A fun show is breaking out. Niall Ferguson on "Krugtron the invincible."
Paul Krugman, for a while now, has been lambasting those he disagrees with by trumpeting their supposed "predictions" which came out wrong, and using words like "knaves and fools" to describe them -- when he's feeling polite. These claims often are based on a rather superficial, if any, study of what the people involved actually wrote, mirroring the sudden narcolepsy of Times fact-checkers any time Krugman steps in to the room. Niall has lately been a particular target of this calumnious campaign.
Niall's fighting back. "Oh yeah? Let's see how your "predictions" worked out!" Don't mess with a historian. He knows how to check the facts. This is only "part 1!" Ken Rogoff seems to be on a similar tear. (and a new item here.) This will be worth watching.
As regular blog readers know, I don't think science advances by evaluating soothsaying. You make good unconditional predictions with very badly wrong structural models, and very good structural models make bad unconditional predictions. The talent of predicting and the talent of understanding are largely uncorrelated. The judgmental forecasts of individuals are poor ways to evaluate any serious economic or scientific theory. I carefully don't make "predictions" for just that reason. So, I don't regard this cheery deconstruction effort as a useful way to show that Krugman's "model," whatever it is, is wrong. I also can't see that anyone but the devoted choir of lemmings is paying much attention to Krugman's mudslinging any more. But it is nice that Niall and Ken are taking the effort to ask the great doctor if perhaps he also doesn't need a bit of healing; perhaps they will force Krugman to go back to actually writing about economics.
Update: Benn Steil Chimes in, this time on the Baltics, Iceland, and the supposed wonders of currency devaluation.
Tuesday, October 8, 2013
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My money would be on Krugman.
ReplyDeleteRelevant:
ReplyDeletehttp://noahpinionblog.blogspot.com/2013/04/krugtron-invincible.html
What I recall is that Krugman's predictions on the economics of the euro were correct and that his conclusion that Greece would leave the currency union was motivated by his analysis of the politics: he thought that the Greeks would not take any more of the pain and choose to leave. It seemed to me that he made an obvious mistake there, because the degree of political commitment is huge: the euro is the project of an entire generation of European leaders that inherited a continent torn by WWII. So I think he was right about the economics but not about the politics. In fact, Krugman is awful at forecasting political events. But it seems to me that Roggoff and Ferguson should be explicit at pointing out that his political analysis was wrong, not his economic analysis. At least not in this case.
ReplyDeleteI am a regular reader of this blog as well as Krugman's (and those of DeLong, Mankiw, etc.) because I like to hear all the different sides of the debate. What I do not like is the vitriol. I think Krugman is largely responsible for that, but I also think that people like Lucas and other economists were largely dismissive of Keynesian approaches. That does not help either.
Great blog. Greetings from Peru.
"The talent of predicting and the talent of understanding are largely uncorrelated". They might be uncorrelated, but they are certainly not independent.
ReplyDelete"As regular blog readers know, I don't think science advances by evaluating soothsaying." and neither does it by mudslinging. Why not have a proper scientific discussion about whose models reflected actual reality the best and whose did not? This way we could maybe come to an actual scientific theory instead of just "opinion". I did not read Krugman for a while for his personal attacks as they added little to the academic debate. Now it looks like he dragged others also on that level. I wish economics would not sink into reality TV territory but alas that may remain a futile hope. I doubt the world will be better off for it.
ReplyDeleteOh my God, I've created a meme monster.
ReplyDelete"Krugtron" survives but Professor Cochrane has quite missed the point of your original post.
Deletenote all the adjectives Krugman used. "Maybe, may, might, possible, rapidly approaching"
ReplyDeleteI see no predictions made by Krugman in any of Ferguson's quotes. Compare it with this list
http://www.businessinsider.com/niall-ferguson-bad-track-record-on-economics-keynes-comments-2013-5
Main point I think is that classical models predict that a massive stimulus should drive up interest rates which did not happen. What is the explanation for that, Krugman's bad manners notwithstanding?
what massive stimulus?
DeleteNone of those are adjectives, by the way.
DeleteIf we disregard the fact that Niall Ferguson has no training in macroeconomics (and that is obvious everytime he opens his mouth), that could be interesting. Or not really.
ReplyDeleteI think people should be evaluated by whether what they say makes sense, not by "training," or "expertise." Lots of economists venture into history with zip training. And I think it's a lot less embarrassing to talk sensibly about economics with a history degree, as Niall does, than it is to have a lot of training and then violate all of its principles, like many economists do.
DeleteOK, evaluate Ferguson by whether what he says makes sense. Here's what he wrote in "The Ascent of Money" about statistical inference:
DeleteJacob Bernoulli proposed in 1705 that ‘Under similar conditions, the occurrence (or non-occurrence) of an event in the future will follow the same pattern as was observed in the past.’ His Law of Large Numbers stated that inferences could be drawn with a degree of certainty about, for example, the total contents of a jar filled with two kinds of ball on the basis of a sample. This provides the basis for the concept of statistical significance and modern formulations of probabilities at specified confidence intervals (for example, the statement that 40 per cent of the balls in the jar are white, at a confidence interval of 95 per cent, implies that the precise value lies somewhwere between 35 and 45 per cent – 40 plus or minus 5 per cent).
I continue to be mystified that anyone bothers to read what he writes.
I think the crux of the problem is not Ferguson's lack of training in Economics (that was my euphemism), but the observation that Ferguson gets nearly everything wrong on Economics.
DeleteIronic how Cochrane says that Ferguson "knows how to check the facts." According to this esteemed historian: "Currently, net interest payments on the federal debt are around 8% of GDP."
DeletePretty soon, even Cochrane will be forced to preface Ferguson's name with "Harvard professor" in order to mitigate Ferguson's collapsing reputation.
I think the Krugman-Ferguson "debate" is a keen reminder of why history isn't as interesting (barring hobbyism) as economics. Historians read history and make soothsayer predictions. Economists regularly make predictions, but give time-tables and estimates of magnitude.
ReplyDeleteThe difference between Krugman and Ferguson is that the former is sometimes a soothsayer, sometimes economist whilst the latter is by trade only a soothsayer. Call Krugman what you will, but at least he's consistent with applying a model-based methodology.
Careful examination of the Krugman quotes reveals qualifiers such as "it looks like x is the case" or "x is more possible". Not "x is certainly the case"...then Neil goes on to talk about R&R's 90% "Law of Finance" and "the Great Hyperinflation of the 2010's". Bold, but far more foolish.
Let's be honest: Krugman rubs people the wrong way because of his rhetoric, not his predictions.
Can I just introduce the words "numpty", "eejut" and "gobshite" from the Celtic fringes to describe Prof Fergusson? Or "tosspot" if we stick to the Anglo Saxon core.
ReplyDeleteAre those synonymous to "pompous mediocrity" or "overrated charlatan"?
DeleteI think we need more calling-out on predictions and more openness on the track records of models. It seems to me that most macro models on both sides of the aisle were created for the purpose of arguing for more or less government intervention in the market instead of trying to accurately forecast the economy.
ReplyDeleteThe problem with this is that Ferguson has been writing sheer, utter garbage for a while now (years in fact) and getting accolades for the same. He really does need to be brought down, and you surely don't seem to be in a hurry to rebuke him, so it falls to Krugman. Incidentally, he writes plenty of econ on his blog, perhaps not microfoundations econ, but econ nonetheless. Rogoff is a different case completely. Aside from the 90% debt paper, Krugman has been very nice to him, as far as I can see. And the 90% paper did a lot of harm, even if you don't happen to believe in huge fiscal multipliers right now.
ReplyDeleteFerguson is an historian. Shouldn't he go back to writing history rather than arguing with Krugman? I bet Bob Murphy would be happy to take up the slack, perhaps ghost-writing to take advantage of Ferguson's name recognition.
ReplyDeleteDon't forget this epic Krugman take down by the late great Anna Schwartz: http://www.nybooks.com/articles/archives/2007/mar/29/who-was-milton-friedman/?pagination=false
ReplyDeleteHow, exactly, do you think science advances, if not by "evaluating soothsayers"", that is, testing predictions against actual results? I thought using models to develop testable (and more importantly falsifiable) propositions (i.e., predictions) and then conducting experiments to see if the predicted results occur was the ESSENCE of science. I find your nihilsm regarding rigor and accountability shocking.
ReplyDeleteBrad deLong deconstructs Ferguson.
ReplyDeletehttp://delong.typepad.com/sdj/2013/10/laboring-in-vain-to-raise-the-level-of-the-debate-over-the-debt-and-the-deficit-low-morale-weblogging.html#more
A quibble: there's some double speak going on. Krugman has claimed to have been right about essentially everything, and that Ferguson has been wrong about essentially everything. Ferguson interprets that extremely narrowly to mean Krugman claims to have been right specifically about his prognostications. That's not really true. In economics, we often use the term "prediction" to mean something a bit different than it's common definition. Economist use "prediction" to refer to a particular result of the theoretical model, which may either be confirmed or refuted by the data. Notably, this does not mean that the model actually makes unconditional forecasts in the data. The "prediction" is merely a conditional forecast--a causal relationship between variables within the model.
ReplyDeleteFerguson takes a lot of quotes out of context, but it is pretty clear from the context that Krugman is only claiming that the recession has been consistent with the "predictions"--in the economic theorist's use of the word--of his New Keynesian liquidity trap model. He does not claim to have "prognosticated" anything. One such prediction is that conditional on the economy remaining in a liquidity trap, QE would not cause hyperinflation. Many conservative economists and commentators like Ferguson "predicted" the exact opposite: that even in a liquidity trap, QE would cause hyperinflation. We did stay in a liquidity trap, we did get QE, we did not get hyperinflation. At least as far as that particular "prediction" goes, one set of models was vindicated, and an alternative set of models--including Ferguson's--was debunked.
So, to sum up, Krugman's "right about everything" does not mean that he claims to have foreseen anything. To suggest that's what he meant is to take him totally out of context. An historian should know better than to do that.