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Megan McArdle on Paul Krugman
Posted by: Jon Henke on Friday, January 11, 2008

Megan McArdle:
Paul Krugman is voting for doom. It's worth keeping in mind, however, that Paul Krugman has predicted eight of the last none recessions under the Bush administration.
Like Megan, I think "a recession seems likely-ish", but "Krugman predicts" is generally a good sign to bet the other way.

  • "[R]ight now it looks as if the economy is stalling..." — Paul Krugman, September 2002

  • "We have a sluggish economy, which is, for all practical purposes, in recession..." — Paul Krugman, May 2003

  • "An oil-driven recession does not look at all far-fetched." — Paul Krugman, May 2004

  • "[A] mild form of stagflation - rising inflation in an economy still well short of full employment - has already arrived." — Paul Krugman, April 2005

  • "If housing prices actually started falling, we'd be looking at [an economy pushed] right back into recession. That's why it's so ominous to see signs that America's housing market ... is approaching the final, feverish stages of a speculative bubble." — Paul Krugman, May 2005

  • "In fact, a growing number of economists are using the "R" word [i.e., "recession"] for 2006." - Paul Krugman, August 2005

  • "But based on what we know now, there’s an economic slowdown coming." - Paul Krugman, August 2006

  • "this kind of confusion about what’s going on is what typically happens when the economy is at a turning point, when an economic expansion is about to turn into a recession" - Paul Krugman, December 2006

  • "Right now, statistical models ... give roughly even odds that we’re about to experience a formal recession. ... [T]he odds are very good — maybe 2 to 1 — that 2007 will be a very tough year." - Paul Krugman, December 2006

Atrios, Huffington Post, Media Matters/Eric Boehlert, The Daily Show's Jon Stewart and Glenn Greenwald are constantly telling me things like how "it's worth taking note of just how constantly wrong all of our Most Serious Political Analysts are" (Glenn Greenwald, again) and how there should be some sort of consequence for that sort of relentless wrongness. Doesn't seem to apply to their own, though.
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Previous Comments to this Post 

Wait until a recession eventually comes, whether it be next year, 2010, or 2015. Paul Krugman will say, "See, I told you so!... I told you back in 2002, 2003, 2004, 2005, 2006, 2007...ect"
Written By: Jimmy the Dhimmi
Predictions on the economy are not likely to be realized in one or two years. If we go into recession in the next year or two, Krugman will be seen to have been right. Wait and see.
Written By: Scott Erb
How do you falsify an open-ended prediction? How do you judge the merits of his claims if we’re always "turning the corner" toward recession, but never actually arriving?

Of course there will be a recession eventually. But that’s the equivalent of a weatherman saying "it will rain" and claiming expertise because, hey, he’s bound to be right....eventually.
Written By: Jon Henke
"How do you falsify an open-ended prediction?"

You can’t, of course. That is why they make it vague and without details. That scam has been around since at least the Delphic Oracle. We now have priests of academe instead of priests of Apollo, but it is still the same old con; pay me and I will tell you the future, but if you are too dumb to understand it ain’t my fault.
Written By: timactual
URL: http://
Wait and see

Perhaps I do not have the magical powers that a PhD. automatically grant, but that seems a touch weak on the prognostication front.

Predictions on the economy are not likely to be realized in one or two years.

So the sainted Clinton did not, in fact, usher in the foretold age of milk and honey? Economic cycles acted like, dunno, cycles? Media and academic advocates were just as wrong as the evil capitalist stockbrokers?

Haruspication and augury. I’ll go on the record with this: if Krugman says it, it will be erroneous. Not in some namby-pamby "in the next year or two", something with definite limits and rules.

Guess I’m just tired of a bunch of J-school and liberal arts majors posing as economic sages. Apparently reading about something makes you more of an expert than folks with a proven track record (of success, Krugman) or real world experience (Erb).
Written By: Uncle Pinky
URL: http://
Guess I’m just tired of a bunch of J-school and liberal arts majors posing as economic sages.
You realize, don’t you, that Paul Krugman is not a J-school or liberal arts major? He is, in fact, a world-renowned expert in economics, who has contributed some of the most important developments to economics in the past few decades. He is a legitimate economic genius. He just sucks at predictions, especially since he tends to substitute partisanship for objectivity in his punditry.
Written By: Jon Henke
It’s worth keeping in mind, however, that Paul Krugman has predicted eight of the last none recessions under the Bush administration.
Even a broken clock is right twice a day. Economies run in cycles. Which means that at some time now or later, as he continues to predict economic gloom every year (only under Republican administrations?), at some point Krugman is bound to be right.. statistically. Unfortunately, when one of his predictions does finally come true, his long and well documented track record of being dead-wrong so many times before will be ignored by the media as he wags his finger in unison with other leftists screaming "I told you so, but Republicans wouldn’t listen! George Bush, Halliburton, blah, blah"
and how there should be some sort of consequence for that sort of relentless wrongness. Doesn’t seem to apply to their own, though.
Exactly right. Most on the left are dishonest to the core, and their double standards with Krugman’s "relentless wrongness" is just example #11,355.
Written By: Darrell
URL: http://
Jon is right, Krugman’s predictions are worthless because there are always signs which can point to recession (or expansion) and his partisanship means he will see what he wants to be most important as the key factor.

That being said, in all likelihood we are already in a recession. It probably will not be declared officially until after it is over, or almost over. Despite the headlines we probably had employment decline by almost half a million jobs last month, which is needless to say, huge.

I’ll address that topic on Monday at my place(s) but Krugman’s point about the lack of power of interest rate relief is spot on. Here he sounds more like an economist, and less like someone suffering from BDS.

Furthermore, fiscal policy is problematic as well, so we really do not have many options but to let the capitalist system work out its issues.
Written By: Lance
Where the jobs went: Dec 2007 snapshot
The private sector’s job-creation rate is trending downward, and the unemployment rate ticked upward. That’s the "bad" news. The good news: the private sector nonetheless created 1.5 million new jobs in the last 12 months, which more than offset the half million jobs that went away, for a net increase of one million new jobs. More good news: one million (of the 1.5 million) new jobs pay more than the half million jobs that went away.
Written By: ABC
URL: http://
Boris Erb astonishes:
Predictions on the economy are not likely to be realized in one or two years. If we go into recession in the next year or two, Krugman will be seen to have been right. Wait and see.
1. Krugman wasn’t predicting recession two years out, or even one year out. He was predicting imminent recession.

2. Even alert high school kids who follow economic news would learn that economic predictions about what will happen in six months, let alone two years, are nothing more than guesswork because there are just too many variables at play.

But, Boris, if the next recession doesn’t happen for another two years, you can still claim that Krugman was right, this time, right?
Written By: Martin McPhillips

He is right, but that is the past 12 months. Last month however is the point, not the year as a whole. Also, the numbers he is using are not delineated. Is that from the establishment survey or the household survey? There is a huge difference. As I said, I’ll be breaking that down on Monday.
Written By: Lance
Remember, the primary difference between economists and meteorologists is that the meteorologists can agree what the weather was like yesterday.
Written By: Phil Smith
URL: http://
I like that you threw in the stagflation quote. Let’s also remember that a few years back, Krugman said we were threatened by deflation (" And so the threat of deflation is worse now than it was a year ago. In fact, by some measures deflation is already here.").

So, over the past few years of the Bush Administration (since 2002), Krugman was prediciting stagflation, deflation, and recession (repeatedly). None of which occurred.

Is there an economist out there with a worse track record? I can’t see how.
Written By: A.S.
URL: http://
Predictions on the economy are not likely to be realized in one or two years. If we go into recession in the next year or two, Krugman will be seen to have been right. Wait and see.
And, see, years ago Bush was saying "we are winning" in Iraq. If years from now (even decades from now), Iraq does become a stable country, Bush will have been right!
Written By: A.S.
URL: http://
OK Lance I’ll take that bet, so it your contention that economic activity in Q4 07 and Q1 08 will be NEGATIVE, the definition of Recession, even though the economy grew at an annualized rate of 4.9% in Q3 07? I’m not an economist but that’s gonna take a whole lot of economic braking to come about, doancha think?

Krugman WAS a world class economist...Choamsky WAS a world class language guru as well, though to be truthful the idea of "deep structures" as a basis for language really ought to have set off alarm bells, as the "Deep Structures" he talked about-IIRC- were not subject to obseration, i.e. an non-falsifiable hypothesis. Now both of them have become bitter partisan hacks. Sure Dr.’s Krugman and Chomsky MIGHT be right and might be capable of disinterested scholarship, but after there recent performances how could you ever know?
Written By: Joe
URL: http://

Actually my guess, and it is only an educated guess, is 4th quarter will be positive, 1st quarter negative. Also, we won’t know it if it is true until possibly a year from now. Revisions, revisions.

Take the recent employment numbers, which are going to be revised way down if history is any guide, just like the "jobless expansion" numbers coming out of the recession have been revised upward by many millions. The last revision upward for 2002 occurred about a year ago. That is almost five years after the fact and they find literally hundreds of thousands more jobs.

Remember, the establishment survey is a statistical artifact. They take the survey, and then they apply algorithms to adjust for the creation and destruction of new enterprises. Without that adjustment even the establishment survey showed a large net loss of jobs in December. How laughable are the adjustments given the change we have seen in the economy? The adjusted survey claims we added jobs in the financial sector last month, and have done so every month this year. Do you believe that?

The establishment survey always lags changes in the course of the economy as trend following statistical models struggle to keep up. Likely the loss of jobs last month was over 400k, which is stunning. Almost certainly it was very negative.

Look, I am not happy about it, I don’t think it is Bush’s fault, but I am just the messenger. If we are not in recession we are certainly slowing down markedly.
Written By: Lance
Lance, "slowing down" is NOT a recession....most of the revisions I have seen, recently have been UPWARD, BTW, that the oh-fish-yul statistics UNDER estimated econmic activity, not over estimated it.

The Financial Industry is having problems, as is the MSM. The result is that, there IS a Recesiion in them, or at least job layoffs and masssive losses...geeeeeee is it any wonder that Goldman and the NYT think the economy stinks?

Mind you I’m not saying there is NO prblem, just that every time I hear that "the End Is Nigh" that quarter’s econmic news is good....
Written By: Joe
URL: http://
He is a legitimate economic genius [...] especially since he tends to substitute partisanship for objectivity in his punditry.
I’d say anyone who starts with a conclusion and then finds supporting "facts", negates any claim of genius. Krugman has become a mere partisan hack.
Written By: bains
URL: http://
Where Krugman is concerned,’predicting’ a recession is simply a case of wish being father to the thought
Written By: Robbins Mitchell
URL: http://
Why not take the Futurist’s predictions, which correctly predicted in May 2006 that victory in Iraq would arrive exactly in 2008?

Or who predicted in November 2006 that 2007 would NOT be a recession year?

Or who even created a stock portfolio at the start of 2007, that soundly outperformed the market over 2007?

Krugman is a joke, by comparison. Even amateurs are beating him, with far more detailed, multi-variable predictions.
Written By: Tood
URL: http://
He is, in fact, a world-renowned expert in economics, who has contributed some of the most important developments to economics in the past few decades.

I do, in fact, realize this. That is one of the things that makes reading him particularly depressing. It’s like watching a brilliant physicist who can not catch a ball or a great architect who can not manage to figure out Tinker Toys. Krugman’s large scale thoughts are thought provoking and elegant, but when he tries anything small scale predictive he fails. As you noted "he tends to substitute partisanship for objectivity in his punditry" and that’s kind of sad. Worse is that he seems to go out of his way and twist himself in order to make partisan attacks. That is more than sad, it is intellectually dishonest.

My remarks on J school and liberal arts majors were directed toward the increasingly common situations in which reporters believe that, simply by virtue of being reporters, they are suddenly expert on any matter that they write about. They were not directed at Krugman, they were more towards folks like the linked names at the bottom of the post and the more hysterical in our news organizations. These people also do not seem to face responsibility for their incorrect predictions.
Written By: Uncle Pinky
URL: http://
Just today, another leading economic indicator points down : the $1 movie rental machine is being removed from the local supermarket.

Evidently Chinese financing cannot be found.
Written By: Ron Hardin
Krugman reminds me of the hypochondriac who requested the following inscription to be placed on his tombstone:

"See? I TOLD you I was sick!"
Written By: MarkJ
URL: http://
Picking on Krugman’s column is like picking on my 5 year old when he colors outside the lines. Comes to a point where you just throw your hands up in the air and stop mentioning it. I think at times he does these things just to get under the skin of tose who know for a fact he is wrong.
Written By: daniel
It seems to be fairly well established that we had a recession starting roughly the end of 2000 or the start of 2001.

Did Krugman predict that one?
Written By: Chester White
URL: http://
So did Krugman put his money where his mouth was and short the Nasdaq or Dow in Sept 2002? He’d be down 33% not including margin interest.
Written By: PD Quig
URL: http://
Alas, Mr. Krugman was once a world renowned economist, but the world he wanted wasn’t supported by economics. So he became a world class liar, trading on his brand to compensate for the poor quality of his later products.

Pity. Good corporations take better care of their brands. We have no shortage of liars, and a shortage of honest world class economists. Only one who has rejected economics would make Krugman’s career decisions faced with the obvious conditions of Supply and Demand.
Written By: Don Meaker
Paul Krugman has been prescient about alot of things. He was the first person to write that the California energy crisis was not the result of bad legislation, but of deliberate market manipulation. He has very good sources and good values. On a debate that Tim Russert had with him and Bill O’Reilly several years ago, O’Reilly brought up Krugman’s various guesses re the U.S. economy nearterm and that he had been wrong. In response, Krugman said that he was not a good pronosticator on the U.S. economic near term future, commenting that it is very difficult to do that. So he takes your point. Most economists have difficult making such predictions. Making an inaccurate prediction on the near term U.S. economy does not disqualify one from being a great economist. Krugman is a great economist and a courageous human being and I respect him.
Written By: jim
URL: http://
"In response, Krugman said that he was not a good pronosticator on the U.S. economic near term future, commenting that it is very difficult to do that."

Then why does he keep doing it? Nawww, it couldn’t have anything to do with his partisanship.

Written By: Publius
URL: http://
Even a broken clock is right twice per day, or as Benny Hill once said; "Live each day as if it were your last, because someday you’ll be right!"
Written By: Craig
URL: http://
Matthew Yglesias comments on this, including filling out some of the quotes:
Written By: Barry
URL: http://
"the current recession "

You mean the one that started the day Bush was inaugurated?
Written By: timactual
URL: http://
I remember reading a piece that I think was written by the late Louis Rukeyser. He was asked what the secret was to market forecasting. His reply was something like "If you tell them when, don’t tell them which direction or by how much. If you tell them which direction, don’t tell them when or by how much. And if you tell them by how much, don’t tell them when or which direction."

I’ve always felt that advice was good for economic forecasting, as well. Perhaps Professor Krugman should adopt such a strategy.
Written By: Tim
Jeez Louise, I happened here by accident, but Krugman looks like more of a genius than ever and anyone who denies this is clearly guilty of what they accuse Krugman of- partisan hackery of the most delusionary sort. Not only did he predict this recession, he predicted the specifics of the economic mechanisms that would bring it about. That’s pretty damn prescient if you ask me. It is Alan Greenspan who is guilty of shoddy thinking and ideological squirming but doing nothing when he had the chance to prevent the current sub prime crisis which is roicking world markets as we speak. Paul Krugman has been doing a great public service by pointing this out clearly and often, so that maybe next time such a crisis is brewing folks will listen to logic rather than their own greed.

On the other hand I happened here because I suspect Krugman is partisan for Hillary and I prefer Obama. I typed "Krugman on Clinton Payroll?" and got this board. So he ain’t perfect, but I’d bet my left nut that he’s whip anyone on this board in a brain fight.
Written By: Tom Stern
URL: http://

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