Krugman coined the phrase on his blog to describe the British government’s economic policies.  I like the term, but in truth, I think all Keynesianism must be of the “crony” variety, in practice if not in theory.

Keynesianism says that in a period of declining aggregate demand, the government must spend money to boost the economy.  (That’s the super-simplified version.)  Well, if politicians are spending money, you can bet that they will make sure to spend it on their friends and their pet projects.  This is still just as stimulative to the economy as any spending, so the Keynesian theory is fulfilled, but at the same time, it’s a kind of corruption.

But, as Krugman says, it’s still a sound economic policy overall.  It’s just that politicians take advantage of it to engage in a little cronyism on the side.  Only to be expected, because you can’t really be a politician without engaging in cronyism.

I’ve been meaning to blog about this Paul Krugman vs. Ron Paul debate for quite a while. First of all, while I side pretty much with Krugman, do think it’s kind of cool that Representative Paul was willing to debate him. Do you think we’ll ever see Romney debate Krugman?

A few points:

  1. For the most part, they talk past one another. It’s not really a back-and-forth except for a few snarky remarks, (e.g. Krugman’s Diocletian quip). They just say their ideas without responding to the other guy’s.
  2.  Krugman got Rep. Paul good on the question of what Milton Friedman said about the Fed.
  3. On the other hand, he kind of let Paul’s “competing currency” scheme go. There was a lot of currency competition among the thirteen colonies and in the early U.S.  And it didn’t last. Also, what was the Congressman talking about with “legalizing currency competition”? What about BerkShares?