Monday, November 12, 2007

Krugman vs. Mankiw on Health Care

Two of the bestselling economics textbooks are by Paul Krugman of Princeton and Greg Mankiw of Harvard. Reading the textbooks, it’s not abundantly clear that the authors would disagree about much: both illustrate supply and demand, the gains from trade, the deadweight loss caused by taxes, the market failure that results from the existence of externalities.

So what could these two very smart men possibly disagree on? As it turns out, a lot.

Mankiw’s blog and Krugman’s New York Times op-ed column have become the sources of economic talking points for conservatives and liberals, respectively. As Brandon noted in a previous Aplia Econ Blog post, Mankiw recently wrote a column about American health care problems that are, in his opinion, overblown by some proponents of a national health insurance program. Krugman responded in his column a few days later. You can read Mankiw’s original article here, Krugman’s response here, and a rebuttal Mankiw wrote to his critics here. There’s plenty of blog chatter from both economists and non-economists as well.

There are several reasons why economists can disagree about public policy. These disagreements can be broadly categorized as follows:

  1. They may disagree as to which economic theories are valid and which are not. This is fairly rare. Theories start with assumptions and derive conclusions from them. As long as they are mathematically accurate, most theories are valid for the assumptions on which they are based.

  2. They may disagree as to which theories are best suited to addressing a particular problem. Another way of thinking about this is that since different theories are based on different assumptions, economists may disagree as to the validity of certain assumptions when applied to a particular problem.

  3. They may disagree on a normative level rather than a positive one. Even if economists agree about the nature of a problem and which economic theories are most relevant, they may have different normative perspectives. For example, two economists may agree on a particular tradeoff between efficiency and equity, but one may prefer the more efficient outcome, while the other may prefer the more equitable one.
Discussion Questions

1. Which of the arguments made by Mankiw and Krugman do you find to be strongest? Which do you think are weakest? Why?

2. Based on the categories above (or any others you may come up with), what do you think is the nature of the disagreement between Mankiw and Krugman? How does each of them portray their differences with the opposing viewpoint? Why is there a disconnect between the true nature of their argument and the motives they ascribe to their opponents?

3. Mankiw and Krugman clearly have strongly held viewpoints based in part on differences in political ideology. What impact do you think this has on their teaching and research? For an academic economist, what is the appropriate level of ideology?

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  • At 8:58 AM, November 13, 2007, Blogger Don Coffin said…

    There's a fourth type of disagreement. They may disagree on the facts relevant to the evaluation of the theory. I suspect that is very much the case in the disagreement between Krugman and Mankiw.

  • At 9:14 AM, November 13, 2007, Blogger Chris Makler said…


    Absolutely. I had initially thought of that as being part and parcel with disagreeing about which assumptions are best to make in solving a particular problem. Here's why.

    In theory, at least if everyone has access to the same information, the facts should not be in dispute -- only the interpretation of the facts. (Not so, of course, with the "relevant" facts - and which facts are relevant to the discussion is very much a modeling choice.)

    In real life, where only data (rather than facts) are directly observable, I'd say that your point is right on the money. Data is available to everyone; but the "facts" one gleans from that data are often a source of disagreement.

    Thanks for writing in!



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