16 Jun 2009

Krugman’s Record on Inflation Forecasts

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Bob Roddis sent me this 2004 National Review piece in which Donald Luskin tears Krugman a new one, assuming the items are authentic. I don’t have the time right now, but at some point I may discuss the differing inflation forecasts of monetarists and supply-siders in the 1980s. Specifically, the ratio of M1/real GDP rose after the Reagan tax cuts, leading people like Milton Friedman to warn of impending price inflation. That didn’t happen, though, because (in the explanation of Arthur Laffer) the Reagan tax cuts and deregulations increased the demand for dollar-denominated assets.

Anyway, it’s not such a big deal if Krugman put his name on a document that misfired in predicting big inflation. (I better not be too harsh, since I could very well be in the same boat three years from now!) After all, I think Summers was his superior, and maybe Krugman just went along with it.

But then he certainly had no business later on, patting himself on the back:

These days [in 2004], however, Krugman flat out lies about his inflation-forecasting record. Instead of admitting he got it wrong, in his New York Times column last Friday, he bragged that the collapse of inflation in the 1980s “played out just as ‘left-wing Keynesian economics’ predicted.”

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