Friday, January 1, 2021

The 2021 Forecast From the Economist Who Makes the Worst Forecasts

Paul Krugman, economic forecaster

 In 1988, Paul Krugman stepped up to the plate and told us:

 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.

In 2012, Krugman came out with a book titled,  End This Depression Now!,  when it was clear the Great Recession was over years earlier.

The chart above shows real GDP for the entirety of the Great Recession and the recovery.

The economy had clearly turned the corner in mid-2009 (red arrow). It was asinine to write a book three years (yellow arrow) later calling for an end to a Depression that didn't exist at that time. In fact, real GDP was at a new all-time high when the book came out. But that is how Krugman's rolls and he is not stopping now.

Just hours before the New Year begins, Krugman's latest column has dropped at The New York Times.

It begins--drum roll-- with a forecast:

The next few months will be hell in terms of politics, epidemiology and economics. But at some point in 2021 things will start getting better. And there’s good reason to believe that once the good news starts, the improvement in our condition will be much faster and continue much longer than many people expect.

I am saving this forecast for future reference. He may have outdone himself. 

This forecast could be a bigger flopperoo than his forecasting that the internet will have no greater impact on the economy than the fax machine.

In the EPJ Daily Alert, I am forecasting that by mid-year, roughly about the time Krugman says the good news will start and that things will be getting better, a serious jump in price inflation. First to 3%, then 5% and then possibly as high as 10%.

It is going to be the exact opposite of the good times rolling.

Given his track record, you really have to wonder if Krugman would be able to accurately forecast a subway train arrival at Times Square even if he was using a real-time subway train arrival app.


1 comment: