Monday, December 08, 2008

Defending Paul Krugman; and debunking him

The ever more erratic and undependable Associated Press caught up with Nobel laureate in Stockholm, Sweden and totally screwed up his interview before blasting it all over the world.
"STOCKHOLM, Sweden (AP) -- Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.
""It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy.""

Krugman denies that he said the entire industry "will likely disappear" and I believe him.

From his blog:
"I gather that there’s a report on the wires quoting me as saying that the US auto industry would disappear. What I actually said was that the concentration of the industry around Detroit would disappear."

"And did I really say “me and my colleagues”? I guess it’s possible — but that doesn’t sound like I speaking."

I've seen Dr. Krugman speak at length about the car bailout and I've never heard him say anything like that the U.S. auto industry would disappear.

But saying that the industry is no longer "sustained by the current economy?" That's our Krugman.

And that's ridiculous. What is not sustained by the current economy -- or any economy at any time -- is the mess that the United Auto Workers has created in conjunction with management of the Big Three. Our economy needs lots of well-made cars. But the fact even when they do sell it is usually at a loss is hardly the economy's fault. In fact, the economy is doing exactly what it is supposed to do, which is grind to a halt until prices come down to meet the new equilibrium price.

A bankrupt Big Three can get there. A bailed out Big Three delays the inevitable. Why would a sane people take the more painful option?