Paul Kragman on Macroeconomics

choi

(1) Paul Krugman
https://en.wikipedia.org/wiki/Paul_Krugman
(1953- ; "is an American New Keynesian economist * * * Krugman was previously a professor of economics at MIT, and, later [starting in 2000], at Princeton University which he retired from in June 2015, holding the title of professor emeritus there ever since"/ table: current Robin Wells [(since 1996), who has been co-author of his macroeconomics textbook, see the bottom)

The other branch of economics is neoclassical economics (which includes Chicago school). In contrast with the latter, Keynesian favors government intervention. A politician may look cold-hearted when he chooses not to anything and loses election (as happened to Mitt Romney, the Republican nominee in the 2012 presidential election when he courted Michigan voters who spurned him instead because in his 2008 campaign to win the same, he refused to bail out American auto industry (which President George W Bush did bail out), but I will stick to the gun if I were in those shoes.

(2)
(a)
(i) Paul Krugman on How to Think about Trade Imbalances; Introductions by Markus Brunnermeier. Princeton University, undated (video uploaded to YouTube; though one may HEAR it in podcast FOLLOWING the Webinar)
https://economics.princeton.edu/ ... t-trade-imbalances/
(Series: Marcus' Academy; Date & Time: January 30, 2025  12:30 Pm  Location  Zoom")
(ii) There is no transcript, but a summary is available.

https://economics.princeton.edu/ ... MA-Paul-Krugman.pdf
(footnote 1 on page 1: "Summary produced [remotely] by Pablo Balsinde (PhD student, Stockholm School of Economics)")
(A) The lecture made a critique on Michael Pettis and Erica Hogan, Trade Intervention for Freer Trade. Washington, DC: Carnegie Endowment for International Peace, Oct 3, 2024.
https://carnegieendowment.org/re ... freer-trade?lang=en

Pettis is a professor  based in Beijing, but he does not hold PhD in anything and certainly not in economics. Erica Hogan. Research Assistant, Global Order and Institutions Program, Carnegie Endowment for International Peace, undated.
https://carnegieendowment.org/people/erica-hogan?lang=en
(B) Krugman's lecture started at 06:17 (see page 1 of summary), and (at page 2 of summary) stated, "Illustrated by the new view's emphasis on the Triffin Problem, this is a 1950s/1960s view of the world."
Krugman meant to say that Pettis and Hogan had been inspired by now obsolete Triffin Problem. See Triffin dilemma
https://en.wikipedia.org/wiki/Triffin_dilemma
("This dilemma was identified in the 1960s by Belgian-American economist Robert Triffin [who was a baron conferred by Belgian, not England's,  king]. He noted that a country whose currency is the global reserve currency, held by other nations as foreign exchange (FX) reserves to support international trade, must somehow supply the world with its currency [by chronic trade deficit in goods] in order to fulfill world demand for these FX reserves")  Take notice of "somehow,"
(C) The last bullet point in page 2 of summary also stated, "Capital flowed to the US due to its technological success. It was its TFP surging from 1995 to 2005 due to the IT revolution (which the U.S. benefited comparatively more from) that led to its current and trade account deficits." TFP stands for total factor productivity
https://en.wikipedia.org/wiki/Total_factor_productivity
, or productivity for short.
(b) Here are slides in that presentation. which, by itself, implies the theory is unproven. I do not know whether this theory is sound (for I do not pay attention to it).
https://paulkrugman.substack.com/p/rethinking-trade-imbalances  
("Later this week I’ll be giving a presentation to Markus Brunnermeier's macroeconomics webinar at Princeton")
(i) Marcus' Academy
https://www.youtube.com/@markus_academy
("Markus' Academy is a [virtual] webinar series developed by world-renowned economist, Edwards S. Sanford Professor of economics at Princeton University, and Director of the Bendheim Center for Finance, Markus Brunnermeier. When he started Markus' Academy in 2020, the goal was to create a platform to exchange ideas and knowledge about urgent problems facing our global society at a time when our traditional forms of communication were severely limited"_

Grammatically, either Marcus' Academy or Marcus's Academy is correct. Only Jesus has ONE possessive form Jesus' (eg, Jesus' teachings).  
(ii)
(A) What is FRED?
https://fredhelp.stlouisfed.org/ ... -fred/what-is-fred/
(B) Federal Reserve Economic Data
https://en.wikipedia.org/wiki/Federal_Reserve_Economic_Data
(St Louis only)
(iii) Slide 3 showed "Shares of gross domestic product: Net exports of goods and services" from FRED. Because trade in services pales in absolute amount next to trade in goods, what about ""Shares of gross domestic product: Net exports of goods." The figure looks similar to Slide 3. See
Brian Reinbold and Yi Wen, Historical U.S. Trade Deficits. FRED, May 17, 2019
https://www.stlouisfed.org/on-th ... -u-s-trade-deficits
(A) More recent data can not be found, and is probably does not exist in FRED.
(B) So yesterday news in print blasted record trade deficit in goods, that is absolute amount, but relatively mild compared to George W Bush era (which experienced the (first) China shock.


(3)
(a) In 2000s I found a Krugman's macroeconomics textbook in a bookstore near Harvard Square, which was new and wrapped (so that a reader could not browse it). I sighed. Presently that textbook is (Paul Jrugman and Robin Wells, Macroeconomics. 7th ed. ‎Worth Publishers, Jan 11, 2024).

But the first edition is free online (by the same authors, in 2007)
https://studyroombd.wordpress.co ... s-krugman-wells.pdf

The key was Chapters 18 and (especially) 19. I read (on my own) macroeconomics already, so I began
• at page 437 (the opening page of Chapter 18)
• at page 441 (Pitfalls) and page 442 Does trade hurt poor countries?
• at page 449 economics in action: Trade, Wages, and Land Prices in the Nineteenth Century (some are bound to gain and some others bound to lose in international trade).
• at page 450 The Effects of a Tariff
(b) The bottom line of Chapter 19 is found in equation 19-1 at page 462 plus Figure 19-1 in the following page. I thought this could not be true, because after China entered WTO it has run trade surplus AND received Foreign Direct Investments for decades. This paradox was explained in page 482 (economics in action: China Pegs the Yuan).


================Feb 8
Last night I doubted validity of Equation 1901 and the conclusion "Capital flowed to the US due to its technological success. It was its TFP surging from 1995 to 2005 due to the IT revolution (which the U.S. benefited comparatively more from) that led to its current and trade account deficits."

(a) This morning I read Principles of Economics. 3rd ed. Rice University (1912- ; at Houston, TX), undated (OpenStax resource)
https://openstax.org/books/principles-economics-3e/
(table of contents in the left column)
, whose sections 23.3 and 23.5 disabuses me.

(b) But is it true that Foreign Direct Investment (FDI) into the United States is, or has been, a lot?
(i)
(A) ((Rest of the World; Foreign Direct Investment in US; Asset (Current Cost), Transactions/1000)/Gross Domestic Product)*100.  FRED, undated
https://fred.stlouisfed.org/graph/?g=mU0O
(upper right corner: "1947-10-01 to 2024-07-01)

The "current cost" is to adjust inflation, meaning to say that the, say, 1950 figure, is in 2024 dollars (the real figure in 1950, in 1950 dollar, would be smaller)

I was troubled by unit (Transactions/1000)/Gross Domestic Product)*100). Why go through the trouble?
(B) This (the convoluted unit) is because FRED reports the absolute amount (not relative to, or as a percentage of, GDP) of FDI in millions (NOT billions). See y axis in
Rest of the World; Foreign Direct Investment in U.S.; Asset (Current Cost), Transactions (ROWFDIQ027S). FRED, undated ("1946-10-01 to 2024-07-01")
https://fred.stlouisfed.org/series/ROWFDIQ027S

You see, in Note (b)(i)(A) above , "millions of dollars divided by 1000 is turned into billions of dollars. Still GDP unit is trillions of dollars. So, without multiplication by 100. the figures will be decimals.

If you read next, you will wonder why this graph does not comport with the next. This is because the figures in this graph are reported (right upper corner: "Frequency: Quarterly") (italic original), but the next is ANNUAL numbers.
(ii) the annual values (absolute amounts):

New Foreign Direct Investment in the United States, 2023. Bureau of Economic Analysis (BEA), US Department of Commerce, July 12, 2025
https://www.bea.gov/news/blog/2024-07-12
("Expenditures by foreign direct investors to acquire, establish, or expand US businesses totaled $148.8 billion in 2023, down $57.4 billion, or 28 percent, from $206.2 billion in 2022")

(iii) How is FDI into US compared with other main recipients of FDI?

Valentina Romei and Sam Fleming (reporting from London), US Share of Global Foreign Direct Investment Surges to Record. Financial Times, Jan 21, 2025
https://www.ft.com/content/38c1687a-dba5-4442-a7e6-5ec0e0b0ac5b

paragraphs 2 to 4:

"The figures for announced greenfield projects — where companies build or expand new facilities and operations in a foreign country — come as political and business leaders gather in Davos to debate how the Trump presidency might reshape the global economic order through steep tariffs and reshored production.

"The proportion of new FDI projects announced in the US rose from 11.6 per cent in 2023, to 14.3 per cent in the 12 months to November 2024, according to the Financial Times’ analysis of data collected by fDI Markets, an FT-owned company that has tracked cross-border investments from 2003.

"The increase has been driven by buoyant consumer demand and government incentives in the world’s largest economy, according to economists.

my explanation:
(A) Firstly this report was about the FDI that was announced but not yet implemented (and may be not implemented after all; just look at the announced investment by Foxconn next to Trump in his first term in Wisconsin to build liquid crystal display factory there). Secondly, this report is about greenfield investment only. See James Chen, Greenfield Investment. Investopedia, updated on Oct 8, 2024
https://www.investopedia.com/terms/g/greenfield.asp

In other words, this report excluded "acquire" in the Note (n)(ii) title ("acquire, establish, or expand").
(B) This report had two graphs: The top one had the heading "Number of new projects, established or expanded, 12 months to November," whereas the bottom one has "Capex [capital expenditure] on greenfield cross-border projects, 12 months to November ($bn)."

The top graph was about number of projects that excluded acquired at ;east, while the bottom one was about money invested in greenfield projects only.