02 Mar 2013

One More On Krugman and Predictions

Krugman 14 Comments

I am not sure everyone fully got my point about Krugman in this last post.

Look, Krugman has been absolutely apoplectic the last 3 years, jumping up and down on his blog, complaining that the press and public keep taking seriously the people who have “gotten everything totally wrong” in the crisis. He keeps lamenting that he used to think economic science was objective, and that someone’s credibility would be based on the predictions of his models. In the post I linked above, I quoted him as complaining that the people in charge in Europe, were the ones who had proved so incompetent in predicting the results of so-called austerity.

Now then, Ben Bernanke was hilariously wrong, at every step along the way, from 2005 through 2008 in the latter stages of the housing bubble.

Yet this is what Krugman said in August 2009 when Ben Bernanke was reappointed. Remember, this occurred after 4 straight years of non-stop error and failed predictions from Bernanke’s economic model:

Generally, I’m pleased. Bernanke has done a good job in the crisis — he’s been far more aggressive and creative than almost anyone else would have been in his place, partly because he’s a scholar of the Great Depression, partly because he took Japan’s lost decade seriously and was therefore intellectually prepared for a liquidity-trap world.

I do have one qualm, though, which isn’t really about Bernanke, but rather about the broader symbolism of the reappointment — namely, it unfortunately seems to be a reaffirmation of Serious Person Syndrome, aka it’s better to have been conventionally wrong than unconventionally right.

Thus, you’re not considered serious on national security unless you bought the case for invading Iraq, even though the skeptics were completely right; you’re not considered a serious political commentator unless you dismissed all the things those reflexive anti-Bushists were saying, even though they all turn out to have been true; and you’re not considered serious about economic policy unless you dismissed warnings about a housing bubble and waved off worries about future crises.

That said, Ben Bernanke’s performance over the past year deserves praise, and there’s nobody I’d rather have in his position. Congratulations, Ben.

I mean, you almost get the sense that Krugman doesn’t care about predictive track records, and merely has an affinity for people who share his worldview and policy prescriptions. Is there a term for this malady?

P.S. I’m going on a 9-day cruise with Peter Schiff and Mark Skousen. (There will be others; it’s not like the 3 of us just take a break to plot strategy.) Not sure what the Internet connection will be like on the Love Boat, so you may have to go cold turkey with Free Advice.

14 Responses to “One More On Krugman and Predictions”

  1. The Existential Christian says:

    No Free Advice? I’m already going through withdrawal.

    • Bob Murphy says:

      Talk to someone who’s been through it already. You don’t need to face this alone.

    • Yancey Ward says:

      There is no such thing as free advice.

  2. Rohit says:

    Peter Schiff go 9 days without warning the outside world of a bond bubble? We’d sooner see Obama embrace austerity. I expect you will have internet.

  3. Keshav Srinivasan says:

    Bob, I think Krugman considers affinity fraud to be believing someone’s predictions despite their bad predictive track records, because you have an affinity for them ideologically. But here Krugman is just supporting Bernanke, not accepting his predictions as gospel.

    And as far as your previous post goes, Krugman wasn’t citing Bernanke to show that he’s right; he specifically says “credentials aren’t dispositive here”. He was citing him in order to refute people saying “no one agrees with Krugman”.

    • Major_Freedom says:

      Speaking of affinity fraud…

  4. William Anderson says:

    Amazing. Krugman has been presenting himself as a modern-day Elijah, a voice in the wilderness preaching the economic doctrines of printing money, borrowing, and spending. But no one listens. No one.

    I guess that is why Krugman makes millions of dollar with his speeches, books, appearances, and Princeton salary. I guess that is why Krugman is always on the Sunday talk shows, since no one ever pays attention to him.

    That he cannot even present himself honestly is yet another mark on his character. I guess because the U.S. Government has not doubled its spending in the past four years, the entire country is undergoing “austerity.” Or, he claims that the cause of an economic recovery is spending by all levels of government, and since state governments have not had the tax revenues to spend as much as Krugman wants them to do, somehow those governments are following deliberate schemes of austerity.

    It is amazing people take this guy seriously at all. The man is a crank, an inflationist on the order of Silvio Gesell.

    By the way, Argentina and Venezuela pretty much are doing what Krugman recommends, and we see how well things are going in that country. If they get worse here, look for Krugman to call for our own capital controls and mass nationalization of who industries. Oh, he already has done that.

  5. William Anderson says:

    Bob, I only hope your cruise is not a repeat of the Carnival Cruise disaster of a few weeks ago!

    • Major_Freedom says:

      I don’t understand why they didn’t just let people swim in the water to take a dump.

      • Yancey Ward says:

        Sharks were holding their Spring Break around the ship.

      • Cody S says:

        If the ship was stationary, the waste would pool around it. No one would possibly want to swim near the liner. British sailors used to call it “Admiral Brown”.

        Not a great situation.

      • Matt Tanous says:

        I don’t understand why they couldn’t jerry-rig a system to use the sea water to flush the toilet into the sea. The passengers could have exercised by manning the pumps for it, too! What kind of mincy losers are these “sailors” running these cruise ships?

  6. John S says:

    Here’s another gem from the past: Krugman would have lost this bet (offered by Greg Mankiw) on the extent of the recovery from 2008 to 2013.


    That is, if Krugman had the guts to accept the bet.

  7. Tel says:

    Hey this is a bit off topic, but I think it reflects something about the public, and where we are going with Austrian economics, and also why Krugman is so popular, but Bob isn’t.


    So just to fill you in on background, the basic infrastructure cost of a national FTTP rollout in Australia has been estimated at $40 billion (but entirely possible it will go over budget, just a question of how much). In addition, the largest private carrier (Telstra) once used to be government (Telecom Australia) and has inherited a virtual monopoly on copper cables, but now they are private and they want to hang onto their monopoly position, as a consequence there is estimated to be another $11 billion paid to Telstra in order to pay them not to compete with the new FTTP rollout and to give full access to the new fiber. Yes, that’s right, they are being paid to shut down existing infrastructure.

    OK, so from the article above, they are arguing that the price to the end-user will be reduced by 40% thus, the revenue goes down as investment costs go up.

    Neither the author, nor any of the commentators seem in the least bit concerned that you can’t actually run a business where revenues are falling and costs are going up. It just runs on magic.

    None of them are in the least bit concerned that the new NBN business will be a government owned monopoly, and thus in a position to raise prices without losing customers. Yes there will be competition at the retail level so you can choose who puts their name on your bill, but no competition at the wholesale level. This exact situation has already been implemented with electricity in New South Wales (and other places) with government-owned electricity distribution companies raking in approx 50% of the revenue and the other 50% being split amongst the generators and the retailers and various taxes. The result for the electricity consumer has been consistently higher prices across the board.

    So basic economics tells you that the NBN must cause retail prices to rise, and the experiment has already been done with electricity and retail prices did rise, but yet the unicorn farmers are still out there in force. These are not entirely stupid people either, most of them are tech-savvy and quick learners, they just really really want to believe in magic.

    This is the real battle that Austrian economics is up against. People like Krugman just have a message that the crowd wants to hear — easy answers. Austrian economics says, “No, stop and figure it out,” but people don’t want to do that.

Leave a Reply