October 7, 2005

#193: "forgets himself and becomes an economist again"

P. Krugman


Sometimes Paul Krugman forgets himself and becomes an economist again. It doesn't happen often, but we have always noted this odd transformation when it does occur. In A Pig in a Jacket (10/06/05), he drops partisanship, at least temporarily, and assesses our energy problems thusly:

"Now, much of the public believes that corporate evildoers with close ties to the administration are conspiring to drive

Just in case you think I've gone soft on the energy industry, let me say that claims that we're having a crisis because environmentalists wouldn't let oil companies do their job are equally bogus. When you hear someone talk about how no refineries were built for 25 years, remember that until recently, oil companies weren't interested in building refineries, because they had excess capacity and profit margins were thin.

In fact, the current crisis is nobody's fault, except Mother Nature's. Both Katrina and Rita were stronger hurricanes when they plowed through offshore oil and gas fields than when they made landfall. And because damaged refineries and other energy facilities are competing for a limited number of repair crews, it's taking a long time to get those facilities back up and running."

OOOkay. Sounds like the energy industry is responding to incentives exactly as they should. It's not Cheney or Halliburton or cronyism, but market forces that carry the day. He didn't say it, of course, but the rapid recovery of gulf operations is due heavily to the unsung private sector. Krugman ends up making a perfunctory swipe at energy dependence and global warming and a vague appeal to non-price energy conservation. But the damage is done. Krugman has struck a blow for free enterprise. We predict he will soon come to his “senses” and begin trashing Bush energy policies for being non-green and industry dependent.

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]

Posted by John Weidner at October 7, 2005 8:48 PM
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