5 ms·

Why most economists' predictions are wrong (1998)

26 points by patrickaljord 13y ago

patrickaljord 13y ago
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.
- elgabogringo 13y ago
  "Why most economists' predictions are wrong." - By an economist whose predictions are mostly wrong.
- phaed 13y ago
  How is this guy still taken seriously?
  - cblanc 13y ago
    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?
    - VMG 13y ago
      Then how could he have been so wrong in his prediction?
      - MisterBastahrd 13y ago
        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.
nullterminated 13y ago
Clearly Krugman has underestimated the impact the fax machine has had on the economy.
mattgreenrocks 13y ago
Hate to be that guy, but what is the purpose of digging this up? To say "ha ha, the Internet is amazing?"
- k-mcgrady 13y ago
  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.
- hatu 13y ago
  He wrote a critical article about Bitcoins
- potatolicious 13y ago
  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.
  - smokeyj 13y ago
    I don't think opinions are meant to be refuted.
  - 3pt14159 13y ago
    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.
k-mcgrady 13y ago
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.
elgabogringo 13y ago
Krugman is a hack.
snitko 13y ago
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/ http://krugman.blogs.nytimes.com/2013/12/29/the-humor-test/
- k-mcgrady 13y ago
  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.
- deleted 13y ago
  [deleted]
- pdeuchler 13y ago
  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.
VMG 13y ago
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.
- ye 13y ago
  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".
  - onebaddude 13y ago
    >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.
    - joshuapants 13y ago
      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.
      - onebaddude 13y ago
        >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.
jhonovich 13y ago
He who has not made an incorrect prediction in the past 15 years shall cast the first stone....
bjornsing 13y ago
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...? :)
ffrryuu 13y ago
Because economists are paid to push a point of view by their employer. Eg the Bank or the Fed.
T-A 13y ago
Yet another example of Amara's law, http://en.wikipedia.org/wiki/Roy_Amara 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").
vermooten 13y ago
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.

26 points by patrickaljord 13y ago

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.

elgabogringo 13y ago
"Why most economists' predictions are wrong." - By an economist whose predictions are mostly wrong.
phaed 13y ago
How is this guy still taken seriously?
- cblanc 13y ago
  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?
  - VMG 13y ago
    Then how could he have been so wrong in his prediction?
    - MisterBastahrd 13y ago
      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.

nullterminated 13y ago

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

mattgreenrocks 13y ago

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

k-mcgrady 13y ago
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.
hatu 13y ago
He wrote a critical article about Bitcoins
potatolicious 13y ago
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.
- smokeyj 13y ago
  I don't think opinions are meant to be refuted.
- 3pt14159 13y ago
  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.

k-mcgrady 13y ago

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.

elgabogringo 13y ago

Krugman is a hack.

snitko 13y ago

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

k-mcgrady 13y ago
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.
deleted 13y ago
[deleted]
pdeuchler 13y ago
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.

VMG 13y ago

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.

ye 13y ago
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".
- onebaddude 13y ago
  >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.
  - joshuapants 13y ago
    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.
    - onebaddude 13y ago
      >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.

jhonovich 13y ago

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

bjornsing 13y ago

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...? :)

ffrryuu 13y ago

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

T-A 13y ago

Yet another example of Amara's law, http://en.wikipedia.org/wiki/Roy_Amara 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").

vermooten 13y ago

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.