This is a nice way of saying that if Paul Krugman believes the economy is in that "liquidity trap," then he gets to say what the "new rules" of economics are, and the first thing to go is that oppressive Law of Opportunity Cost. He writes:
Now, some people will ask, didn’t I used to be a free-trader? Yes, and under normal circumstances I still mostly am. But these are not normal circumstances! In an economy that isn’t in a liquidity trap, one can reasonably assume that jobs lost due to Chinese exports will be offset by jobs gained elsewhere, although that may be small comfort to the workers affected. Under current conditions, however, there is absolutely no reason to believe that there are offsetting gains — on the contrary, the losses to import competition are magnified through multiplier effects.The idea of "free trade" is nothing more than a rendition of opportunity cost. One's production decisions are based upon the opportunity costs involved, period.
Like everything in economics, support for free trade should be based on analysis, not slogans. And if you’re in a situation where the analysis says normal rules don’t apply, then they don’t apply.
What Krugman is saying is that our situation today repeals the Law of Opportunity Cost and with it the Law of Scarcity. Thus, we are left with the head-scratching notion that goods no longer are scarce, even as people are being deprived.
(I am sure I will have a host of angry readers claiming I am putting words into Krugman's mouth. All I can say is that by debunking the Law of Comparative Advantage, which is based upon the Law of Scarcity and the Law of Opportunity Cost, Krugman is doing away with those things. There is no way around it, even if Krugman's fans don't like it.)