Crémant and Krugman in Luxembourg

I spent one week in Luxembourg in a workshop on income distribution. Even if it might sound ironic, Luxembourg hosts a vast data bank of income statistics (LIS) that provide a great setting for studying income inequalities across the world. This year, a 2-day conference on middle classes was integrated into the workshop programme. I was especially excited about a keynote lecture by professor Paul Krugman. I'm not so interested in his macro-economic models on international trade for which he won a Nobel Prize but rather I know him from his New York Times columns in which he fiercely used to criticise the Bush government or talks about economics in popular (but always insightful and sometimes even funny) terms. If you check his blog The Conscience of a Liberal, you will find under the topic "Inequality and Crises" (27 June) the powerpoint show he used for his presentation to us. In a later entry from 30 June "The Icelandic Post-Crisis Miracle", he gets inspired by a presentation of an Icelandic scholar in our conference.

He didn't say anything fantastically new (and he is by no means a specialist of income distribution) but his thesis about the connection between inequality and economic depression was interesting and he also provided data to back up his theory as historical data shows that increase in inequality (measured as the share of total income owned by the top 1% of income distribution) has (always) been followed by depression (however, this has happened twice in the recorded history so making sound analyses is somewhat hard). Basically, there are three ways how to explain their relation. First, the connection is a pure hazard. Second, inequality and economic depression may have a common cause, for example neo-liberal ideology. Or third, inequality actually causes macro-economic instability. Krugman focused on the second possibility and tried to provide evidence that the neo-liberal or republican policies have simultaneously led us towards a more unequal society and more vulnerable economic system.


Krugman's lecture took place in Arcelor-Mittal's (the huge steel company) headquarters in an old palace where the audience included some royal members of Luxembourgian duchy and some elite members of the country. The workshop participants were remarkably underdressed, but at the reception after the lecture, waiters poured us crémant (the bubbling wine of Luxembourg) with no discrimination.


Of course we were all childishly excited about Krugman (first observation: oh, he's short). Some of us bought his book to later get a signature in it (I regret that I didn't) and we all got in a group photo with him (very exciting). On our way to a conference dinner, I had the opportunity of making him laugh – not directly speaking to him but telling a joke loud enough so he could hear it as well. A young American researcher got to sit next to him during the dinner and afterwards, her eyes were shining as if she had just met the boy of her dreams. But I guess that seeing Matt Damon jogging in the Central Park still goes ahead of this intellectual event...