In early 1999, Krugman served on an advisory panel (including Larry Lindsey
and Robert Zoellick
) that offered Enron
executives briefings on economic and political issues. He resigned from the panel in the fall of 1999 to comply with The New York Times
rules regarding conflicts of interest, when he accepted the Times
's offer to become an op-ed columnist.
Krugman later stated that he was paid $37,500 (not $50,000 as often reported - his early resignation cost him part of his fee), and that, for consulting that required him to spend four days in Houston
, the fee was "rather low compared with my usual rates", which were around $20,000 for a one-hour speech.
He also stated that the advisory panel "had no function that I was aware of", and that he later interpreted his role as being "just another brick in the wall" Enron used to build an image.
When the story of Enron's corporate scandals
broke two years later, Krugman was accused of unethical journalism, specifically of having a conflict of interest.
Some of his critics claimed that "The Ascent of E-man," an article Krugman wrote for Fortune
about the rise of the market as illustrated by Enron's energy trading, was biased by Krugman's earlier consulting work for them.
Krugman later argued that "The Ascent of E-Man" was in character, writing "I have always been a free-market Keynesian: I like free markets, but I want some government supervision to correct market failures and ensure stability."
Krugman noted his previous relationship with Enron in that article and in other articles he wrote on the company.
Krugman was one of the first to argue that deregulation of the California energy market had led to market manipulation by energy companies.