From a facebook discussion, in relation to the following:-
Boudreaux’s letter seems very fair to me. “[Krugman's column] should be read on the basis of its evidence, not on its alleged ideological baggage. ” That’s the whole point – Krugman is explaining what we need to do to slay a dragon that does not in actuality exist, and Sir Samuel is encouraging him in his delusions. Outside of the peripheral countries – which have their own specific problems – it is not true that “there is an ever-widening pool of unemployed people and of unused capacity”. The pool is diminishing at a solid pace, although the level remains on the high side.
Also, Sir Samuel does not mention a more important part of the problem, which is regulation – particularly of the labour market. Look at the difference in performance between relatively free states in the US and heavily regulated, poorly governed ones. Similarly – the reason why youth unemployment especially is so high in peripheral Europe is not some market-originated inside-outside phenomenon; it is because of a very heavily regulated labour market. In 2002 Germany was the sick man of Europe; they undertook reforms; it was very painful; but it has paid off. Any honest and true discussion ought to at least tackle these questions.