Tuesday, May 1, 2012

Ron Paul Praises the Post World War II Economy for Its Reduction in Government Spending

Paul Krugman notes his debate with Ron Paul:
he insisted (if I understood him correctly) that currency debasement and price controls destroyed the Roman Empire. I responded that I am not a defender of the economic policies of the Emperor Diocletian.
I studied ancient history as well as economics in college but I don’t profess to know much about the policies of Emperor Diocletian either. Paul’s performance was strange in so many ways. For example, he pretended to be the defender of free markets as accused Dr. Krugman of not being in favor of market based economies. Yet, Ron Paul was the one who does not want the market to determine exchange rates, which is just one of many ways we know he is not very familiar with the writings of Milton Friedman. I guess there was one subtle point of concession between the two debaters. Both seemed to think the economy that followed World War II was a good one. But Ron Paul’s praise of this period struck me as odd as he claimed that the reason that the government debt to GDP ratio fell was an alleged decline in government spending. Our graph does show that government spending as a share of GDP was still high in 1945 so this ratio had to decline as we reduced defense spending as World War II ended. But our graph shows that government spending rose as a share of GDP for much of the latter half of last century. So maybe Ron Paul knows more about the Roman Empire than I do but his knowledge of recent history is suspect.


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