David R. Henderson  

Will Paul Krugman Say He's Sorry?

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Being Paul Krugman means never having to say you're sorry.

Paul Krugman writes:

But being a conservative means never having to say you're sorry for predicting inflation.

He's talking about Art Laffer's prediction in 2009 that inflation due to the large growth in the money supply would be very high. Of course, Laffer was wrong. I was pretty confident at the time that he would be wrong, which is why I bet Bob Murphy and won. I wish I had bet Laffer, who probably would have been willing to bet more, as I would have.

Anyway, the implication from Krugman's sentence is that someone who predicts high inflation should say he's sorry when his prediction fails to materialize. I don't think one should necessarily say one is sorry: I think one should say simply that he was wrong.

But, hey, Krugman does seem to believe that people who make such wrong predictions should say they're sorry.

Those who follow my posts on Krugman probably know by now where I'm going. The first week he, Larry Summers, and I were senior economists under Martin Feldstein, chairman of the Council of Economic Advisers, Paul and Larry wrote a memo predicting high inflation. I made a copy at the time because I thought it was wrong. And it was.

But I don't recall Paul ever saying he was wrong, let alone apologizing. Can anyone find evidence that he did? If not, will he do so now?


Commenter Zack points out below that Paul Krugman, in a post titled "In Praise of Art Laffer," actually credited Laffer for his intellectual honesty after his inflation prediction failed to come true. Krugman wrote:

This is a remarkable act of intellectual honesty -- remarkable because it happens so rarely.

I do wonder exactly what model Laffer was using. As I pointed out again and again, basic IS-LM analysis said that even huge increases in the monetary base aren't inflationary in a liquidity trap; and yes, I was making that prediction in advance. From where I sit, our models have worked just fine.

But still, credit where it's due -- Laffer, unlike almost everyone else in the inflationista camp, has admitted both that he was wrong and that some rethinking is needed.

Comments and Sharing

CATEGORIES: Monetary Policy

COMMENTS (5 to date)
Peter Lewin writes:


On what did you base your contrary prediction?

David R. Henderson writes:

@Peter Lewin,
A bunch of things:
2. Gut feel
3. My view that Bernanke was smart enough to start reining in the money supply if inflation did go above, say, 4%

JHanley writes:

Following the links, I was amused to see that PK's memo was written on paper encouraging federal employees to return some of their money to their employer by buying savings bonds.

So as a citizen, I'm curious to know whether people in the Council of Economic Advisers buy U.S. savings bonds.

Zack writes:

Rather strange post from a guy who wrote this just a couple years ago.

David R. Henderson writes:

Thanks, Zack. I updated above. It’s kind of amazing.

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