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Krugman: Internet’s Economic Impact No Greater Than Fax Machine (1998)

84 points by jcuga 10y ago

mtgx 10y ago
> 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. Every time I read one of Krugman's technology-related articles, he always seems to get it so wrong. After this terrible prediction, I wonder why he keeps bothering. Also, he's nothing but a political hack these days.
- richieb 10y ago
  Krugman often reviews his past predictions and admits when he is wrong: http://www.truth-out.org/opinion/item/31524-ten-years-later-what-i-got-right-and-wrong http://www.truth-out.org/opinion/item/31524-ten-years-later-...
  - forgingahead 10y ago
    Then why does he keep making them? And getting paid to make them? Generally if you are hired to do something, and fail at it multiple times, you are fired, and in the case of potentially moving markets and affecting livelihoods, you should be banned from ever saying anything again!
    - tptacek 10y ago
      That's not what he's paid to do.
    - chillingeffect 10y ago
      A fair question. It really sheds light on how most of the media make their money: by kicking up drama within the boundaries of our own belief systems, not by being accurate. He is hired to stir up the pot and he does that well, because we are poor at critical thinking. We can learn this from the Chomsky/Zinn's media manipulation model..... ....or simply from Criswell's monologue to Ed Wood. If you were to corner most newspaper editors, they would simply say "it's up to readers to do research and make up their minds" or "we provide a service by stimulating conversation and making you think." These are both true, but don't undo the damage caused by sending us careening around in fear and uncertainty by whipping us into perpetual emotional dissonance.
- wyldfire 10y ago
  > most people have nothing to say to each other I think this was more of a confirmation of Metcalfe's Law than anything else. Folks didn't use email (etc) as much in 1998 because it was less likely that your recipient would read it before you might contact them otherwise via phone or other method. No one sent email because no one checked email because the utility of the network wasn't there. As Metcalfe's Law predicts, the utility of the network was climbing steeply but just hadn't hit the inflection point where you could expect ubiquity.
johnwheeler 10y ago
> 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. Sort of dwarfs any validity in the article.
- tossedaway334 10y ago
  Pretty sure thats the point of the HN post.
forgingahead 10y ago
While this is highly embarrassing for Krugman (even if he will never admit it!), he is far from the only person who has fallen for this: Expertise in one area does NOT make you an expert in all. This year especially should drive that point home. It's best to only make bold statements when you are sure, and when you do so, put your money where your mouth is ("Skin in the game", as Nassim Taleb says). And most definitely do not become a paid opinion writer, or even bother taking any of their pontificating seriously.
- richieb 10y ago
  I think he does admit his mistakes: http://krugman.blogs.nytimes.com/2010/09/01/mistakes/ http://krugman.blogs.nytimes.com/2010/09/01/mistakes/
  - forgingahead 10y ago
    "Two mistakes" -- that is a satirical blog post right?
    - addicted 10y ago
      Big, Professional mistakes
      - Booktrope 10y ago
        He calls it "The Conscience of a Liberal" and then says "So yes, I’ve been wrong. Let those who are without error cast the first stone." Krugman is a good example of what's gone amiss with liberalism. Even worse than his many errors, is his hypocrisy. He very loudly accused Amazon of being a "monopsony" during Amazon's most recent dust-up with the big publishers, on grounds that its market power would enable it to hurt consumers, although he acknowledged, Amazon hadn't used its economic power that way. https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-ok.html https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amaz... The impetus for Krugman's column was, Amazon's resistance to big publishers using their market power to overprice ebooks. Krugman was on the side of the big publishers for obvious reasons I think. Krugman's own widely-assigned economics texts provide some of the clearest examples of big publishers using monopsony to overprice ebooks. His publisher, presumably with Krugman's support, sells ebooks of these texts for $100 - $200 a copy. A great example of mmonopsony - because students are assigned Krugman's books and therefore don't have choice, Krugman's publisher extracts monopsony profits. This isn't just a little convenient opportunism -- as Krugman surely knows, overinflated textbook prices are a significant burden on many students, who are leaving university with huge debt. Yet, Krugman goes along with this exploitation, and presumably banks very large royalties for himself at student's expense. I say presumably a couple of times, because I've not seen anything from Krugman explaining or apologizing for the prices of his own books and the way this exploits students.
adamnemecek 10y ago
Also "Why the web won't be a nirvana" http://www.newsweek.com/clifford-stoll-why-web-wont-be-nirvana-185306 http://www.newsweek.com/clifford-stoll-why-web-wont-be-nirva...
- drzaiusapelord 10y ago
  >What the Internet hucksters won't tell you is that the Internet is one big ocean of unedited data, without any pretense of completeness. Lacking editors, reviewers or critics, the Internet has become a wasteland of unfiltered data. You don't know what to ignore and what's worth reading. Except he's correct. The web has become a disinformation, fake news, and conspiracy theory bonanza. Finding good information still takes legwork, 22 years after this article was written. Also to be fair to Cliff, this article was written well before sites like wikipedia had prominence. So yes, back then putting something in a search engine was asking for trouble. The results were very poor because the content was very poor. >What's missing from this electronic wonderland? Human contact. Thus the rise of social media. I think this essay was unusually prophetic and insightful in many ways.
  - ZeroGravitas 10y ago
    > The web has become a disinformation, fake news, and conspiracy theory bonanza. By analogy to "net-negative producers" at what point do the conspiracy theories incubated by the internet detract from it's good points enough that it is overall negative, or perhaps only as positive as say, the fax machine?
  - maverick_iceman 10y ago
    >The web has become a disinformation, fake news, and conspiracy theory bonanza. Yes, conspiracy theories like Russia hacked the election.
deleted 10y ago
[deleted]
mempko 10y ago
While he is wrong about the impact of the internet economically. He isn't wrong that technology progress has been disappointing. When you grow up believing you will be driving flying cars and seeing robots help you around the house, how else are you supposed to feel? It is only now that computing power has started to enable old AI techniques such as neural nets, which were once impractical are now starting to be reasonable. I am also disappointed in how closed and centralized the applications that run on the internet have become since the internet was privatized. Where we used to have decentralized systems in the 80s to late 90s, we now have huge star (wheel and spoke) networks. The days you get your internet from the weird guy down the street running a rack of servers in his closet are long gone. We have also re-created old medium and I seriously doubt people like Alan Kay are impressed with that. We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change. As Alan Kay said "The computer revolution hasn't happened yet".
- rplst8 10y ago
  > We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change. I think this is a mis-characterization. The Internet is used for all sorts of "good" causes. I think we just take for granted the ease with which it allows teams of scientists and researchers to connect, communicate, and share research.
  - deleted 10y ago
    [deleted]
- snrplfth 10y ago
  One of the big problems with people's expectations was, perhaps, a sense that technological progress would involve ever-greater energies, sizes, velocities. This certainly would have made sense in 1967, but what's been done since then has so much to do with using less energy to do more. There's so much to do in computation, biosciences, materials science, and so on - it doesn't look big and impressive necessarily, but it's still major progress.
sgwealti 10y ago
Paul Krugman responded to this a few years ago: http://www.businessinsider.com/paul-krugman-responds-to-internet-quote-2013-12 http://www.businessinsider.com/paul-krugman-responds-to-inte... The article the economic impact of the internet quote came from wasn't a scholarly article or his normal column, it was a fun, let's make some provocative predictions type article.
- Torgo 10y ago
  His normal column hasn't been much better, for years now.
  - tps5 10y ago
    It's a mystery to me how he's gotten away with handing in what amounts to the same column every week for the past couple years. Whether I agree with him or not, I find his haughty, didactic tone very off-putting.
- otaviokz 10y ago
  A "a fun, let's make some provocative predictions type article" sounds like something very unprofessional to me. Also there seems to be a suspicious pattern of claiming exactly that after such an embarrassing prediction is made. I doubt the same would be claimed if he had happened to be right about the internet and the information economy.
  - Jtsummers 10y ago
    > "a fun, let's make some provocative predictions type article" sounds like something very unprofessional to me. Knuth was published in the very unprofessional Mad Magazine. What's your point?
    - ConceptJunkie 10y ago
      Knuth wasn't wrong. His potrzebie system is detailed and consistent. ;-)
misiti3780 10y ago
Fitting I'm currently re-reading "Thinking Fast and Slow" and there is a chapter on expertise: From the book: When do judgments reflect true expertise? An environment that is sufficiently regular to be predictable an opportunity to learn these regularities through prolonged practice. (aka not economics) When both these conditions are satisfied, intuitions are likely to be skilled. Intuition cannot be trusted in the absence of stable regularities in the environment. If the environment is sufficiently regular and if the judge has had a chance to learn its regularities, the associative machinery will recognize situations and generate quick and accurate predictions and decisions. You can trust someone’s intuitions if these conditions are met. When evaluating expert intuition you should always consider whether there was an adequate opportunity to learn the cues, even in a regular environment.
rectang 10y ago
After the new FCC kills net neutrality, Krugman will be proven right.
RodericDay 10y ago
I much prefer Ha-Joon Chang's "the washing machine changed the world more than the internet" [0], which I think fares a lot better than Krugman's claims. > When we assess the impact of technological changes, we tend to downplay things that happened a while ago. Of course, the internet is great – I can now google and find the exact location of this restaurant on the edge of Liverpool or whatever. But when you look at the impact of this on the economy, it's mainly in the area of leisure. > By liberating women from household work and helping to abolish professions such as domestic service, the washing machine and other household goods completely revolutionised the structure of society. As women have become active in the labour market they have acquired a different status at home – they can credibly threaten their partners that if they don't treat them well they will leave them and make an independent living. And this had huge economic consequences. Rather than spend their time washing clothes, women could go out and do more productive things. Basically, it has doubled the workforce. [0] https://www.theguardian.com/technology/2010/aug/29/my-bright-idea-ha-joon-chang https://www.theguardian.com/technology/2010/aug/29/my-bright...
- Eridrus 10y ago
  On that note, maybe we should not be looking for the economic impact it has had on the US, but the impact it has had on India, China, etc. I also wonder what we would find if we measured the productivity gains of the washing machine; I'm not sure we would see the rise that economists want to see from computing technology.
rm_-rf_slash 10y ago
It's kind of unfair to point and laugh at the person who didn't predict the future correctly. I don't think anybody could have foreseen the interactive potential for the internet. The internet encompasses vast video game experiences, nearly realtime communication from politicians and public figures (without hauling around a C-SPAN 2 camera team), and has even taken on a life of its own with YouTube stars and internet celebrities, completely bypassing the traditional media channels that were usually dominated by the whims of their producers. Even now I think our impression of the internet is roughly in line with the people of the early 20th century who could not have begun to imagine the vast possibilities provided by mass electrification.
- forgetsusername 10y ago
  >It's kind of unfair to point and laugh at the person who didn't predict the future correctly. If you're going to put your predictions out there in the public sphere as an influencer, then I think it's fair (in fact necessary) to judge people on those predictions and their record. However, I doubt many of us would do better if held to the same level of scrutiny. Two examples from these boards: Dropbox ("it sucks!") and Theranos ("game-changing!") would embarass at least a few of us.
return0 10y ago
To me, all this shows is that economics is very hard. I like krugman although he s a bad public speaker and a sore loser, yet even he cant model long-term effects of things. I wonder where his thought process fails
jokoon 10y ago
I'm still curious to know what are the "Internet Economic Impact". This article was written before the net bubble. So far all I see in the economics of internet is netflix replacing DVDs, twitter/facebook/online presence (which is advertising, which means little to me), and... that's it. Other domains like online gaming are not that great in term of economic impact. Amazon is closing book and movie stores. I can see that the internet changed many things, but was it improvement? I don't know. When you account music and movie piracy, credit card fraud, scammers, online security, it doesn't seem so great. The only improvements I can see is porn (being able to channel your sexuality) and dating websites (more people being able to risk a little more to find somebody).
- cema 10y ago
  This article was written before the net bubble. I think it was in fact written during the big bubble, although my memory may be a bit off. I do remember distinctly having read (and chuckled at) an article by a supposedly serious economist who said something along these lines, but I absolutely do not remember if it was the same article. And the same economist. Krugman's name did not ring a bell for me then.
  - Jtsummers 10y ago
    You are correct. 1998 is the year of Pets.com and many other internet bubble ventures. Which led to a surge in CS enrollment from ~1999-2005 which really, really sucked for those of us that actually wanted to study CS and weren't in it "for the money". The professional/academic feedback loop also managed to catch me when I tried going to graduate school (again, actually interested in it) and found myself surrounded by people who were in grad school to ride out the (then) downturn in the internet-based business sector (circa 2006). Enrollment numbers were sky high in grad programs so competition for advisors and TA positions was much harder than normal. Very frustrating times.
- wmeredith 10y ago
  Go talk to your cable provider or local newspaper about how the internet hasn't had much economic impact.
colordrops 10y ago
Despite his impressive pedigree, Paul Krugman is more of a political mouthpiece than an economist. His regular opinion pieces in the New York times or frequently abrasive and wrong.
- forgetsusername 10y ago
  >Despite his impressive pedigree, Paul Krugman is more of a political mouthpiece than an economist. That's easy to say if all you read are his opinion pieces rather than his academic work.
- GCA10 10y ago
  My general sense is that academic superstars who decide to opine on world events generally do slightly better than their Hollywood counterparts ... but not much On team academia, Linus Pauling, Edward Teller, Bertrand Russell, Paul Krugman, etc. On team Hollywood, Jane Fonda, Clint Eastwood, Al Franken, Madonna, etc. Being tremendously prominent in one domain has only a loose correlation with expertise in something else quite different.
- matt4077 10y ago
  This article is posted here to embarrass Krugman, but if you look at GDP growth over time, you'd think there should be a kink in the graph /somewhere/ to account for the economic benefits of the internet. It's possible that growth would have been even more anaemic without the internet, but that's hard to argue from the data.
  - snrplfth 10y ago
    Well, you could say that the internet was not a totally unique thing in itself, but just another (big) forward step in the ever-improving telecommunications sector, which had already seen the expansion of telegraphs, radio, telephones, and so on, and would also have represented big improvements in communication capacity.
ZeroGravitas 10y ago
This is similar to the Robert Solow's 1987 quip, "You can see the computer age everywhere but in the productivity statistics." Is a big part of this what exactly economists are measuring, and either they're right and we're just too close to see it, or they're missing important stuff when they measure. And to be fair, I think the fax was pretty big in it's day for business to business communication.
hyperpape 10y ago
While this article is probably wrong (I don't know what the economic impact of the fax machine was, but I suspect a lot smaller than the Internet), we should probably all be asking ourselves whether the economic impact of our industry is really all that big. Looking at the profit of companies like Google and Facebook overstates the impact for them. They are making tons of money, but a lot of that is just a shift in the location of advertising dollars. Amazon has lowered prices, and there's real economic impact there, but what is the actual percentage? In my current line of work, transportation management software, we're giving companies tools to be more efficient and reduce their freight expenditure, but the reductions are really very modest--good enough to keep customers happy, but nothing revolutionary. That seems to be the pattern for an awful lot of software: if you can beat an established industry by a little bit, that's enough for a business, but that's not the kind of revolution that you'd think there is listening to people hyping startups. And if you think I'm wrong, ask yourself why GDP growth has been so anemic in the age of the Internet.
- snrplfth 10y ago
  One must also ask, how much of it is consumer surplus. In just the same way as a disease going away reduces the economic activity associated with managing that disease, information technology and the internet have done away with many previously necessary activities, in the process of creating an overall improvement - potentially "shrinking" GDP, even while it delivers substantial benefits. What is instantaneous worldwide communication worth? What would it have been worth in 1967? It's so common and important now - but it's also very cheap, so it doesn't show up significantly in many calculations of economic production.
  - hyperpape 10y ago
    This is a good question. I think there is certainly some consumer surplus not captured in GDP statistics, though it doesn't necessarily undermine my point. That said, your example of curing disease is a bad case of the broken window fallacy. No longer having to combat specific diseases 1) leaves people healthy and able to contribute to economic activity, and 2) leaves the people previously employed in medical fields able to take other jobs. Maybe in 2016, where there's a seeming lack of jobs in the developed world, that's not a clear driver of economic growth, but in 1916, it was.
mhneu 10y ago
Krugman today wrote an article saying that America is at risk because some politicians are prioritizing their own power over the good of the country [0]. GOP politicians in the new cabinet and the White House are named. Why was the OP posted to Hacker News today? Is it in response to Krugman's dire warning about American democracy and how the GOP is putting us all at risk? Be careful about politics on Hacker News. The tech industry has an important role to play in media, and we know that the GOP has spent substantial sums to create bias in the media. [1] There is a strong incentive for the GOP to astroturf Hacker News and we should all be careful. It's true that "reality often has a liberal bias" - and that's because the leaders of the GOP -- politicians and their big donors -- are trying to create their own reality, where they can cut taxes to keep more money in the pockets of the 0.01%. Use your own head when you see links like this. [0] http://www.nytimes.com/2016/12/19/opinion/how-republics-end.html http://www.nytimes.com/2016/12/19/opinion/how-republics-end.... [1] http://www.salon.com/2008/09/24/mccain_letters/ http://www.salon.com/2008/09/24/mccain_letters/ edit: I expect the vocal right-leaning minority here to vote heavily; if you agree with the above and you're not a frequent voter please upvote posts here you agree with.
kurthr 10y ago
All of this was written before the Dotcom boom! Do you remember when you had to .com after every company or had to put www. before every company, because almost no one knew how to search (on AltaVista or redirect in a DNS record), or just restarted their computer to get back to the Yahoo! home page? If not, then you don't remember this time... but almost everyone remembers the DotCom bust 3 years later, when the nerds got their comeuppance! 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. -Krugman
Hasknewbie 10y ago
Bill Gates himself almost completely dismissed the Web only a couple of years earlier in his book "The Road Ahead"[0], to such an extent that he had to heavily update it in the second edition one year later. With that in perspective, is it really surprising to see non-specialists like Krugman still considering it a novelty in 1998, before Google, e-commerce, e-booking, etc? [0] https://en.wikipedia.org/wiki/The_Road_Ahead_%28Bill_Gates_book%29 https://en.wikipedia.org/wiki/The_Road_Ahead_%28Bill_Gates_b...

84 points by jcuga 10y ago

mtgx 10y ago

> 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. Every time I read one of Krugman's technology-related articles, he always seems to get it so wrong. After this terrible prediction, I wonder why he keeps bothering. Also, he's nothing but a political hack these days.

richieb 10y ago
Krugman often reviews his past predictions and admits when he is wrong: http://www.truth-out.org/opinion/item/31524-ten-years-later-what-i-got-right-and-wrong http://www.truth-out.org/opinion/item/31524-ten-years-later-...
- forgingahead 10y ago
  Then why does he keep making them? And getting paid to make them? Generally if you are hired to do something, and fail at it multiple times, you are fired, and in the case of potentially moving markets and affecting livelihoods, you should be banned from ever saying anything again!
  - tptacek 10y ago
    That's not what he's paid to do.
  - chillingeffect 10y ago
    A fair question. It really sheds light on how most of the media make their money: by kicking up drama within the boundaries of our own belief systems, not by being accurate. He is hired to stir up the pot and he does that well, because we are poor at critical thinking. We can learn this from the Chomsky/Zinn's media manipulation model..... ....or simply from Criswell's monologue to Ed Wood. If you were to corner most newspaper editors, they would simply say "it's up to readers to do research and make up their minds" or "we provide a service by stimulating conversation and making you think." These are both true, but don't undo the damage caused by sending us careening around in fear and uncertainty by whipping us into perpetual emotional dissonance.
wyldfire 10y ago
> most people have nothing to say to each other I think this was more of a confirmation of Metcalfe's Law than anything else. Folks didn't use email (etc) as much in 1998 because it was less likely that your recipient would read it before you might contact them otherwise via phone or other method. No one sent email because no one checked email because the utility of the network wasn't there. As Metcalfe's Law predicts, the utility of the network was climbing steeply but just hadn't hit the inflection point where you could expect ubiquity.

johnwheeler 10y ago

> 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. Sort of dwarfs any validity in the article.

tossedaway334 10y ago
Pretty sure thats the point of the HN post.

forgingahead 10y ago

While this is highly embarrassing for Krugman (even if he will never admit it!), he is far from the only person who has fallen for this: Expertise in one area does NOT make you an expert in all. This year especially should drive that point home. It's best to only make bold statements when you are sure, and when you do so, put your money where your mouth is ("Skin in the game", as Nassim Taleb says). And most definitely do not become a paid opinion writer, or even bother taking any of their pontificating seriously.

richieb 10y ago
I think he does admit his mistakes: http://krugman.blogs.nytimes.com/2010/09/01/mistakes/ http://krugman.blogs.nytimes.com/2010/09/01/mistakes/
- forgingahead 10y ago
  "Two mistakes" -- that is a satirical blog post right?
  - addicted 10y ago
    Big, Professional mistakes
    - Booktrope 10y ago
      He calls it "The Conscience of a Liberal" and then says "So yes, I’ve been wrong. Let those who are without error cast the first stone." Krugman is a good example of what's gone amiss with liberalism. Even worse than his many errors, is his hypocrisy. He very loudly accused Amazon of being a "monopsony" during Amazon's most recent dust-up with the big publishers, on grounds that its market power would enable it to hurt consumers, although he acknowledged, Amazon hadn't used its economic power that way. https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-ok.html https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amaz... The impetus for Krugman's column was, Amazon's resistance to big publishers using their market power to overprice ebooks. Krugman was on the side of the big publishers for obvious reasons I think. Krugman's own widely-assigned economics texts provide some of the clearest examples of big publishers using monopsony to overprice ebooks. His publisher, presumably with Krugman's support, sells ebooks of these texts for $100 - $200 a copy. A great example of mmonopsony - because students are assigned Krugman's books and therefore don't have choice, Krugman's publisher extracts monopsony profits. This isn't just a little convenient opportunism -- as Krugman surely knows, overinflated textbook prices are a significant burden on many students, who are leaving university with huge debt. Yet, Krugman goes along with this exploitation, and presumably banks very large royalties for himself at student's expense. I say presumably a couple of times, because I've not seen anything from Krugman explaining or apologizing for the prices of his own books and the way this exploits students.

adamnemecek 10y ago

Also "Why the web won't be a nirvana" http://www.newsweek.com/clifford-stoll-why-web-wont-be-nirvana-185306 http://www.newsweek.com/clifford-stoll-why-web-wont-be-nirva...

drzaiusapelord 10y ago
>What the Internet hucksters won't tell you is that the Internet is one big ocean of unedited data, without any pretense of completeness. Lacking editors, reviewers or critics, the Internet has become a wasteland of unfiltered data. You don't know what to ignore and what's worth reading. Except he's correct. The web has become a disinformation, fake news, and conspiracy theory bonanza. Finding good information still takes legwork, 22 years after this article was written. Also to be fair to Cliff, this article was written well before sites like wikipedia had prominence. So yes, back then putting something in a search engine was asking for trouble. The results were very poor because the content was very poor. >What's missing from this electronic wonderland? Human contact. Thus the rise of social media. I think this essay was unusually prophetic and insightful in many ways.
- ZeroGravitas 10y ago
  > The web has become a disinformation, fake news, and conspiracy theory bonanza. By analogy to "net-negative producers" at what point do the conspiracy theories incubated by the internet detract from it's good points enough that it is overall negative, or perhaps only as positive as say, the fax machine?
- maverick_iceman 10y ago
  >The web has become a disinformation, fake news, and conspiracy theory bonanza. Yes, conspiracy theories like Russia hacked the election.

deleted 10y ago

[deleted]

mempko 10y ago

While he is wrong about the impact of the internet economically. He isn't wrong that technology progress has been disappointing. When you grow up believing you will be driving flying cars and seeing robots help you around the house, how else are you supposed to feel? It is only now that computing power has started to enable old AI techniques such as neural nets, which were once impractical are now starting to be reasonable. I am also disappointed in how closed and centralized the applications that run on the internet have become since the internet was privatized. Where we used to have decentralized systems in the 80s to late 90s, we now have huge star (wheel and spoke) networks. The days you get your internet from the weird guy down the street running a rack of servers in his closet are long gone. We have also re-created old medium and I seriously doubt people like Alan Kay are impressed with that. We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change. As Alan Kay said "The computer revolution hasn't happened yet".

rplst8 10y ago
> We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change. I think this is a mis-characterization. The Internet is used for all sorts of "good" causes. I think we just take for granted the ease with which it allows teams of scientists and researchers to connect, communicate, and share research.
- deleted 10y ago
  [deleted]
snrplfth 10y ago
One of the big problems with people's expectations was, perhaps, a sense that technological progress would involve ever-greater energies, sizes, velocities. This certainly would have made sense in 1967, but what's been done since then has so much to do with using less energy to do more. There's so much to do in computation, biosciences, materials science, and so on - it doesn't look big and impressive necessarily, but it's still major progress.

sgwealti 10y ago

Paul Krugman responded to this a few years ago: http://www.businessinsider.com/paul-krugman-responds-to-internet-quote-2013-12 http://www.businessinsider.com/paul-krugman-responds-to-inte... The article the economic impact of the internet quote came from wasn't a scholarly article or his normal column, it was a fun, let's make some provocative predictions type article.

Torgo 10y ago
His normal column hasn't been much better, for years now.
- tps5 10y ago
  It's a mystery to me how he's gotten away with handing in what amounts to the same column every week for the past couple years. Whether I agree with him or not, I find his haughty, didactic tone very off-putting.
otaviokz 10y ago
A "a fun, let's make some provocative predictions type article" sounds like something very unprofessional to me. Also there seems to be a suspicious pattern of claiming exactly that after such an embarrassing prediction is made. I doubt the same would be claimed if he had happened to be right about the internet and the information economy.
- Jtsummers 10y ago
  > "a fun, let's make some provocative predictions type article" sounds like something very unprofessional to me. Knuth was published in the very unprofessional Mad Magazine. What's your point?
  - ConceptJunkie 10y ago
    Knuth wasn't wrong. His potrzebie system is detailed and consistent. ;-)

misiti3780 10y ago

Fitting I'm currently re-reading "Thinking Fast and Slow" and there is a chapter on expertise: From the book: When do judgments reflect true expertise? An environment that is sufficiently regular to be predictable an opportunity to learn these regularities through prolonged practice. (aka not economics) When both these conditions are satisfied, intuitions are likely to be skilled. Intuition cannot be trusted in the absence of stable regularities in the environment. If the environment is sufficiently regular and if the judge has had a chance to learn its regularities, the associative machinery will recognize situations and generate quick and accurate predictions and decisions. You can trust someone’s intuitions if these conditions are met. When evaluating expert intuition you should always consider whether there was an adequate opportunity to learn the cues, even in a regular environment.

rectang 10y ago

After the new FCC kills net neutrality, Krugman will be proven right.

RodericDay 10y ago

I much prefer Ha-Joon Chang's "the washing machine changed the world more than the internet" [0], which I think fares a lot better than Krugman's claims. > When we assess the impact of technological changes, we tend to downplay things that happened a while ago. Of course, the internet is great – I can now google and find the exact location of this restaurant on the edge of Liverpool or whatever. But when you look at the impact of this on the economy, it's mainly in the area of leisure. > By liberating women from household work and helping to abolish professions such as domestic service, the washing machine and other household goods completely revolutionised the structure of society. As women have become active in the labour market they have acquired a different status at home – they can credibly threaten their partners that if they don't treat them well they will leave them and make an independent living. And this had huge economic consequences. Rather than spend their time washing clothes, women could go out and do more productive things. Basically, it has doubled the workforce. [0] https://www.theguardian.com/technology/2010/aug/29/my-bright-idea-ha-joon-chang https://www.theguardian.com/technology/2010/aug/29/my-bright...

Eridrus 10y ago
On that note, maybe we should not be looking for the economic impact it has had on the US, but the impact it has had on India, China, etc. I also wonder what we would find if we measured the productivity gains of the washing machine; I'm not sure we would see the rise that economists want to see from computing technology.

rm_-rf_slash 10y ago

It's kind of unfair to point and laugh at the person who didn't predict the future correctly. I don't think anybody could have foreseen the interactive potential for the internet. The internet encompasses vast video game experiences, nearly realtime communication from politicians and public figures (without hauling around a C-SPAN 2 camera team), and has even taken on a life of its own with YouTube stars and internet celebrities, completely bypassing the traditional media channels that were usually dominated by the whims of their producers. Even now I think our impression of the internet is roughly in line with the people of the early 20th century who could not have begun to imagine the vast possibilities provided by mass electrification.

forgetsusername 10y ago
>It's kind of unfair to point and laugh at the person who didn't predict the future correctly. If you're going to put your predictions out there in the public sphere as an influencer, then I think it's fair (in fact necessary) to judge people on those predictions and their record. However, I doubt many of us would do better if held to the same level of scrutiny. Two examples from these boards: Dropbox ("it sucks!") and Theranos ("game-changing!") would embarass at least a few of us.

return0 10y ago

To me, all this shows is that economics is very hard. I like krugman although he s a bad public speaker and a sore loser, yet even he cant model long-term effects of things. I wonder where his thought process fails

jokoon 10y ago

I'm still curious to know what are the "Internet Economic Impact". This article was written before the net bubble. So far all I see in the economics of internet is netflix replacing DVDs, twitter/facebook/online presence (which is advertising, which means little to me), and... that's it. Other domains like online gaming are not that great in term of economic impact. Amazon is closing book and movie stores. I can see that the internet changed many things, but was it improvement? I don't know. When you account music and movie piracy, credit card fraud, scammers, online security, it doesn't seem so great. The only improvements I can see is porn (being able to channel your sexuality) and dating websites (more people being able to risk a little more to find somebody).

cema 10y ago
This article was written before the net bubble. I think it was in fact written during the big bubble, although my memory may be a bit off. I do remember distinctly having read (and chuckled at) an article by a supposedly serious economist who said something along these lines, but I absolutely do not remember if it was the same article. And the same economist. Krugman's name did not ring a bell for me then.
- Jtsummers 10y ago
  You are correct. 1998 is the year of Pets.com and many other internet bubble ventures. Which led to a surge in CS enrollment from ~1999-2005 which really, really sucked for those of us that actually wanted to study CS and weren't in it "for the money". The professional/academic feedback loop also managed to catch me when I tried going to graduate school (again, actually interested in it) and found myself surrounded by people who were in grad school to ride out the (then) downturn in the internet-based business sector (circa 2006). Enrollment numbers were sky high in grad programs so competition for advisors and TA positions was much harder than normal. Very frustrating times.
wmeredith 10y ago
Go talk to your cable provider or local newspaper about how the internet hasn't had much economic impact.

colordrops 10y ago

Despite his impressive pedigree, Paul Krugman is more of a political mouthpiece than an economist. His regular opinion pieces in the New York times or frequently abrasive and wrong.

forgetsusername 10y ago
>Despite his impressive pedigree, Paul Krugman is more of a political mouthpiece than an economist. That's easy to say if all you read are his opinion pieces rather than his academic work.
GCA10 10y ago
My general sense is that academic superstars who decide to opine on world events generally do slightly better than their Hollywood counterparts ... but not much On team academia, Linus Pauling, Edward Teller, Bertrand Russell, Paul Krugman, etc. On team Hollywood, Jane Fonda, Clint Eastwood, Al Franken, Madonna, etc. Being tremendously prominent in one domain has only a loose correlation with expertise in something else quite different.
matt4077 10y ago
This article is posted here to embarrass Krugman, but if you look at GDP growth over time, you'd think there should be a kink in the graph /somewhere/ to account for the economic benefits of the internet. It's possible that growth would have been even more anaemic without the internet, but that's hard to argue from the data.
- snrplfth 10y ago
  Well, you could say that the internet was not a totally unique thing in itself, but just another (big) forward step in the ever-improving telecommunications sector, which had already seen the expansion of telegraphs, radio, telephones, and so on, and would also have represented big improvements in communication capacity.

ZeroGravitas 10y ago

This is similar to the Robert Solow's 1987 quip, "You can see the computer age everywhere but in the productivity statistics." Is a big part of this what exactly economists are measuring, and either they're right and we're just too close to see it, or they're missing important stuff when they measure. And to be fair, I think the fax was pretty big in it's day for business to business communication.

hyperpape 10y ago

While this article is probably wrong (I don't know what the economic impact of the fax machine was, but I suspect a lot smaller than the Internet), we should probably all be asking ourselves whether the economic impact of our industry is really all that big. Looking at the profit of companies like Google and Facebook overstates the impact for them. They are making tons of money, but a lot of that is just a shift in the location of advertising dollars. Amazon has lowered prices, and there's real economic impact there, but what is the actual percentage? In my current line of work, transportation management software, we're giving companies tools to be more efficient and reduce their freight expenditure, but the reductions are really very modest--good enough to keep customers happy, but nothing revolutionary. That seems to be the pattern for an awful lot of software: if you can beat an established industry by a little bit, that's enough for a business, but that's not the kind of revolution that you'd think there is listening to people hyping startups. And if you think I'm wrong, ask yourself why GDP growth has been so anemic in the age of the Internet.

snrplfth 10y ago
One must also ask, how much of it is consumer surplus. In just the same way as a disease going away reduces the economic activity associated with managing that disease, information technology and the internet have done away with many previously necessary activities, in the process of creating an overall improvement - potentially "shrinking" GDP, even while it delivers substantial benefits. What is instantaneous worldwide communication worth? What would it have been worth in 1967? It's so common and important now - but it's also very cheap, so it doesn't show up significantly in many calculations of economic production.
- hyperpape 10y ago
  This is a good question. I think there is certainly some consumer surplus not captured in GDP statistics, though it doesn't necessarily undermine my point. That said, your example of curing disease is a bad case of the broken window fallacy. No longer having to combat specific diseases 1) leaves people healthy and able to contribute to economic activity, and 2) leaves the people previously employed in medical fields able to take other jobs. Maybe in 2016, where there's a seeming lack of jobs in the developed world, that's not a clear driver of economic growth, but in 1916, it was.

mhneu 10y ago

Krugman today wrote an article saying that America is at risk because some politicians are prioritizing their own power over the good of the country [0]. GOP politicians in the new cabinet and the White House are named. Why was the OP posted to Hacker News today? Is it in response to Krugman's dire warning about American democracy and how the GOP is putting us all at risk? Be careful about politics on Hacker News. The tech industry has an important role to play in media, and we know that the GOP has spent substantial sums to create bias in the media. [1] There is a strong incentive for the GOP to astroturf Hacker News and we should all be careful. It's true that "reality often has a liberal bias" - and that's because the leaders of the GOP -- politicians and their big donors -- are trying to create their own reality, where they can cut taxes to keep more money in the pockets of the 0.01%. Use your own head when you see links like this. [0] http://www.nytimes.com/2016/12/19/opinion/how-republics-end.html http://www.nytimes.com/2016/12/19/opinion/how-republics-end.... [1] http://www.salon.com/2008/09/24/mccain_letters/ http://www.salon.com/2008/09/24/mccain_letters/ edit: I expect the vocal right-leaning minority here to vote heavily; if you agree with the above and you're not a frequent voter please upvote posts here you agree with.

kurthr 10y ago

All of this was written before the Dotcom boom! Do you remember when you had to .com after every company or had to put www. before every company, because almost no one knew how to search (on AltaVista or redirect in a DNS record), or just restarted their computer to get back to the Yahoo! home page? If not, then you don't remember this time... but almost everyone remembers the DotCom bust 3 years later, when the nerds got their comeuppance! 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. -Krugman

Hasknewbie 10y ago

Bill Gates himself almost completely dismissed the Web only a couple of years earlier in his book "The Road Ahead"[0], to such an extent that he had to heavily update it in the second edition one year later. With that in perspective, is it really surprising to see non-specialists like Krugman still considering it a novelty in 1998, before Google, e-commerce, e-booking, etc? [0] https://en.wikipedia.org/wiki/The_Road_Ahead_%28Bill_Gates_book%29 https://en.wikipedia.org/wiki/The_Road_Ahead_%28Bill_Gates_b...