
Why most economists' predictions are wrong (1998) - patrickaljord
http://web.archive.org/web/19980610100009/www.redherring.com/mag/issue55/economics.html#?hn
======
patrickaljord
Full quotes:

* The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"\--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.

* As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.

~~~
phaed
How is this guy still taken seriously?

~~~
cblanc
Because he's one of the of the most respected scholars in the field of
Economics?

He's likely devoted thousands more hours than us pondering economic matters.
I'm just looking through his wiki here... published hundreds of scholarly
articles and 20 books. A professor of Economics at some of the best
universities in the world. He's even received a Nobel Prize.

How can we fault someone for taking Paul Krugman seriously on economic
matters?

~~~
VMG
Then how could he have been so wrong in his prediction?

~~~
MisterBastahrd
Please explain exactly how he is wrong. The internet hasn't substantially
changed the rate of growth nor the size of the economy. It also hasn't created
any new transformative markets. It has simply made them more accessible.
That's why the fax machine analogy is so apt.

Amazon is a storefront. Google is an ad service. Facebook is a glorified
telegraph service. It doesn't matter how nifty their tech is. The only thing
that matters in this context is what they do, and how that affects the overall
economy.

------
VMG
Beware of cynics.

Despite this being on hacker news, Krugman's incorrect prediction actually
doesn't harm his reputation significantly. Pessimism and pointing out of flaws
elevates your status, while optimism can be construed as being naive.

~~~
ye
Doesn't harm his reputation? It shows, clearly, that the man, while being an
expert in one field, and while being objectively smart, can be a complete
moron in another field and make very very very wrong "predictions".

~~~
onebaddude
> _can be a complete moron in another field_

A complete moron? In the field of monetary economics? Yeah, okay. You may
think Bitcoin is major internet monies, but the economists are interested in
studying it from aspect of a medium of exchange.

Discussing economics on HackerNews is like discussing medicine on Reddit:
everyone is an expert, whether they know anything about the subject or not.

~~~
joshuapants
Read the post before jumping to your reply button.

> while being an expert in one field, and while being objectively smart, can
> be a complete moron in another field

ye said that Krugman is an expert in his field, but has no idea what he's
talking about when it comes to computers and the impact thereof.

~~~
onebaddude
>Read the post before jumping to your reply button.

Maybe you should do the same.

Krugman isn't looking at Bitcoin as a technology, but as a currency. Just
because he doesn't understand "computers and the imnpact thereof", doesn't
mean he doesn't understand Bitcoin as money.

~~~
joshuapants
The article we're commenting on has nothing to do with bitcoins. So again we
get back to the issue of reading comprehension.

------
snitko
He actually wrote a new post today, saying that "Bitcoin is Evil" was supposed
to be a joke. Allegedly, nobody in the Bitcoin community understood it and now
he complains about the lack of sense of humor that the Bitcoin community
demonstrated.

[http://krugman.blogs.nytimes.com/2013/12/29/the-humor-
test/](http://krugman.blogs.nytimes.com/2013/12/29/the-humor-test/)

~~~
k-mcgrady
Clearly the 'Bitcoin is Evil' title was meant in jest. He doesn't say anything
like that in the article. Like most article titles on the web it was link
bait. The substance of the piece though seems perfectly sensible to me.

------
T-A
Yet another example of Amara's law,
[http://en.wikipedia.org/wiki/Roy_Amara](http://en.wikipedia.org/wiki/Roy_Amara)
(sometimes also attributed to Arthur C. Clarke in the form "When it comes to
technology, most people overestimate the impact in the short term and
underestimate it in the long term").

------
mattgreenrocks
Hate to be that guy, but what is the purpose of digging this up? To say "ha
ha, the Internet is amazing?"

~~~
potatolicious
Because he had the gall to make fun of Bitcoin. So now instead of refuting his
opinions directly we're going to to do shit like this.

~~~
3pt14159
This isn't really an either-or. We refuted and continue to refute any
objective claims he makes while concurrently posting his widely inaccurate
predictions from the past. Don't forget, we're attacking someone who is using
his reputation as an economist to speak with authority on Bitcoin. The only
way you can refute the authority is to refute the individual's previous
claims.

And it isn't like we've been hiding under a rock. We're just getting tired of
doing it. He's an overrated economist that nobody that greatly understands
Bitcoin takes seriously. He's like Opera, accessible to the masses,
emotionally involved, but utterly void of a deep understanding of the issues
involved.

If you want to make widely inaccurate claims about something that is
controversial you are going to get lots of upvotes. The problem with Bitcoin
is that the people that informed about it are usually tilt pro-Bitcoin[1],
while the people that are against Bitcoin usually haven't done enough research
into economics, mathematics, and politics.

[1] We're not the lunatics that post on /r/bitcoin everytime Bitcoin doubles.
Many of us see valid challenges ahead for Bitcoin, especially from the
government.

~~~
onebaddude
> _The problem with Bitcoin is that the people that informed about it are
> usually tilt pro-Bitcoin[1], while the people that are against Bitcoin
> usually haven 't done enough research into economics, mathematics, and
> politics._

99% of this board haven't done the research Mr. Krugman has done in economics,
or even have the experience in applied math he does.

But "those who are pro bitcoin are smart, those who are against it aren't",
really?

From most of what I've read, here and on /r/bitcoin and elsewhere, Bitcoin
proponents are utterly clueless when it comes to economics.

~~~
3pt14159
This board has the top computer scientists, mathematicians, and engineers from
the best universities in the world.

Furthermore, I said that the majority of people that have really dug into how
bitcoin works and what it would mean, _tilt_ pro-bitcoin.

That doesn't mean that the people who are pro-bitcoin are smart.

That doesn't mean that there arn't people that have dug into it and are
against it.

All it means is that generally when we see Krugman's simplistic objections we
roll our eyes like you would roll your eyes at Oprah explaining credit default
swaps to her audience. We've responded to his claims over and over. It is
getting boring and old.

------
nullterminated
Clearly Krugman has underestimated the impact the fax machine has had on the
economy.

------
bjornsing
Krugman's prediction (originally pointed out by the title of this HN post): _"
By 2005 or so, it will become clear that the Internet's impact on the economy
has been no greater than the fax machine's."_

The most puzzling thing is that he's not far from right, in a national
economics sense at least. Here's the riddle: US GDP has only increased by 25%
in real terms since the year 2000. But if you took an average HN reader and
sent them back there, to before the mobile phone and high speed residential
broadband became widespread, they would kill themselves. How is that
possible...? :)

------
jhonovich
He who has not made an incorrect prediction in the past 15 years shall cast
the first stone....

------
k-mcgrady
Need to put the year in the title. Looks like it was written in 1997/1998\.
Doesn't seem to explicitly say unless I'm missing something but the year is
implied in the text.

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vermooten
Everyone's predictions are wrong because no-one can see into the future. I
know that, stated like this, it's a tautological statement. But hopefully you
know what I mean.

AND! the existence of different interpretations of history suggest, oddly,
that this also applies to the past.

------
ffrryuu
Because economists are paid to push a point of view by their employer. Eg the
Bank or the Fed.

------
elgabogringo
Krugman is a hack.

