A win by decision for Prof. Ferguson?

Paul Krugman

Niall Ferguson

Krugman, Ferguson toe to toe in verbal pugilism of Keynesian scale

By Cho Jin-seo

A war of words between pro-Keynesian and anti-Keynesian camps continued in a more dramatic form in Seoul on Wednesday, as Paul Krugman and Niall Ferguson met face-to-face in a conference to continue their thorny and well-publicized exchange of economics ideas and personal affronts.

The aggressive debate of the two famous scholars in the field of economics, which began in April 2009 and continued primarily on writings, often bordered on personal insults on Wednesday as they did not hesitate attacking each other on the global economy and the U.S. government's monetary policy.

At the World Knowledge Forum held at Sheraton Walkerhill in Seoul, Krugman, a Nobel prize winner in economics, said he wants the U.S. government to implement expansionary monetary policies in order to prevent the “third great depression” from taking place.

On the contrary, Ferguson, a Harvard historian and a TV commentator, was suspicious whether printing more money at the cost of inflation is really necessary for the world right now.

Both were not afraid of throwing punches against each other in front of the large audience, that packed the vast Vista hall.

“If Keynes were here in this platform, it is far from clear that he would agree with you,” Ferguson said, facing Krugman. “Keynes warned about the extreme danger of economists taking his theory, and vulgarize it, simplify it, and turn it into a license to run deficit and print money.”

He continued his attack on the bearded Princeton professor. “If Keynes is here, I wish he were, to advise on the G20 summit, then he would say 'don't listen to this vulgar Keynesian with this remedy of printing money.'”

Krugman replied that the same Keynesian expansionary monetary policy from the 1930s can be adopted in today's United States, and in the process of arguing he did not miss a chance to attack the Harvard historian's relative lack of knowledge in finance.

“There is nothing about this crisis that is unprecedented, even though of course there are fancy things now. We have more complex financial institutions and the shadow banking. Oh, I'm sorry that you are not an expert in shadow banking so you cannot talk about that,” he said.

After the conference, the Korea Times asked Krugman whether he found any specific weakness of logic in his archenemy. Krugman seemed that he was waiting for that question.

“I don't find any specific weaknesses in what he said. As far as I can make out, it was all weak. Was there any argument there?” he said. “It was all assumptions that terrible things might happen, in which there is no evidence.”

He continued to say that the last time Ferguson was saying something meaningful was 18 months ago. “He predicted the U.S. interest rate was about to sour, which did not happen,” he said.

Krugman is well-known for his nobel prize as well as columns appearing on the New York Times. Ferguson has his share of fame for his best-selling book “The Ascent of Money,” which is popular in South Korea as well and was made into a documentary by BBC, in which Ferguson himself appeared as commentator. He was born in Scotland but is now teaching history at Harvard.

The hostility, at least shown to the public, between the two scholars began back in April 2009 with the aforementioned argument on the U.S. interest rate and bond market. The debate has since then developed into a more general one, as they continued to fight on most of current economic issues.

The American used his blog and the New York Times to attack Ferguson, while the Brit took advantage of London's Financial Times. The colorfulness of their language reached the height of “poser” for Ferguson and “patronize” for Krugman.

Ferguson, who thought he was lesser known that Krugman at the time, used an ancient analogy to describe this public battle. “A cat may look at a king, and sometimes a historian can challenge an economist.”

Nowadays Ferguson is not less famous than Krugman at least in South Korea for the success of his book “the Ascent.” And it could have impossible to make the two meet in person in Seoul, if not the presence of Shin Hyun-song as moderator.

Shin, who is now serving as a special advisor to South Korean president Lee Myung-bak on the G20 issues, is a fellow professor of Krugman at Princeton University. But he is also a friend of Ferguson, as they lived next door during their undergraduate years at Magdalen College, Oxford.

Before the referee started the fight, he recalled how Ferguson, as a history student, fell to studying Keynesian economics.

“After his first tutorial in economics, Niall came back to me and said 'this subject economics is interesting. I learned about his fella Keynes. He seems like an interesting fella.'”

Though Shin might feel more closely associated with Ferguson, Krugman said that it was a fair match and the referee did his job well.
“I think professor Shin did a fine job. He had to give equal time to each of us, and I think he did,” he said. “I also think that he would be glad that he was not sitting between us.”

After the debate is concluded, Shin, the moderator, said it is usual business in the field of economics that even the greatest of experts cannot agree on the most fundamental questions.

“This kind of process enables us to search for solutions,” he told The Korea Times. “There can be different verdicts on who was the winner of the debate, depending on who is making the verdict.”

Ferguson may agree that economics is not science, but an art. “Nothing in economics is that scientific,” he once said.

During Wednesday's debate, Krugman said that he was not offended by Ferguson's aggresive comments, such as “vulgar Keynesian” and his continual attempt to jump in. “I was pretty aggressive, too. Wasn't I?”

The Princeton professor also defended the expansionary policies of the U.S. government. “There are times, and this is one of them, when very simple Keynesian analysis is effective. The tragedy of policy in today's world is that we have tools, but we choose not to believe them and choose not to use them.”

Ferguson, on the other hand, was suspicious that the situation cannot be that bad, considering the economic downturn is over in Asia and other emerging regions. “It concerns me when People like professor Krugman say it is depression time like 1930s,” he said. “That's just the United States, and the rest of the world is very far from being depression. I am suspicious of the statement of we need a large stimulus,” Ferguson said.

Krugman admitted that his main concern is the United States and Europe. “I have to say that I have a first-world centric view because that's where the problem has started,” he said, before attacking Ferguson. “if you say we can't do that, then what are you proposing?”

The acerbic exchange continued when Krugman came up with an analogy of the World War II, saying that the increased state spending then helped the global economy to grow and the ensuing inflation solved the problem of national debt as well. Listening to this, Ferguson was quick in throwing a jab.

“Paul, you are saying that the World War II was a great stimulus. The World War II was not great to the rest of the world."