Clash of the Liberal Titans
Kinsley vs. Krugman
11:05 AM, Mar 24, 2010 • By MATTHEW CONTINETTI
It's been fascinating to watch the debate between Michael Kinsley and Paul Krugman over inflation. Kinsley, like a lot of people, worries that all this government expansion will result in inflation somewhere down the line. Krugman dismissed Kinsley with his typical combination of arrogance and ill will, saying that "textbook economics" separates inflation (not always bad) from hyperinflation (always bad). Kinsley responded by pointing out that Greg Mankiw's textbook makes no such distinction:
Krugman's rebuttal? Kinsley checked the wrong textbook. In his text, Krugman points out, there is a difference "between Zimbabwe-type hyperinflation and the more moderate type of inflation that afflicted the US and others in the 70s."
Something tells me the American consumers, investors, and savers of the 1970s wouldn't say the inflation they suffered during that decade was "moderate." Inflation may help governments deal with the debt burden by reducing that burden in nominal terms. But it also reduces the real value of wealth and punishes individuals who save for the future. The author of the non-Krugman textbook weighs in here:
Are any of these scenarios -- punishing tax rates, inflation, default -- what we really want to see in our future?