arguments of Smith). It would be a very strong argument. But the people that would care are - I fear - unmovable, and the rest won't care. I'd be much better off writing about the S&E labor market or expanding my work on hiring credits to the North and South Carolina programs or time use decisions in the household.
Both paths are good economics, economics I'm excited about, and questions that are important. But the latter set is distinctive in that people seem to appreciate the contribution. When I tell people in the S&E workforce community that I and people who think like me think that it's important to understand the role of the market process in the S&E workforce, they've pretty much accepted that. When I tell people in the Austrian community that I and people who think like me consider it important to understand the role of the market process in generating a flourishing society, they often refuse to take "yes" for an answer and insist on explaining it to me. That gets old, and I have to confess it sometimes makes me wonder how much substance is really there to engage.