Among Krugman's other "accomplishments" is this quote:
"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."
Krugman's response in a letter to Business Insider. Business Insider was asking him about that quote and about his recent commentary on Bitcoin.
Well, two things.
First, look at the whole piece. It was a thing for the Times magazine's 100th anniversary, written as if by someone looking back from 2098, so the point was to be fun and provocative, not to engage in careful forecasting; I mean, there are lines in there about St. Petersburg having more skyscrapers than New York, which was not a prediction, just a thought-provoker.
But the main point is that I don't claim any special expertise in technology -- I almost never make technological forecasts, and the only reason there was stuff like that in the 98 piece was because the assignment required that I do that sort of thing. The issues about Bitcoin, however, are not technological! Everyone agrees that it's technically very sweet. But does it work as money? That's a very different kind of question.
And the fact that people are throwing around my 98 quote actually shows that they don't get this point -- that they're confusing technology with monetary economics. -- Krugman, Business Insider Letter [http://www.businessinsider.com/paul-krugman-responds-to-inte...]
I read that before I posted the quote. I think it's worth reading, so I'm glad you posted it.
I'm not trying to prove Krugman is bad with the quote; I simply added it because I find it amusing.
His excuse says: "I was writing in print about something I'm not an expert in, and I wasn't being serious anyway." Fine. That is how I would interpret things even without the excuse. It still says something about Krugman, but no, the quote is not overly damning by itself. (Krugman's entire body of non-academic work, on the other hand....)
While politicians who like to defer responsibility to economists would want their electorate to believe otherwise, economists are not soothsayers. They are familiar with some ideal models for modeling economic systems of a few variables that may or may not hold up depending on the actual market conditions.
Economic forecasts are a bit like really bad weather forecasts - given a few variables and that nothing changes they may hold up.
But they cannot predict what will change and what effects it will have. Like the long term implications of internet.
For small systems with stable technologies like markets for a limited set of products some macroeconomic rules may hold up pretty well. But for large scale economies the economic decisions are as much political as fiscal, and the soundness of the decisions can be found out only in retrospect...
Are you honestly going to drop a quote from the 100th anniversary of Time magazine in which the authors were instructed to speculate about the world in 2098 as some sort of referendum on Krugman's economic knowledge?
Cherry picking a random sentence from a variety magazine isn't quite as strong of an argument as people keep insisting.
You're right. I am absolutely not making the argument that Krugman is bad because of the quote. I'm asserting that Krugman is bad, because I know that to be true, without offering proof, which would be outside the scope of an HN comment.
Separately, I'm also adding the quote to make fun of him.
I didn't expect people to take my comment as some sort of intellectual argument. As you point out, obviously, it is not.
And another Krugmanism, in the early 2000's: "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
this guy has been on the wrong side of history so often I have no idea why anyone listens to him.
I'm not sure why I feel compelled to defend Krugman again, but this specific argument is so incredibly tired and completely disingenuous. Krugman in the early 2000's was as far away from the seat of power as humanly possible, he had 0 impact on policy in the Bush administration.
Just look at how the quotes are represented on HN:
"To fight this recession the Fed needs…soaring
household spending to offset moribund business
investment. [So] Alan Greenspan needs to create a
housing bubble to replace the Nasdaq bubble."
Compared to what was actually said:
"The basic point is that the recession of 2001 wasn't a
typical postwar slump, brought on when an inflation-
fighting Fed raises interest rates and easily ended by a
snapback in housing and consumer spending when the
Fed brings rates back down again.
This was a prewar-style recession, a morning-after
brought on by irrational exuberance. To fight this
recession the Fed needs more than a snapback; it needs
soaring household spending to offset moribund business
investment. And to do that, as Paul McCulley of Pimco put
it, Alan Greenspan needs to create a housing bubble to
replace the Nasdaq bubble."
He went on to describe why he thinks Greenspan will try to create a housing bubble:
Bear in mind also that government officials have a stake in
accentuating the positive. The administration needs a
recovery because, with deficits exploding, the only way it
can justify that tax cut is by pretending that it was just what
the economy needed. Mr. Greenspan needs one to avoid
awkward questions about his own role in creating the
stock market bubble.
I'm at a loss how someone can read "Greenspan will create a housing bubble because he's in bed with the administration and they need to justify the huge tax cuts that haven't stimulated the economy and distract from the Fed's role in the stock bubble" and then think that was a policy recommendation and not a prescient critique of a bumbling economic policy.
> to fight this recession, as OTHER GUY put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
it's clear that Krugman is talking about someone else (Paul McCully)'s phrasing of some advice. What isn't clear is whether Krugman also thinks this advice is a good idea. It seems that way from my reading it - unless Krugman thinks ending the ression is not desirable. It's anything but clear, though.
"your interpretation is incorrect" is a reasonable opinion. "I don't see how anyone could interpret it that way" sounds like hyperbole.
A formal language used on social networks could solve problems like this. A record of accurate predictions made in a formal language could be a solid source of reputation.
The difference really just lies in whether you think that a prediction of an outcome somehow is an endorsement of that outcome.
I think the Patriots are going to win the Superbowl, but frankly I don't care if they do or not.
The entire context of the Krugman article was the administration's insistence that the tax cuts were stimulative and were bringing the economy back. He rightly predicted that in an effort to aid that narrative (since Greenspan had given them political cover), the Fed would keep rates low for longer than was healthy. He also rightly predicted that these actions would lead to a housing bubble.
It's a huge leap to go from reading these predictions to assuming that Krugman supported that outcome. He talks specifically about how this isn't a normal inflation-driven recession that can be fixed with Fed action, which just gives greater evidence to his lack of support for a housing bubble.
Add to that, other contemporary articles where Krugman loudly warns of an impending housing bubble / burst, and it's clear what he thought of Greenspan's actions. From Aug. 2005[1], an article that drew a loud critique:
Meanwhile, the U.S. economy has become deeply dependent
on the housing bubble. The economic recovery since 2001 has
been disappointing in many ways, but it wouldn't have
happened at all without soaring spending on residential
construction, plus a surge in consumer spending largely based
on mortgage refinancing. Did I mention that the personal
savings rate has fallen to zero?
Now we're starting to hear a hissing sound, as the air begins to
leak out of the bubble. And everyone - not just those who own
Zoned real estate - should be worried.
You don't need a reputation engine, just some critical eye and enough context.
http://en.wikipedia.org/wiki/Paul_Krugman
That this is written by a Nobel Prize winner and NYT columnist definitely makes it a bit more noteworthy.