Why most economists' predictions are wrong (1998) | Hacker News Reader

Why most economists' predictions are wrong (1998)

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26 pointspatrickaljord40 comments

Full quotes:

* 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.

"Why most economists' predictions are wrong." - By an economist whose predictions are mostly wrong.

How is this guy still taken seriously?

Because he's one of the of the most respected scholars in the field of Economics?

He's likely devoted thousands more hours than us pondering economic matters. I'm just looking through his wiki here... published hundreds of scholarly articles and 20 books. A professor of Economics at some of the best universities in the world. He's even received a Nobel Prize.

How can we fault someone for taking Paul Krugman seriously on economic matters?

Then how could he have been so wrong in his prediction?

Please explain exactly how he is wrong. The internet hasn't substantially changed the rate of growth nor the size of the economy. It also hasn't created any new transformative markets. It has simply made them more accessible. That's why the fax machine analogy is so apt.

Amazon is a storefront. Google is an ad service. Facebook is a glorified telegraph service. It doesn't matter how nifty their tech is. The only thing that matters in this context is what they do, and how that affects the overall economy.

Beware of cynics.

Despite this being on hacker news, Krugman's incorrect prediction actually doesn't harm his reputation significantly. Pessimism and pointing out of flaws elevates your status, while optimism can be construed as being naive.

Doesn't harm his reputation? It shows, clearly, that the man, while being an expert in one field, and while being objectively smart, can be a complete moron in another field and make very very very wrong "predictions".

>can be a complete moron in another field

A complete moron? In the field of monetary economics? Yeah, okay. You may think Bitcoin is major internet monies, but the economists are interested in studying it from aspect of a medium of exchange.

Discussing economics on HackerNews is like discussing medicine on Reddit: everyone is an expert, whether they know anything about the subject or not.

Read the post before jumping to your reply button.

> while being an expert in one field, and while being objectively smart, can be a complete moron in another field

ye said that Krugman is an expert in his field, but has no idea what he's talking about when it comes to computers and the impact thereof.

>Read the post before jumping to your reply button.

Maybe you should do the same.

Krugman isn't looking at Bitcoin as a technology, but as a currency. Just because he doesn't understand "computers and the imnpact thereof", doesn't mean he doesn't understand Bitcoin as money.

The article we're commenting on has nothing to do with bitcoins. So again we get back to the issue of reading comprehension.

Unlike HN commentors, whose ability to parse the Bitcoin white paper suddenly turns them into macroeconomic experts.

Believe it or not, it is quite conceivable that many people on HN actually took enough time to read lots of books on economics and made up their mind about which school of thought is closer to the truth.

I don't believe anyone fully understands macroeconomics, and there is no direct incentive for anyone to do so. Certain powerful interests have an incentive to promote some schools of thought over others, because of political implications that directly impact their business.

Bitcoin promoters will typically promote ideologies that help bitcoin, because they've invested in bitcoin. I doubt anyone has a truly unbiased perspective on any of it.

I agree with you and this is why Austrian economics disregards macroeconomics completely.

Doesn't Austrian economics also disregard reality?

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

I've read this article sometime ago and what struck me while I was reading it, is that the author actually describes WHY Austrian economics is superior and explains it quite good. I couldn't find an actual reason why he decided to not be an Austrian anymore. tl;dr: of that article is like "So this is what Austrian economics is all about, but I don't subscribe to that point of view anymore".

I definitely read it differently. The author cited too many examples of how Austrian economic theory doesn't actually jive with empirical evidence.

He is still a writer for the NYT and taken seriously by the mainstream audience. Proof that talk is cheap, especially dismissiveness is not punished if it turns out that it was unwarranted.

Just something to keep in mind when reading dismissive opinions.

Predictions are irrelevant. What truly harms Krugman's reputation is his open support of the violent state system, quote: "USD is backed by people with guns while Bitcoin is not". I think he quite clearly understands what Bitcoin stands for and I think he correctly identified that it has more to offer to those who lean libertarian. What he either doesn't say or doesn't believe in is that states and central bankers are a violent group of thugs who exploit other people by either fooling them or threatening them. I know many people on HN do not share this point of view. Fine. Problem is, Bitcoin will bring this fact to light so that no one would be able to obscure it with meaningless words and lies.

He actually wrote a new post today, saying that "Bitcoin is Evil" was supposed to be a joke. Allegedly, nobody in the Bitcoin community understood it and now he complains about the lack of sense of humor that the Bitcoin community demonstrated.

http://krugman.blogs.nytimes.com/2013/12/29/the-humor-test/

Clearly the 'Bitcoin is Evil' title was meant in jest. He doesn't say anything like that in the article. Like most article titles on the web it was link bait. The substance of the piece though seems perfectly sensible to me.

Classic Krugman. Of course those that don't immediately break into uproarious laughter at "Bitcoin Is Evil" are clearly the ones that need their funny bone checked.

Dr. Krugman seems to be the Benjamin Button of Economics... his early work was by far his greatest and he seems to have been settling for cashing checks in exchange for making ideological arguments wrapped up in very eloquent nonsense.

Yet another example of Amara's law, http://en.wikipedia.org/wiki/Roy_Amara (sometimes also attributed to Arthur C. Clarke in the form "When it comes to technology, most people overestimate the impact in the short term and underestimate it in the long term").

Hate to be that guy, but what is the purpose of digging this up? To say "ha ha, the Internet is amazing?"

I'm guessing it's to try and discredit Krugman. I don't think he's liked around here from what I've read in various comment threads.

He wrote a critical article about Bitcoins

Because he had the gall to make fun of Bitcoin. So now instead of refuting his opinions directly we're going to to do shit like this.

I don't think opinions are meant to be refuted.

This isn't really an either-or. We refuted and continue to refute any objective claims he makes while concurrently posting his widely inaccurate predictions from the past. Don't forget, we're attacking someone who is using his reputation as an economist to speak with authority on Bitcoin. The only way you can refute the authority is to refute the individual's previous claims.

And it isn't like we've been hiding under a rock. We're just getting tired of doing it. He's an overrated economist that nobody that greatly understands Bitcoin takes seriously. He's like Opera, accessible to the masses, emotionally involved, but utterly void of a deep understanding of the issues involved.

If you want to make widely inaccurate claims about something that is controversial you are going to get lots of upvotes. The problem with Bitcoin is that the people that informed about it are usually tilt pro-Bitcoin[1], while the people that are against Bitcoin usually haven't done enough research into economics, mathematics, and politics.

[1] We're not the lunatics that post on /r/bitcoin everytime Bitcoin doubles. Many of us see valid challenges ahead for Bitcoin, especially from the government.

>The problem with Bitcoin is that the people that informed about it are usually tilt pro-Bitcoin[1], while the people that are against Bitcoin usually haven't done enough research into economics, mathematics, and politics.

99% of this board haven't done the research Mr. Krugman has done in economics, or even have the experience in applied math he does.

But "those who are pro bitcoin are smart, those who are against it aren't", really?

From most of what I've read, here and on /r/bitcoin and elsewhere, Bitcoin proponents are utterly clueless when it comes to economics.

This board has the top computer scientists, mathematicians, and engineers from the best universities in the world.

Furthermore, I said that the majority of people that have really dug into how bitcoin works and what it would mean, tilt pro-bitcoin.

That doesn't mean that the people who are pro-bitcoin are smart.

That doesn't mean that there arn't people that have dug into it and are against it.

All it means is that generally when we see Krugman's simplistic objections we roll our eyes like you would roll your eyes at Oprah explaining credit default swaps to her audience. We've responded to his claims over and over. It is getting boring and old.

Clearly Krugman has underestimated the impact the fax machine has had on the economy.

Krugman's prediction (originally pointed out by the title of this HN post): "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."

The most puzzling thing is that he's not far from right, in a national economics sense at least. Here's the riddle: US GDP has only increased by 25% in real terms since the year 2000. But if you took an average HN reader and sent them back there, to before the mobile phone and high speed residential broadband became widespread, they would kill themselves. How is that possible...? :)

He who has not made an incorrect prediction in the past 15 years shall cast the first stone....

Need to put the year in the title. Looks like it was written in 1997/1998. Doesn't seem to explicitly say unless I'm missing something but the year is implied in the text.

Everyone's predictions are wrong because no-one can see into the future. I know that, stated like this, it's a tautological statement. But hopefully you know what I mean.

AND! the existence of different interpretations of history suggest, oddly, that this also applies to the past.

Because economists are paid to push a point of view by their employer. Eg the Bank or the Fed.

Krugman is a hack.

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