Paul Krugman (1998): By 2005 Internet will have no more economic impact than fax(web.archive.org)
web.archive.org
Paul Krugman (1998): By 2005 Internet will have no more economic impact than fax
http://web.archive.org/web/19980610100009/www.redherring.com/mag/issue55/economics.html
12 comments
I'm sorry, but how constructive is your comment really? Do you think it's and ad-hominem on Krugman? He's not popular with me, but even leaving that aside, there's something more here.
Some say love and passion are two sides of the same coin, and the only separate sentiment is indifference.
He sure seems to hate bitcoin with a passion now. Today's article is at least not as bad as his last piece from only 3 days before, krugman.blogs.nytimes.com/2013/04/12/adam-smith-hates-bitcoin/ that was discussed here.
At least this time in the article he properly acknowledged bitcoin as the "ultimate fiat currency", that's an evolution.
Yet he still sees nothing wrong with quantitative easing and the greenback, and compare that situation to the goldbugs. Poeple who are too optimistic about gold do not necessarily have to be right to make a good investment - if the fiat currencies are doing down, that alone would make gold an interesting investment (I for one would not place a single cent in a heavy precious metal the US government has already confiscated in the past following executive orders)
Just notice how sentimentally charged his article are - look at the keywords in the titles, "hate" or "antisocial". It would be interesting to grab them all and feed them into a sentiment analysis software, to see how he positionned himself on other topics in the past, and if these position evolves over time.
Still, it's weird and funny. Does he intend to write a bitcoin article a day when the $300 cap is reached? He should post them on bitcoin related sites and rename his blog.
Some say love and passion are two sides of the same coin, and the only separate sentiment is indifference.
He sure seems to hate bitcoin with a passion now. Today's article is at least not as bad as his last piece from only 3 days before, krugman.blogs.nytimes.com/2013/04/12/adam-smith-hates-bitcoin/ that was discussed here.
At least this time in the article he properly acknowledged bitcoin as the "ultimate fiat currency", that's an evolution.
Yet he still sees nothing wrong with quantitative easing and the greenback, and compare that situation to the goldbugs. Poeple who are too optimistic about gold do not necessarily have to be right to make a good investment - if the fiat currencies are doing down, that alone would make gold an interesting investment (I for one would not place a single cent in a heavy precious metal the US government has already confiscated in the past following executive orders)
Just notice how sentimentally charged his article are - look at the keywords in the titles, "hate" or "antisocial". It would be interesting to grab them all and feed them into a sentiment analysis software, to see how he positionned himself on other topics in the past, and if these position evolves over time.
Still, it's weird and funny. Does he intend to write a bitcoin article a day when the $300 cap is reached? He should post them on bitcoin related sites and rename his blog.
He is a prolific blogger (2-3 items per day, about 6-7 days a week) and he has written about bitcoin a grand total of 3 times over the 3 years.
The feelings he seems to have for bitcoin are much worse than hate - it's bemused indifference, which must be what drives bitbugs so mad.
The feelings he seems to have for bitcoin are much worse than hate - it's bemused indifference, which must be what drives bitbugs so mad.
In all fairness, shouldn't Krugman be a "paperbug"?
It's not "goldbug" vs "paperbug" so much as "the value of ANY currency is an illusion" versus "the value of gold is real, but that of paper is an illusion".
(My favorite example of this is the post apocalyptic scenario -- I fill my bunker with guns and food, you fill yours with krugerands: who wins?)
This is the problem with the bitcoin crowd -- they're trying to replace "gold" with something "even better" not realizing that this is a blind alley.
(My favorite example of this is the post apocalyptic scenario -- I fill my bunker with guns and food, you fill yours with krugerands: who wins?)
This is the problem with the bitcoin crowd -- they're trying to replace "gold" with something "even better" not realizing that this is a blind alley.
I don't think there are too many "paperbugs". Nobody considers his checking account to be an investment or a speculation. Krugman probably has the typical portfolio of a rich guy--Munis, equities, sovereigns, etc.
Anyway, fiat is not just social: It's inherently valuable because of the government's requirement for tax payment in it, and for the massive existing short positions. People like Krugman don't say this because it's unpleasant.
Anyway, fiat is not just social: It's inherently valuable because of the government's requirement for tax payment in it, and for the massive existing short positions. People like Krugman don't say this because it's unpleasant.
Not when that describes the vast majority of professional economists.
"In all fairness, shouldn't Krugman be a "paperbug"?"
They lack the fanatical/evangelistic zeal, I don't see them as equivalents.
They lack the fanatical/evangelistic zeal, I don't see them as equivalents.
Ugh, he commented now on the story because bitcoins are the craze now - or were. He doesn't hate bitcoins: he's just used it to make many of his arguments clearer. This is his style, it's not personal. The only people that could leverage that accusation against him (and be wrong) are JoeScar and the Flimflam man. Is just about the data. He was wrong about the internet because he commited the mistake he usually criticizes in others: talk about something without the data or knowing the data. He is not wrong about bitcoins. It doesn't mean bitcoins don't work as alternate currencies (which they obviously do) but how reliable can they be when their value changes so drastically? Bitcoins will hardly matter on a post apocalyptic world because it hardly matters today (unless bitcoins holders increase dramatically): that's why he called it antisocial.
And why was this a top item https://news.ycombinator.com/item?id=5548976 (around the same time CATO published a positive review on Bitcoin)? HNers shorting bitcoins?
>> HNers shorting bitcoins?
Or maybe it's just a dumb idea. Let's see, I buy enough computing hardware and I can create money! I think it's a glorified pyramid scheme.
Or maybe it's just a dumb idea. Let's see, I buy enough computing hardware and I can create money! I think it's a glorified pyramid scheme.
Today, John Mauldin, a lesser known (but well known) financier wrote a more positive note on BitCoin. You can freely subscribe and read his position: http://www.mauldineconomics.com/ttmygh/bit-happens
What worries me is that the guy who couldn't see the potential of the Internet is the same guy who thinks that five years of quantitative easing is "temporary" and that printing trillions of dollars of funny money is just "fine".
> The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis... We have huge economic problems, but green pieces of paper are doing fine — and we should let them alone.
> The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis... We have huge economic problems, but green pieces of paper are doing fine — and we should let them alone.
Krugman's error is to label the the bitcoin open network 'antisocial' in comparison to the federal reserve closed network. If antisocial means 'not wanting the company of others' : I think that means a closed network not an open network; the exact opposite of what he postulates.
Krugman doesn't mention it in that article, but I suspect his real issue with Bitcoin is that it is deflationary and thus increases the risk of a deflationary spiral[1].
Edit: Krugman actually has written about the deflationary nature of Bitcoin previously. Quote: In effect, Bitcoin has created its own private gold standard world, in which the money supply is fixed rather than subject to increase via the printing press. [0]
Krugman's arch nemesis' - economonists from the Austrian and Chicago schools - dispute whether deflationary spiral occur, whereas Keynesian like Krugman consider them a real risk.
(Note that this is also the reason why goldbugs generally agree with the Austrian and Chicago schools of thought regarding economics, whilst Keynesian regard gold merely as a safe value store - the "flight to safety" school of thought).
[0] http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...
[1] http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
Edit: Krugman actually has written about the deflationary nature of Bitcoin previously. Quote: In effect, Bitcoin has created its own private gold standard world, in which the money supply is fixed rather than subject to increase via the printing press. [0]
Krugman's arch nemesis' - economonists from the Austrian and Chicago schools - dispute whether deflationary spiral occur, whereas Keynesian like Krugman consider them a real risk.
(Note that this is also the reason why goldbugs generally agree with the Austrian and Chicago schools of thought regarding economics, whilst Keynesian regard gold merely as a safe value store - the "flight to safety" school of thought).
[0] http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...
[1] http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
Krugman isn't perfect, but he actually has been one of the more accurate prognisticators (http://www.poynter.org/latest-news/mediawire/130485/claim-kr...)
More importantly, Krugman actually admits when he is wrong based on new data, as he has done on several occasions in his blog and the NYT. To me, that is the mark of a scientist, one who is able to be swayed by data.
Very few of the Austrians and Chicago types seem to admit to being wrong, and often, contradictory data is simply waved away as conspiratorial (inflation, econometrics). The whole notion of praxeology turns their conclusions into untestable pseudo-science. It takes on the air of a religion rather than geeky engineers willing to hold their ideas to fire of real world tests.
There are two issues at play here: the deep desire of technolibertarians for "free money" and decentralization, and moral arguments surrounding the function of the state and application of force, and the real world where their predictions often fail. It's possible to love Bitcoin, but also admit Krugman is right about it.
Bitcoin is a magnificent creation of cryptography. In fact, the entire field of modern cryptography, from one way functions, zero knowledge proofs, oblivious transfer, to high level schemes involving money, voting, homomorphic encryption, et al, is staggering beautiful. When I first read of Broadcast Encryption, despite its use in DRM, my mind was blown. I love all this stuff, and have a deep affinity for subversive systems.
But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch, because the deep beliefs about how a totally free economy would work in practice don't have to be any more true than the beliefs about how anarcho-syndicalist communities would work when scaled up. The real world is complex, and a mixed set of strategies is more adaptive and stable than a set of purist ones.
More importantly, Krugman actually admits when he is wrong based on new data, as he has done on several occasions in his blog and the NYT. To me, that is the mark of a scientist, one who is able to be swayed by data.
Very few of the Austrians and Chicago types seem to admit to being wrong, and often, contradictory data is simply waved away as conspiratorial (inflation, econometrics). The whole notion of praxeology turns their conclusions into untestable pseudo-science. It takes on the air of a religion rather than geeky engineers willing to hold their ideas to fire of real world tests.
There are two issues at play here: the deep desire of technolibertarians for "free money" and decentralization, and moral arguments surrounding the function of the state and application of force, and the real world where their predictions often fail. It's possible to love Bitcoin, but also admit Krugman is right about it.
Bitcoin is a magnificent creation of cryptography. In fact, the entire field of modern cryptography, from one way functions, zero knowledge proofs, oblivious transfer, to high level schemes involving money, voting, homomorphic encryption, et al, is staggering beautiful. When I first read of Broadcast Encryption, despite its use in DRM, my mind was blown. I love all this stuff, and have a deep affinity for subversive systems.
But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch, because the deep beliefs about how a totally free economy would work in practice don't have to be any more true than the beliefs about how anarcho-syndicalist communities would work when scaled up. The real world is complex, and a mixed set of strategies is more adaptive and stable than a set of purist ones.
You nailed it. My view is that bitcoin fans tend to be so enamoured with the cool technology that they wholly ignore the economics and social aspects of it.
From a mainstream view though, the technology is completely irrelevant - no one cares if iPhone apps are written in Objective C or Lisp - what matters is the end product and what people can do with it.
When someone like Krugman looks at bitcoin, they do not see any of the technology (nor should they). They see a deflationary currency with vicious boom-bust cycles. Knowing the miserable experience with such currencies in the past, they don't think highly of this particular one.
From a mainstream view though, the technology is completely irrelevant - no one cares if iPhone apps are written in Objective C or Lisp - what matters is the end product and what people can do with it.
When someone like Krugman looks at bitcoin, they do not see any of the technology (nor should they). They see a deflationary currency with vicious boom-bust cycles. Knowing the miserable experience with such currencies in the past, they don't think highly of this particular one.
Does it not have business appeal in that it allows transacting parties to pay direct -- without a middle man (banker) collecting fees?
Also it being deflationary (to me) is as much as a problem as USD being inflationary. I don't spend all my USD as quickly as possible fearing next week those things will be more expensive.
EDIT: Also rereading the post there is nothing substantial in his arguments to support his conclusion -- mostly focusing on red herrings to discredit it: He may not like it politically.
Also it being deflationary (to me) is as much as a problem as USD being inflationary. I don't spend all my USD as quickly as possible fearing next week those things will be more expensive.
EDIT: Also rereading the post there is nothing substantial in his arguments to support his conclusion -- mostly focusing on red herrings to discredit it: He may not like it politically.
I think part of the deflationary problem is that as bitcoins become more valuable, the initial holders of bitcoins get an increasingly large share of global wealth.
Suppose bitcoin continues on its current trajectory. The Winklevoss twins allegedly invested $11 million into Bitcoins, and they allege they own 1% of all the coins.
If they hold onto that asset and say, the entire rest of the world switches over to bitcoin, various sources have suggested the total money supply is between 50 and 75 trillion dollars. Assume that this amount converts to 21 million bitcoins - the 110-120 thousand coins they own will be worth a quarter of a trillion dollars.
The Winklevoss twins will have made over a two million percent return, doing nothing but joining a bandwagon with a decently sized investment.
This is, I think, one of the big problems with bitcoin. The incentive to "join in" is going to be less and less and less because existing owners of bitcoins will have an enormous amount of wealth.
That's not even the largest bitcoin account. There's one account listed[1] with nearly 450,000 coins - imagine them controlling 2.1% of the global monetary supply (over 1 trillion dollars) merely for being an early adopter. Ugh. Disgusting.
[1] http://bitcoinreport.appspot.com/
Suppose bitcoin continues on its current trajectory. The Winklevoss twins allegedly invested $11 million into Bitcoins, and they allege they own 1% of all the coins.
If they hold onto that asset and say, the entire rest of the world switches over to bitcoin, various sources have suggested the total money supply is between 50 and 75 trillion dollars. Assume that this amount converts to 21 million bitcoins - the 110-120 thousand coins they own will be worth a quarter of a trillion dollars.
The Winklevoss twins will have made over a two million percent return, doing nothing but joining a bandwagon with a decently sized investment.
This is, I think, one of the big problems with bitcoin. The incentive to "join in" is going to be less and less and less because existing owners of bitcoins will have an enormous amount of wealth.
That's not even the largest bitcoin account. There's one account listed[1] with nearly 450,000 coins - imagine them controlling 2.1% of the global monetary supply (over 1 trillion dollars) merely for being an early adopter. Ugh. Disgusting.
[1] http://bitcoinreport.appspot.com/
Ah, Krugman... love that guy. He's my favorite comedian!
> But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch [...]
I think the Austrians would be the first to admit that the world is complex.[0] ;-) To be fair, BitCoin has come extraordinarily far in an incredibly short period of time. Just imagine trying to explain its present-day state to almost anyone two to three years ago.
It seems to me, the whole point of this posting is that trying to judge BitCoin as a technolibertarian savior today is a bit like judging the internet's equivalence to a fax machine in 1998: it's just too early to tell, especially if (like Krugman), you have so little vision.
Who knows, maybe BitCoin is only cryptocurrency's ARPANET. Just give it a minute.
[0] http://www.goodreads.com/quotes/102966-the-curious-task-of-e...
> But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch [...]
I think the Austrians would be the first to admit that the world is complex.[0] ;-) To be fair, BitCoin has come extraordinarily far in an incredibly short period of time. Just imagine trying to explain its present-day state to almost anyone two to three years ago.
It seems to me, the whole point of this posting is that trying to judge BitCoin as a technolibertarian savior today is a bit like judging the internet's equivalence to a fax machine in 1998: it's just too early to tell, especially if (like Krugman), you have so little vision.
Who knows, maybe BitCoin is only cryptocurrency's ARPANET. Just give it a minute.
[0] http://www.goodreads.com/quotes/102966-the-curious-task-of-e...
"Just give it a minute"? Krugman isn't saying "shut it down", he is making fun of the euphoric media reaction that looks a lot more like the Pets.com IPO than anything rational.
The problem with Bitcoin is twofold,
- it presumes (by some) to be changing the nature of money, but if you look closely, it really isn't; its just fiat currency with a different framework for issuing the fiat other than the nation-state.
- there are some very old and obvious issues with its specific limitations (such as mining and being a fixed quantity). This is not necessarily a fundamental limitation, however - just limits its creators declared by fiat. But it betrays a misunderstanding of what money is.
None of the critiques have anything to do with crypto currency in general or the cooler/geekier aspects of Bitcoin like the global ledger.
Bitcoin is a useful experiment but let's also not get ahead of ourselves.
The problem with Bitcoin is twofold,
- it presumes (by some) to be changing the nature of money, but if you look closely, it really isn't; its just fiat currency with a different framework for issuing the fiat other than the nation-state.
- there are some very old and obvious issues with its specific limitations (such as mining and being a fixed quantity). This is not necessarily a fundamental limitation, however - just limits its creators declared by fiat. But it betrays a misunderstanding of what money is.
None of the critiques have anything to do with crypto currency in general or the cooler/geekier aspects of Bitcoin like the global ledger.
Bitcoin is a useful experiment but let's also not get ahead of ourselves.
Maybe you can explain why the fixed quantity is a problem?
If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
Maybe you can explain why the fixed quantity is a problem?
See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.
See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.
So that provides evidence that it doesn't work?
Why would it work?
As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
Right so that shows that what Keynesians actually advocate is theft. They go about it the easy way, printing money instead of taking it directly.
The fixed quantity is a problem because of a general theory of how money works. Bitcoin is effectively an artifically limited gold standard, with all of its positive and negative attributes.
In (very) short terms: consider an economy with three goods: money, bonds, and output (i.e. stuff or servcies we buy). There's a supply and demand for all three. Except one of them (money) has a finite supply limit. When supply of bonds is high and demand low (such as when we've had a financial crisis and people are paying down debt), we eventually run into a case where price of bonds (i.e. their interest rates) are 0%. That means that the price of money soars, and the price of output tanks.
That's called deflation, and it's really painful to the productive economy. People sitting on money doing nothing are fine, but output falls dramatically. The working class are wiped out in a spiral of "making less & spending less". Most of us would rather have an economy where output grows and everyone is better off.
In theory, the ability to "split" bitcoins infinitely would fix the problem, but I think people may have psychological problems with dealing with millionth's of a fraction of a bitcoin for no reason except that the Bitcoin creaters arbitrarily decided there would be no more than 21 million of them.
In (very) short terms: consider an economy with three goods: money, bonds, and output (i.e. stuff or servcies we buy). There's a supply and demand for all three. Except one of them (money) has a finite supply limit. When supply of bonds is high and demand low (such as when we've had a financial crisis and people are paying down debt), we eventually run into a case where price of bonds (i.e. their interest rates) are 0%. That means that the price of money soars, and the price of output tanks.
That's called deflation, and it's really painful to the productive economy. People sitting on money doing nothing are fine, but output falls dramatically. The working class are wiped out in a spiral of "making less & spending less". Most of us would rather have an economy where output grows and everyone is better off.
In theory, the ability to "split" bitcoins infinitely would fix the problem, but I think people may have psychological problems with dealing with millionth's of a fraction of a bitcoin for no reason except that the Bitcoin creaters arbitrarily decided there would be no more than 21 million of them.
Your write up of deflation is excellent, but I'd dispute this: In theory, the ability to "split" bitcoins infinitely would fix the problem
The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
[1] http://en.wikipedia.org/wiki/Debt_deflation
The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
[1] http://en.wikipedia.org/wiki/Debt_deflation
Good point, I hadn't really thought it through.
OK so it would be solved if money could magically clone itself? Imagine that the fed could press a button that would make all USD in existence (physical or digital) suddenly split from $1 into 2x$1. Would that work?
> Very few of the Austrians and Chicago types seem to admit to being wrong...
You either don't know what you're talking about or are just making hand-wavy generalizations and hoping nobody calls bs on your bs. Both Hayek and Friedman have multiple occasions were they would explicitly correct themselves on past statements and admit they were wrong.
They were economists, not politicians or theologians.
You either don't know what you're talking about or are just making hand-wavy generalizations and hoping nobody calls bs on your bs. Both Hayek and Friedman have multiple occasions were they would explicitly correct themselves on past statements and admit they were wrong.
They were economists, not politicians or theologians.
"Very few of the Austrians and Chicago types seem to admit to being wrong"
In the case of the Austrian school, they invent scenarios where they can't be wrong.
http://en.wikipedia.org/wiki/Praxeology#Criticisms
In the case of the Austrian school, they invent scenarios where they can't be wrong.
http://en.wikipedia.org/wiki/Praxeology#Criticisms
I love this prognostication:
"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."
It hinges on a such a fundamental misconception of humanity. It matters not that people have nothing to say to each other, they will still talk at each other! But more importantly humanity has an endless depth of vanity that can only be treated but never filled by an endless depth of drivel. Never before in our history have so many said so much to so many with so little content.
Ok, enough pith for now. :-)
"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."
It hinges on a such a fundamental misconception of humanity. It matters not that people have nothing to say to each other, they will still talk at each other! But more importantly humanity has an endless depth of vanity that can only be treated but never filled by an endless depth of drivel. Never before in our history have so many said so much to so many with so little content.
Ok, enough pith for now. :-)
"Sometime in the next 20 years, maybe sooner, there will be another '70s-style raw-material crunch: a disruption of oil supplies, a sharp run-up in agricultural prices, or both. And suddenly people will remember that we are still living in the material world and that natural resources matter. "
Very true, in consideration of the article on the Rent seeking economy recently posted (https://news.ycombinator.com/item?id=5548730). Vanity, thy name is apps.
Very true, in consideration of the article on the Rent seeking economy recently posted (https://news.ycombinator.com/item?id=5548730). Vanity, thy name is apps.
Has anyone ever listened to Paul Krugman? Well, yes, unfortunately.
'Krugman's Call for a Housing Bubble" http://mises.org/daily/6372/
'Krugman's Call for a Housing Bubble" http://mises.org/daily/6372/
While he missed this particular one, he's not wrong (and note that he's wrong for social reasons more than technological ones). People generally overestimate how quickly technology will change in the future. In 1998, I was fretting over the 333 MHz processor that had just come out rendering my 300 MHz processor obsolete. Today, I'm happily using a 2010 MacBook Air with a processor that was already almost three years old when the thing was brand new. I don't think I saw that coming in 1998.
What people generally get wrong is the shape of technology curves, which are generally S-shaped rather than exponential. Low-hanging fruit yields exponential growth at first, then advancement becomes difficult and capital-intensive. The amount of capital being spent to e.g. keep up with Moore's low is breathtaking. So if a technology is advancing rapidly now, it probably won't look all that different 30 years from now. It's the unexpected technologies that you have to watch out for.
What people generally get wrong is the shape of technology curves, which are generally S-shaped rather than exponential. Low-hanging fruit yields exponential growth at first, then advancement becomes difficult and capital-intensive. The amount of capital being spent to e.g. keep up with Moore's low is breathtaking. So if a technology is advancing rapidly now, it probably won't look all that different 30 years from now. It's the unexpected technologies that you have to watch out for.
It is kind of interesting to think self aware AI, under certain assumptions, and thus possibly the "singularity", could be an issue of an extra decade of Moore's law or not.
"It's the unexpected technologies that you have to watch out for."
Some would argue that the unexpected technologies are what keep technology curves exponential rather than S-shaped. (I'm thinking of Kurzweil here). Once advancement starts to slow something else crops up and re-energizes progress, keeping the exponential growth curve intact.
Some would argue that the unexpected technologies are what keep technology curves exponential rather than S-shaped. (I'm thinking of Kurzweil here). Once advancement starts to slow something else crops up and re-energizes progress, keeping the exponential growth curve intact.
It doesn't make a lot of sense to think of "the technological curve" as opposed to various technological curves. If you look at things like power technology, aerospace, medicine, etc, improvements have not been exponential in the last 5-6 decades.
One of the reasons Moore's law seems to be slowing more than it is, is Intel is putting most of their new transistors into integrated graphics.
Moore's law as a practical matter has been dead for awhile. If you hold capital expenditures to achieve a given level of improvement constant in real dollars, the pace has slowed dramatically since say the late 1980's. What's been hiding the extent of the slowdown is exponential increases in capital expenditures.
So he was wrong, no doubt about that. But I'd be interested in an analysis on why he was wrong? What assumptions he made to reach his conclusion proved out to be untrue?
His comment about WordPerfect 5.1 for DOS suggests he missed the significance of the GUI too. I think he didn't realize the web and email would see truly widespread adoption versus merely being another thing that made the tiny minority of people who (really) used computers slightly happier.
He wasn't wrong if you consider he was talking about macro. He appears to be addressing the claim that the standard of living was going to shoot up so high that we'd all be able to live cheaply and not work as much. He predicted instead that demand would stay high since more tech would cause us to keep wanting more.
Sometimes I think there are more anti-Krugman people than actual economists...
disclaimer: I only read a small part of the article
Sometimes I think there are more anti-Krugman people than actual economists...
disclaimer: I only read a small part of the article
That's a really good question.
After thinking about it a bit, I'd suggest it was technological naivety - he didn't see ecommerce coming (!?) or thought that there was some reason it would fail.
I suspect he was deliberately being contrarian and pessimistic too.
After thinking about it a bit, I'd suggest it was technological naivety - he didn't see ecommerce coming (!?) or thought that there was some reason it would fail.
I suspect he was deliberately being contrarian and pessimistic too.
I think his predictions were consciously pessimistic, designed to underline the title of the article Why most economists' predictions are wrong.
I figure he scored 2/5 (The American triumphalism lasted until 2001, and the raw-material crunch happened multiple times).
I figure he scored 2/5 (The American triumphalism lasted until 2001, and the raw-material crunch happened multiple times).
Not to mention the pace of tech change (computing-wise) seems to slow down, unless we can do something about Moore's law that doesn't involve 2000 cores, battery life, and such.
I don't understand your comment.
The pace of tech change doesn't seem to be slowing down to me.
The iPad was only released 3 years ago and yet now even government websites are optimizing for tablets.
The pace of tech change doesn't seem to be slowing down to me.
The iPad was only released 3 years ago and yet now even government websites are optimizing for tablets.
>The iPad was only released 3 years ago and yet now even government websites are optimizing for tablets.
So? The tablets are not a leap as not having computers -> having computers, or mainframes -> personal computers, were.
It's a small incremental update.
So? The tablets are not a leap as not having computers -> having computers, or mainframes -> personal computers, were.
It's a small incremental update.
Everything seems like small incremental updates when you are too close to it.
If we expand it to "mobile" (ie, tablets & smartphones - and don't forget how recent smartphone usage is) then it's pretty easy to argue that mobile is a bigger leap than anything you listed given how it has made computing resources usable by the vast majority of the worlds population.
If we expand it to "mobile" (ie, tablets & smartphones - and don't forget how recent smartphone usage is) then it's pretty easy to argue that mobile is a bigger leap than anything you listed given how it has made computing resources usable by the vast majority of the worlds population.
>Everything seems like small incremental updates when you are too close to it.
Not really. The jump from "computers are for banks" to "everyone has one" and from "no internet" to "full world wide web" seemed like full-blown updates to me, and I was close to both. The same can be said the jump from EGA 1988 IBM PC to 2000 full blown multimedia PC.
The jump from PC to tablet? Not so much. The jump from 2000 PC to 2013 PC? Not so much either. Heck, a huge percentage of people still use XP, which was out in 2001.
Not really. The jump from "computers are for banks" to "everyone has one" and from "no internet" to "full world wide web" seemed like full-blown updates to me, and I was close to both. The same can be said the jump from EGA 1988 IBM PC to 2000 full blown multimedia PC.
The jump from PC to tablet? Not so much. The jump from 2000 PC to 2013 PC? Not so much either. Heck, a huge percentage of people still use XP, which was out in 2001.
What is the point in beating a dead horse ?
Krugman is often wrong. He got a nobel prize, good for him, but we should not take his opinions - or the opinion of any nobel prize or other authority figures - as words from the gods.
Remember, past performance is not necessarily indicative of future results - and this is as good as an example as it gets.
At least I reckon he made a testable prediction this time.
We are all human and faillible. What authority figures may provide is better calibration - ie not being humble or arrogant, but say how good their prediction is, and not be wrong too often (http://yudkowsky.net/rational/technical).
At least, we should hold them to that standard since their past declarations are available to the public and can be tested against current results.
Krugman is often wrong. He got a nobel prize, good for him, but we should not take his opinions - or the opinion of any nobel prize or other authority figures - as words from the gods.
Remember, past performance is not necessarily indicative of future results - and this is as good as an example as it gets.
At least I reckon he made a testable prediction this time.
We are all human and faillible. What authority figures may provide is better calibration - ie not being humble or arrogant, but say how good their prediction is, and not be wrong too often (http://yudkowsky.net/rational/technical).
At least, we should hold them to that standard since their past declarations are available to the public and can be tested against current results.
He's gotten remarkably good at not making testable recommendations or predictions. If an economy collapses, it's because the government didn't do any stimulus spending. If the government tries to stimulate but its economy still collapses, it's because it didn't stimulate enough. I don't think he's ever gone on record to say specifically how much stimulus is needed. Someone please correct me if I'm wrong.
You're wrong.
http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme...
http://krugman.blogs.nytimes.com/2009/10/05/the-story-of-the...
http://krugman.blogs.nytimes.com/2010/07/28/how-did-we-know-...
http://krugman.blogs.nytimes.com/2008/01/21/stimulus-issues/
http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme...
http://krugman.blogs.nytimes.com/2009/10/05/the-story-of-the...
http://krugman.blogs.nytimes.com/2010/07/28/how-did-we-know-...
http://krugman.blogs.nytimes.com/2008/01/21/stimulus-issues/
In most of these links he argues, true to form, that a certain stimulus proposal wasn't big enough. But nowhere did he actually say how big he thought it should be.
The closest he came was in your first link, in which he demonstrated how one might theoretically calculate an adequate stimulus size. Yet this calculation depends on first choosing a value for the Okun's Law coefficient, and nowhere did he say what he thinks it would be. He just picked an "optimistic" value for the sake of demonstration. This single ambiguity easily gives him a few hundred billion dollars in wiggle room.
The closest he came was in your first link, in which he demonstrated how one might theoretically calculate an adequate stimulus size. Yet this calculation depends on first choosing a value for the Okun's Law coefficient, and nowhere did he say what he thinks it would be. He just picked an "optimistic" value for the sake of demonstration. This single ambiguity easily gives him a few hundred billion dollars in wiggle room.
From the first article:
The CBO looked back at real output / unemployment and made the following estimates.[1]
- http://www.usnews.com/dbimages/master/29996/GR_120620_gdprec...
Which shows the impact of the ARRA. So it seems that between 2-3% reduction in peak unemployment with ~1T. So again, something like $2.5T would've been close.
The point all along is that too little stimulus is far more damaging than too much, and with unemployment still above 7.5% five years later, that point seems to have some evidence.
[1] http://www.cbo.gov/sites/default/files/cbofiles/attachments/...
Let’s be generous and assume that the overall multiplier on tax cuts is 1. Then the per-year effect of the plan on GDP is 150 x 1 + 240 x 1.5 = $510 billion. Since it takes $300 billion to reduce the unemployment rate by 1 percentage point, this is shaving 1.7 points off what unemployment would otherwise have been.
Finally, compare this with the economic outlook. “Full employment” clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we’re looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure.
The CBO looked back at real output / unemployment and made the following estimates.[1]
- http://www.usnews.com/dbimages/master/29996/GR_120620_gdprec...
Which shows the impact of the ARRA. So it seems that between 2-3% reduction in peak unemployment with ~1T. So again, something like $2.5T would've been close.
The point all along is that too little stimulus is far more damaging than too much, and with unemployment still above 7.5% five years later, that point seems to have some evidence.
[1] http://www.cbo.gov/sites/default/files/cbofiles/attachments/...
You're missing the point. Yes, the math is obvious. The correct coefficients to use are not, and those are what make all the difference.
Actually he did - it was about 2 trillion, which does not include tax cuts.
http://www.nytimes.com/2009/01/09/opinion/09krugman.html
This was not a unique opinion at the time - the people who correctly diagnosed the crisis of 2008 prescribed more or less the same medicine.
http://www.nytimes.com/2009/01/09/opinion/09krugman.html
This was not a unique opinion at the time - the people who correctly diagnosed the crisis of 2008 prescribed more or less the same medicine.
Just curious... who do you include in that list of people who properly diagnosed the crisis? Personally, I would say Nouriel Roubini and Peter Schiff were spot-on with this since they started talking about it in 2003-2004.
Schiff's prediction was that there would be an economic crisis soon, driven by hyperinflation and a dollar collapse. That is... not exactly what happened.
Prediction is not the same as Diagnosis.
Peter Schiff did predict problems in the housing market. He thought there would be hyperinflation, whereas the opposite occurred. Not sure if that is a good record or not.
Peter Schiff did predict problems in the housing market. He thought there would be hyperinflation, whereas the opposite occurred. Not sure if that is a good record or not.
> whereas the opposite occurred
No opposite. There certainly is inflation. Just not hyperinflation. Some Austrian economists have also written on what exactly will bring about hyperinflation [1]. In short, it is when large amounts of money comes into circulation, i.e. when you and I can borrow that money to buy stuff.
Peter Schiff follows the Austrian school of economics, but he is not an economist himself. His highest degree is a bachelors in finance and accounting.
[1]: http://mises.org/daily/3390
No opposite. There certainly is inflation. Just not hyperinflation. Some Austrian economists have also written on what exactly will bring about hyperinflation [1]. In short, it is when large amounts of money comes into circulation, i.e. when you and I can borrow that money to buy stuff.
Peter Schiff follows the Austrian school of economics, but he is not an economist himself. His highest degree is a bachelors in finance and accounting.
[1]: http://mises.org/daily/3390
He's also been pretty open about the fact that he views himself as a voice of the left and he's gradually seen himself as more political and less of an academic economist. So he's usually not trying to make testable predictions. I recall this being because he feels he has greater political impact that he did as an academic economist. If you're interested, the New Yorker did a fantastic profile of Krugman a year or two ago that covers how he views his writing for the Times [1]. That said, as other posters have pointed out you're wrong about the specific instance of the stimulus.
1. http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_...
1. http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_...
He's gotten remarkably good at not making testable recommendations or predictions.
That's the problem with empirical economics with idealistic theories. You can't separate the variables, so there's always another excuse to weasel yourself out of having your hypothesis nullified.
That's the problem with empirical economics with idealistic theories. You can't separate the variables, so there's always another excuse to weasel yourself out of having your hypothesis nullified.
I can give him a break on predictions, as no one can be good at predictions on this sort of thing. Just lucky. What really bothers me is what he advocates...
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. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.
-Paul Krugman, 2002
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip...
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. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.
-Paul Krugman, 2002
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip...
>What really bothers me is what he advocates...
What exactly bothers you on this piece? On hindsight, it is extremely prescient. He got the recession AND the housing bubble right, 5 to 6 years before the fact.
(And in case you were confused: he doesn't advocate the creation of a housing bubble here. He predicts one -- and he believes that Greenspan thinks he needs one and will help in creating it, which both were proven true).
What exactly bothers you on this piece? On hindsight, it is extremely prescient. He got the recession AND the housing bubble right, 5 to 6 years before the fact.
(And in case you were confused: he doesn't advocate the creation of a housing bubble here. He predicts one -- and he believes that Greenspan thinks he needs one and will help in creating it, which both were proven true).
The problem I have is that he advocated the boom that nearly destroyed the #1 economy in the world in order to avoid a potential slump.
I read that as not so much advocating it, but rather a sarcastic way of saying "what Greenspan is doing will create a housing bubble."
Anyone of even modest reading comprehension would understand that Krugman is quoting Mr. McCulley, who talked about creating a housing bubble to replace the NASDAQ bubble. (By the way, McCulley wasn't advocating it either, just talking about Greenspan doing it.)
But Krugman-hate has strongly negative effects on reading comprehension.
But Krugman-hate has strongly negative effects on reading comprehension.
He didn't advocate any boom. He writes what Greenspan thinks is needed.
If anything, he is ANTI-bubble.
If anything, he is ANTI-bubble.
Sometime you get what you pray for :-/
Krugman wanted the housing bubble, he got it.
Please tell me, has he asked for any education bubble? I'm not really following what he says unless it's too wonky (like he last piece about Adam Smith hating bitcoin, because you know Adam Smith could have predicted bitcoin and peer to peer and computers http://krugman.blogs.nytimes.com/2013/04/12/adam-smith-hates...)
Krugman wanted the housing bubble, he got it.
Please tell me, has he asked for any education bubble? I'm not really following what he says unless it's too wonky (like he last piece about Adam Smith hating bitcoin, because you know Adam Smith could have predicted bitcoin and peer to peer and computers http://krugman.blogs.nytimes.com/2013/04/12/adam-smith-hates...)
>Krugman wanted the housing bubble, he got it.
No, he didn't WANT a housing bubble. He (correctly) WARNED off one that the Fed will bring on:
"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 doesn't describe what he thinks is right (himself). He describes what he thinks the Fed wants and will do.
No, he didn't WANT a housing bubble. He (correctly) WARNED off one that the Fed will bring on:
"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 doesn't describe what he thinks is right (himself). He describes what he thinks the Fed wants and will do.
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.
Here's the whole paragraph for context. I don't know how it could be read any differently than as advocating this proposed solution.
Here's the whole paragraph for context. I don't know how it could be read any differently than as advocating this proposed solution.
"Tom lost all his money gambling in the market and now his bills are due. To overcome this, he'll have to run a Ponzi scheme." Do you think this endorses running Ponzi schemes?
This old chestnut is continually dredged up by Krugman's detractors. Do you really think Krugman would publicly advocate for the creation of a bubble after just explaining the problems with the previous one? This is like believing Krugman advocates seriously for faking an alien invasion.
BTW, let me finish your quote for you, here it is in full:
"And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging."
This paragraph is clearly critical of Greenspan and speaks about his motives.
This old chestnut is continually dredged up by Krugman's detractors. Do you really think Krugman would publicly advocate for the creation of a bubble after just explaining the problems with the previous one? This is like believing Krugman advocates seriously for faking an alien invasion.
BTW, let me finish your quote for you, here it is in full:
"And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging."
This paragraph is clearly critical of Greenspan and speaks about his motives.
I don't think he advocated or clearly condemned the action in the article mentioned (and I haven't been reading Krugman long enough to recall any other posts on the issue). I think he's merely analyzing the actors involved, their motivations and their likely moves. I think this part of the article in question leads credence to that:
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.
So he's talking about what he thinks Greenspan and the administration will do and why. He doesn't appear to me to be offering any opinion on the wisdom of the course.
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.
So he's talking about what he thinks Greenspan and the administration will do and why. He doesn't appear to me to be offering any opinion on the wisdom of the course.
I'm hardly Krugman's biggest fan, but, really, he's saying "the economy is so boned that he's going to need a housing bubble to get out of it."
Like if I said "you have saved so poorly for retirement that your only hope is lottery tickets."
Like if I said "you have saved so poorly for retirement that your only hope is lottery tickets."
It does sound that way. Here's Krugman in 2005 reconsidering:
"Nobody thought the economy could rely forever on home buying and refinancing. But the hope was that by the time the housing boom petered out, it would no longer be needed."
He doesn't come off too well there either. Edit: read the whole article.
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
"Nobody thought the economy could rely forever on home buying and refinancing. But the hope was that by the time the housing boom petered out, it would no longer be needed."
He doesn't come off too well there either. Edit: read the whole article.
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
He is not reconsidering. Read the comment just above yours.
He merely describes what the prevalent sentiment (on Wall Street et al) was, not what HIS was.
Is reading comprehension a lost art? His writing is not even ironic (where one could be justifiably confused).
It's straight out classical journalistic description of other's opinions and motives.
He merely describes what the prevalent sentiment (on Wall Street et al) was, not what HIS was.
Is reading comprehension a lost art? His writing is not even ironic (where one could be justifiably confused).
It's straight out classical journalistic description of other's opinions and motives.
Until I read all of the context and the later article, I had the same interpretation as you, but it just doesn't hold up. From the article I quoted:
"But a few pessimists, notably Stephen Roach of Morgan Stanley, argue that we have not yet paid the price for our past excesses. I've never fully accepted that view. But looking at the housing market, I'm starting to reconsider."
That is him reconsidering; it says so right in the text. Did you read it?
A careful reading of the 2002 article reveals that his criticism of Greenspan and Co isn't that they want to create a housing bubble, it's actually that the bubble will fail in lifting the economy. In other words, both articles are pessimistic, but one is about a bubble isn't bubbly enough and the other is him realizing it will burst and that's bad. So he missed the first time in the wrong direction and had to do a complete 180. And in that context, it's hard not to read his 2005 article as seriously advocating yet another bubble.
I think you are vastly overestimating the negativity being attached to the word "bubble", and are thus simply reading Krugman as critical because he used a term you're putting in the "bad" bucket. But there simply isn't any support for that in the text.
> Is reading comprehension a lost art? His writing is not even ironic (where one could be justifiably confused).
Seriously?
"But a few pessimists, notably Stephen Roach of Morgan Stanley, argue that we have not yet paid the price for our past excesses. I've never fully accepted that view. But looking at the housing market, I'm starting to reconsider."
That is him reconsidering; it says so right in the text. Did you read it?
A careful reading of the 2002 article reveals that his criticism of Greenspan and Co isn't that they want to create a housing bubble, it's actually that the bubble will fail in lifting the economy. In other words, both articles are pessimistic, but one is about a bubble isn't bubbly enough and the other is him realizing it will burst and that's bad. So he missed the first time in the wrong direction and had to do a complete 180. And in that context, it's hard not to read his 2005 article as seriously advocating yet another bubble.
I think you are vastly overestimating the negativity being attached to the word "bubble", and are thus simply reading Krugman as critical because he used a term you're putting in the "bad" bucket. But there simply isn't any support for that in the text.
> Is reading comprehension a lost art? His writing is not even ironic (where one could be justifiably confused).
Seriously?
Haven't seen him say anything about helping fund the education bubble. But then again, he believes all sorts of silly things. Like if you print money and pay people to dig and bury holes over and over again, you can revive an economy.
Like if you print money and pay people to dig and bury holes over and over again, you can revive an economy.
It is pretty obvious that the economy can be in a state where doing this will revive the economy - because of the indirect positive effect on aggregate demand.
Is is also pretty obvious that there will always be better ways to revive an economy - such as by paying people to do something that is considered to be useful. Then you get both the indirect positive effect on aggregate demand and you're directly getting something useful done (whether it's fixing the infrastructure, cleaning up rivers, taking care of the elderly, or painting pretty pictures really doesn't matter that much).
Keynes actually implied all this in the often quote that Keynes-haters like to bring up again and again without properly understanding it.
It is pretty obvious that the economy can be in a state where doing this will revive the economy - because of the indirect positive effect on aggregate demand.
Is is also pretty obvious that there will always be better ways to revive an economy - such as by paying people to do something that is considered to be useful. Then you get both the indirect positive effect on aggregate demand and you're directly getting something useful done (whether it's fixing the infrastructure, cleaning up rivers, taking care of the elderly, or painting pretty pictures really doesn't matter that much).
Keynes actually implied all this in the often quote that Keynes-haters like to bring up again and again without properly understanding it.
A Cato contributor describes Krugman's alleged advocacy:
http://econlog.econlib.org/archives/2009/06/defending_what.h...
http://econlog.econlib.org/archives/2009/06/defending_what.h...
> Krugman is often wrong. He got a nobel price,
Being wrong now and then is excusable, clearly.
Being wrong now and then is excusable, clearly.
As someone else said, "He's gotten remarkably good at not making testable recommendations or predictions."
With a bad spirit, one could say he got medal for that.
Yet his work on new trade theory in international commerce, and how the european union data contradicted standard HOS theory is quite interesting. He should have kept to that.
But when your self proclaimed intention is to be a voice from the left (or the right, or anything) and have political impact instead of academic impact, you may have to take distance from reality :-/
With a bad spirit, one could say he got medal for that.
Yet his work on new trade theory in international commerce, and how the european union data contradicted standard HOS theory is quite interesting. He should have kept to that.
But when your self proclaimed intention is to be a voice from the left (or the right, or anything) and have political impact instead of academic impact, you may have to take distance from reality :-/
My main point was the spelling error.
Oops. I stand corrected!
11pm and going to bed here, but I fill fix the typo first. It could make a bad taste joke, since it's obviously not for sale ;-)
11pm and going to bed here, but I fill fix the typo first. It could make a bad taste joke, since it's obviously not for sale ;-)
You can swap "often wrong" for "economist".
As much as I'd like to Krugman-bash, with respect to the implied context of his prediction -- the Internet's effect on the macroeconomy, overall income growth, and standard-of-living -- it wasn't that bad of a prediction.
The Internet has massively changed many industries and our ways of living and communicating, especially those of us active on HN. But, the impact in the macro statistics is still.. meh. See also Peter Thiel's laments and Tyler Cowen on 'the great stagnation'.
Personally, I suspect there's been a lot of qualitative improvement that doesn't show up in the time-series statistics. (For example, we're taking a lot of the benefit of the Internet in economically-unmetered leisure/shirking.) Also, I'd guess much of the benefit of new computer/telecom efficiencies has just helped offset continuing losses to outdated and parasitic arrangements by entrenched incumbents. (That is: the Internet's boosts-to-growth have somewhat hidden the continuing losses-to-growth from festering things like anti-competitive regulations, socially-broken education and medical incentives, and income-sapping entitlement program financing/payments.) Net-net, we're still on the same (or even a slowed) long-term income trend, whereas if we fully addressed these older things, we'd be seeing the full bonanza of Internet technology.
The Internet has massively changed many industries and our ways of living and communicating, especially those of us active on HN. But, the impact in the macro statistics is still.. meh. See also Peter Thiel's laments and Tyler Cowen on 'the great stagnation'.
Personally, I suspect there's been a lot of qualitative improvement that doesn't show up in the time-series statistics. (For example, we're taking a lot of the benefit of the Internet in economically-unmetered leisure/shirking.) Also, I'd guess much of the benefit of new computer/telecom efficiencies has just helped offset continuing losses to outdated and parasitic arrangements by entrenched incumbents. (That is: the Internet's boosts-to-growth have somewhat hidden the continuing losses-to-growth from festering things like anti-competitive regulations, socially-broken education and medical incentives, and income-sapping entitlement program financing/payments.) Net-net, we're still on the same (or even a slowed) long-term income trend, whereas if we fully addressed these older things, we'd be seeing the full bonanza of Internet technology.
I strongly disagree about a "qualitative improvement". facebook may be fun, but not that fun if you can't put a dollar value on it or the surrounding ecosystem.
The great stagnation is a real issue.
There is a visible disconnect in the growth rate of OECD countries. It's not just reaching Solow long term equilibrium - it happened too fast. It's just weird and troubling.
Hopefully the "rest of the world" will keep growing and improving the human lot. Too bad for OECD countries.
The great stagnation is a real issue.
There is a visible disconnect in the growth rate of OECD countries. It's not just reaching Solow long term equilibrium - it happened too fast. It's just weird and troubling.
Hopefully the "rest of the world" will keep growing and improving the human lot. Too bad for OECD countries.
I pointed this out on Reddit http://www.reddit.com/r/Bitcoin/comments/1bl0jd/in_2011_paul... (that Krugman was merely making a well-known point in the academic literature that 'you can see the computer age everywhere but the statistics'). Didn't get much of a reception.
All this talk of Krugman reminds me that there's an awful lot of scientism out there today -- beliefs masquerading as science. The scientific method has been thrown out the window in this regard. If someone is going to propose a theory they claim is proven in someway, I want them to also identify the specific event that if it occurs will disprove their theory.
The whole economics profession is filled with scientism, but my two pet peeve issues on this are stimulus spending to fix the economy and man made global warming. For them to be viable scientific theories, there must be an observable event that if actually observed would disprove the theories. Without that, they are just beliefs. Nothing against beliefs, but let's not call them scientific theories.
The whole economics profession is filled with scientism, but my two pet peeve issues on this are stimulus spending to fix the economy and man made global warming. For them to be viable scientific theories, there must be an observable event that if actually observed would disprove the theories. Without that, they are just beliefs. Nothing against beliefs, but let's not call them scientific theories.
Global warming is disprovable at numerous points of evidence.
- Disprove the absorbtion and emission spectra of greenhouse gases like CO2, methane, and water vapor.
- Disprove correlations between measurements of fossil fuel usage and measurements of rising CO2 atmospheric concentrations.
- Disprove measurements of changing carbon isotope ratios in the atmosphere.
- Show that the oceans absorb CO2 more quickly that currently estimated.
- Show that insolation has recently increased more than previously thought.
- Show that measurements of recent global temperature rise are wrong.
etc.
- Disprove the absorbtion and emission spectra of greenhouse gases like CO2, methane, and water vapor.
- Disprove correlations between measurements of fossil fuel usage and measurements of rising CO2 atmospheric concentrations.
- Disprove measurements of changing carbon isotope ratios in the atmosphere.
- Show that the oceans absorb CO2 more quickly that currently estimated.
- Show that insolation has recently increased more than previously thought.
- Show that measurements of recent global temperature rise are wrong.
etc.
This is wrong, though I empathize.
Social scientists come up with useful models that help explain events and behaviours, that aren't disproven by empirical evidence. There are plenty of ways to falsify a social science theory: wait long enough, or study enough data, and you'll amass enough empirical evidence to determine whether your theory holds up or not.
Of course, this does not mean it is proven - there may be a falsifiable data point some day. But that's why we call it a theory.
Environmental science is somewhat harder because the timescales are much longer than we have existed. But we also have well established ways of estimating the climate of ancient eras. This is why global warming is considered a scientific theory.
In economics, there is, for example, a lot of evidence these days in favor of the standard Keynesian IS-LM model for a macroeconomy in liquidity trap conditions, and a dearth of evidence supporting neoclassical models and Real Business Cycle theory. This is almost a paradigm re-shift, in that a previously abandoned paradigm (by many), thought by some to have been falsified, is actually proving more predictive with respect to actual events than previously recognized. Unfortunately economics is closely intertwined with politics and ideology which doesn't mix well with science -- thus the profession is in crisis.
An alternative, I suppose, is to go "full Austrian" and presume economics is an inherently unfalsifiable subject, based on fundamental logical truths. Thus it is justified to ignore all empirical evidence and mathematical analysis in favor of deductive praxeology. This is what Von Mises and Rothbard (founder of the US Libertarian party) believed, and they've been a common source of contra-Krugman arguments.
Social scientists come up with useful models that help explain events and behaviours, that aren't disproven by empirical evidence. There are plenty of ways to falsify a social science theory: wait long enough, or study enough data, and you'll amass enough empirical evidence to determine whether your theory holds up or not.
Of course, this does not mean it is proven - there may be a falsifiable data point some day. But that's why we call it a theory.
Environmental science is somewhat harder because the timescales are much longer than we have existed. But we also have well established ways of estimating the climate of ancient eras. This is why global warming is considered a scientific theory.
In economics, there is, for example, a lot of evidence these days in favor of the standard Keynesian IS-LM model for a macroeconomy in liquidity trap conditions, and a dearth of evidence supporting neoclassical models and Real Business Cycle theory. This is almost a paradigm re-shift, in that a previously abandoned paradigm (by many), thought by some to have been falsified, is actually proving more predictive with respect to actual events than previously recognized. Unfortunately economics is closely intertwined with politics and ideology which doesn't mix well with science -- thus the profession is in crisis.
An alternative, I suppose, is to go "full Austrian" and presume economics is an inherently unfalsifiable subject, based on fundamental logical truths. Thus it is justified to ignore all empirical evidence and mathematical analysis in favor of deductive praxeology. This is what Von Mises and Rothbard (founder of the US Libertarian party) believed, and they've been a common source of contra-Krugman arguments.
I'm with you on global warming.
> An alternative, I suppose, is to go "full Austrian" and presume economics is an inherently unfalsifiable subject, based on fundamental logical truths.
This explains in what way: http://mises.org/daily/2025
> Thus it is justified to ignore all empirical evidence and mathematical analysis in favor of deductive praxeology.
Austrian economists don't ignore evidence. The evidence is interpreted according to their ideological framework, just as any other kind of economist does. It's 2002, house prices are rising rapidly. I have money to spare. What do I do? None of the Austrian economists said "ignore the prices". Instead, they used that data and said "bubble coming up".
> An alternative, I suppose, is to go "full Austrian" and presume economics is an inherently unfalsifiable subject, based on fundamental logical truths.
This explains in what way: http://mises.org/daily/2025
> Thus it is justified to ignore all empirical evidence and mathematical analysis in favor of deductive praxeology.
Austrian economists don't ignore evidence. The evidence is interpreted according to their ideological framework, just as any other kind of economist does. It's 2002, house prices are rising rapidly. I have money to spare. What do I do? None of the Austrian economists said "ignore the prices". Instead, they used that data and said "bubble coming up".
> Austrian economists don't ignore evidence.
I meant in terms of revising their theory to improve its usefulness in the face of new evidence.
I meant in terms of revising their theory to improve its usefulness in the face of new evidence.
Economics is a long way from, say, climate science in terms of its demonstrated ability to make useful predictions. We routinely get advance warning of both short term weather effects (such as storms) and long term climate effects (such as unusually dry seasons). The effects of these predictions have been measurable and palpable.
Economists tend to struggle even to agree on post-hoc explanations of well-documented past events. E.g. serious economists still argue over the root causes of the Great Depression.
Tarring Economic theory and climate science with the same "Scientism" brush is unfair if not downright dishonest.
And even Krugman's economic predictions are testable. The linked article was an example of him opining outside his area of expertise.
Economists tend to struggle even to agree on post-hoc explanations of well-documented past events. E.g. serious economists still argue over the root causes of the Great Depression.
Tarring Economic theory and climate science with the same "Scientism" brush is unfair if not downright dishonest.
And even Krugman's economic predictions are testable. The linked article was an example of him opining outside his area of expertise.
I tend give more weight to what people say when they are in their area of personal expertise. Krugman on economics, I give a lot of credit. He's demonstrably an expert on that topic. Krugman on the Internet or politics, less so.
What happens when the topic of discussion is the intersection between the Internet and economics?
For those of you confused why this is a top item, Krugman wrote a bitcoin piece today: http://www.nytimes.com/2013/04/15/opinion/krugman-the-antiso...