It is safe to say that Paul Krugman is much smarter than I am, and that he understands more economics than I do. He generates a great deal of incisive analysis about the economy, and has often had a gift for stabbing straight through to the one underlying piece of data that gives lie to an otherwise plausible economic theory.
I want to get that out of the way, because otherwise my readers (left and right) might assume that this post is a "libertarian economics blogger makes fun of liberal economist's poor reasoning skills" special, and that's not at all why I'm writing it. Paul Krugman is a brilliant and interesting analyst. He also, like everyone else, can be wrong.
There's an interesting phenomenon that often happens when I blog something critical of Paul Krugman: some of his bigger fans turn up in my comments to argue that I am not worthy to talk, because Paul Krugman is a brilliant insightful analyst who has forgotten more economics than I will ever learn--all undoubtedly true. Over and over, they say, Paul Krugman gets it right when other commentators get it wrong. And as proof of this rare perpicacity, they offer the fact that . . . Paul Krugman called the housing bubble in May 2005.
There is rich irony in the belief that Paul Krugman must be right, and I must be wrong, because he had the foresight to call the housing bubble. That's because I saw it in 2002. As you can see, I blogged quite a bit about it before Paul Krugman wrote his first column on the topic. Neither of us, as far as I can tell, understood what that meant for the financial system. But both of us saw it coming, me a little sooner.
This is not that surprising, actually. Lots of people saw it coming. You hear people asking a lot where the financial journalists were--how they could have missed the housing bubble--and the answer is that they didn't! The Economist was writing about it even before I did, thanks to Pam Woodall, the brilliant economics editor who really may have been the first commentator to identify the global phenomenon. Housing bubble stories and op-eds regularly appeared in newspapers like, well, The New York Times. But most people weren't reading the financial press (or this blog) in 2005, and so when they discover that Paul Krugman was writing about the housing bubble way back then, it seems like amazing foresight.
Meanwhile, today I stumbled across another example of Paul Krugman's "foresight", via David Henderson. Chris Alden, a co-founder of Red Herring, blogs about an article Krugman wrote for them back in the 1990s:
He went on to make some specific predictions, all of which were either mostly or completely wrong:
"Productivity will drop sharply this year."
Nope - didn't happen. In fact productivity continued to improve, as this chart shows:
"Inflation will be back. ...In 1999 inflation will probably be more than 3 percent; with only moderate bad luck--say, a drop in the dollar--it could easily top 4 percent."
"Within two or three years, the current mood of American triumphalism--our belief that we have pulled economically and technologically ahead of the rest of the world--will evaporate."
Nope -- that didn't happen, either. Though September 11th, which happened more than three years after this article, and the Lehman Brother's collapse, which happened more than 10 years after this article was written, have certainly reduced American triumphalism. Here is where I think Krugman may have been the most right, albeit it way too early.
"The growth of the Internet will slow drastically, as the flaw in 'Metcalfe's law'--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other!
By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's."
"As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly."
"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."
Meh. While have seen oil prices spike (although they have yet to reach the annual peak we saw in 1980), this was not due to a crunch or disruption or running out of oil) but rather growth in demand.
I'm inclined to be more charitable than Alden on a couple of these, but there's no question that Krugman got some things really, really wrong.
But it doesn't follow that Krugman is an idiot who should get no respect--any more than calling the housing bubble made him an infallible genius. Krugman remains a giant intellect who is well worth reading on virtually any economic topic. He is also capable of being badly wrong about things.
You often hear people complain that pundits or analysts aren't punished for getting things wrong. But this is why they aren't: everyone gets things wrong. The question "How can you expect us to listen to Pundit Y when he got everything wrong, and our guy called things correctly" only reveals that the person asking it has managed to forget all the blunders "our guy" made.
What pundits give you is not a perfect map of the future--the only people who succeed in that are characters in historical novels written by an author who already knows what happened. What's important is their thought process--do they point you to arguments you hadn't considered? Do they find data you ought to know about? Do they force you to challenge your own decisions?
Paul Krugman succeeds on that score, even if his crystal ball is a little cloudy.
Infomercials are fond of marketing strategies that rely on a theory of psychological pricing. You don't pay a flat fee for your Shake Weight or Magic Bullet or Ginsu Knife; you dish out three easy payments. And your payments aren't $40, of course; they're $39.99.
Most of us, for better but probably for worse, are familiar with the sneaky logic of infomercials. That doesn't mean, however, that we are immune to their charms. Nor are we immune to the pull—ironic, and also very much not—of the products that are sold to us in the late night and early morning, our most vulnerable hours, via charismatic pitchmen and sad-sack stand-ins for human frailty. Oxyclean. The PedEgg. The Pocket Hose. The Clapper. The Socket Dock. The food dehydrator. GLH. Which is, I mean, hair that you spray onto your scalp! Even the most savvy consumers among us can find ourselves ensnared by the bleary promise of life-improvement that can be ours, we are told, for only two easy payments of $19.95 (plus shipping and handling).
The Onion had a problem: It fell behind the times. The mock newspaper hadn’t printed an issue on actual paper since 2013, and in the period since, it never redesigned its website. As the media world changed—as the New York Times and the Washington Post adapted the ways they published stories online—The Onion lost a key satirical weapon. Visually, it no longer looked like many of the publications it parodied. And so, like it had done many times before, The Onion tagged along.
In 2004, two women who were long past college age settled into a dorm room at a large public university in the Midwest. Elizabeth Armstrong, a sociology professor at the University of Michigan, and Laura Hamilton, then a graduate assistant and now a sociology professor at the University of California at Merced, were there to examine the daily lives and attitudes of college students. Like two Jane Goodalls in the jungle of American young adulthood, they did their observing in the students’ natural habitat.
The researchers interviewed the 53 women on their floor every year for five years—from the time they were freshmen through their first year out of college.
Their findings about the students’ academic success later formed the basis for Paying for the Party, their recent book about how the college experience bolsters inequality. They found that the women’s “trajectories were shaped not only by income ... but also by how much debt they carried, how much financial assistance they could expect from their parents, their social networks, and their financial prospects.”
Facebook, it seems, is unstoppable. The social publishing site, just 11 years old, is now the dominant force in American media. It drives a quarter of all web traffic. In turn, Facebook sucks up a huge portion of ad revenue—the money that keeps news organizations running—and holds an enormous captive audience.
We already know, from a Pew poll last year, that nearly half of the adults who use the Internet report getting their news from Facebook alone. Now consider some of the latest numbers from Pew, in its annual State of the Media report, which came out on Wednesday:
• As in previous years, just five companies generate the majority (61 percent) of digital ad revenue: Facebook, Google, Microsoft, Yahoo, and AOL.
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
Before Napoleon Bonaparte uttered his last words ("France, l'armée, tête d'armée, Joséphine") and perished on the windswept island of Saint Helena at the age of 51, he reportedly treated himself to a feast. The exiled French leader scarfed down liver and bacon chops, sauteed kidneys in sherry, shirred eggs with cream, and garlic toast with roast tomatoes.
Those wishing to revisit his last meal might have a hard time recreating it—Trader Joe's doesn't stock kidneys, last I checked—but they can enjoy the next best thing. The food-advertising director Gus Filgate is creating a series of short films that reproduce the last meals of noteworthy individuals.
The one for Napoleon seems to hint at the visceral, brutal nature of 19th-century French rule: Lard snaps in an iron skillet; kidneys drip with milk; a tomato's head is severed and its guts spew out.
BEIT HANOUN, Gaza Strip—Eight months after last summer’s war between Israel and Palestinian militant groups, Gaza remains in ruins. Drive five minutes into the territory from the crossing point in southwestern Israel and you reach Beit Hanoun, one of the areas hit most severely by land and air during the conflict. Bright blue sky spreads over buildings with big bites taken out of them. Half-eaten bedrooms and kitchens yawn open to reveal tangled wires, broken rock, and household goods: a slipper, a pack of sanitary pads, a ripped-up schoolbook. People peek over mounds of rubble from tents behind their former homes, like aliens come to settle an abandoned planet.
In Gaza City, the flags and slogans of Hamas, the Islamic militant group that governs Gaza, cover the street corners: “Resist, O Palestinian people, your perseverance is our only hope for freedom.” Driving through the city, you see murals of doves and children holding hands, UNRWA cartoons about saving water and picking up trash, and then a stick figure blowing up an Israeli tank. Across the street, someone has scrawled a Star of David on a garbage bin.
Do you understand money? Let’s see how well you do with the following questions.
1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? A) more than $102; B) exactly $102; C) less than $102; D) do not know; refuse to answer.
2. Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy A) more than, B) exactly the same as, or C) less than today with the money in this account?; D) do not know; refuse to answer.
3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.” A) true; B) false; C) do not know; refuse to answer.