Friday, May 27, 2005

Will Krugman eventually be right? Maybe with an infinite amount of time

Paul Krugman has made plenty of ludicrous statements before, like, "And don't forget that President Clinton's 1993 tax increase ushered in an economic boom." This time, he's really outdone himself. Donald Luskin today quoted the real zinger in Krugman's latest column, asking if it'll be in Krugman's upcoming macroeconomics textbook:
...the Fed's ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.
It boggles my mind how an economics professor, a winner of the "John Clark Bates medal" and perennial Nobel hopeful, can make up economics as he goes along. And the economics isn't even realistic!

So Krugman's new economic catch phrase is "housing bubble." Does anyone still believe his doom-and-gloom wailings? For crying out loud, he perfectly embodies the joke, "Economists have successfully forecasted 10 of the last 3 recessions." It's part of the law of large numbers: if Krugman keeps predicting recessions, "bubbles" or "currency crises" year after year, eventually he'll be right. But he'll be as accurate as the L.A. resident who keeps saying a 7.0+ earthquake will hit the valley "this year," repeating it year after year. Krugman will be as accurate as the Red Sox fans who said from 1919 through 2004 that their team would win the World Series.

In the late 1990s, Krugman wrote about currency crises occurring about every 19 months. (At the end of that paper, he warned about a possible euro crisis! Which, of course, never happened.) Even before Bush was first sworn into the presidency, Krugman warned that Bush's economic policies would bring economic disaster. Krugman warned that the federal deficits will cause a "fiscal train wreck." Krugman even warned back in 2000 of a possible economic crisis like Mexico's if the next president didn't have an air of "legitimacy."

Of course, none of Krugman's economic Armageddons came to pass. He came closest with the first, but he can't take any credit for it. His predictions were only after the Asian Crisis, and even counting Brazil and Argentina, where is this cycle of currency crises every couple of years? And though more than a few liberals today still believe that Bush stole the 2000 election, our only economic crisis was the 2001 recession -- which precipitated from the economic deceleration at the end of Clinton's presidency.

But Krugman always needs some economic spectre to frighten people. After his previous prognostications' miserable failures, he's now chosen the "housing bubble" for his latest harping. Krugman's problem is that he just can't admit that we have economic prosperity without Democrats in charge. We're long past the recovery: how can any real economist not call our current growth a full-blown expansion? It's fast enough to continue adding plenty of jobs, yet moderate enough that it should satisfy Keynesians obsessed with "sustainability."

Except for Keynesians like Krugman.


Anonymous Anonymous said...

It seems that Krugman isn't alone in his Chicken Little routine about the "housing bubble", because the MSM has been squawking about that for days now, so I know it must not be true.

Monday, May 30, 2005 7:07:00 AM  
Blogger capitalgain said...

Krugman is as much an economist as Ward Churchill is a Cherokee Indian. Both are members of the famous lost "Fugawi" tribe.

Monday, May 30, 2005 3:58:00 PM  

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