Julian Simon and I vs. Paul Krugman
The two economists [Krugman and Simon] appeared in different ways. Krugman wrote a deeply, though unintentionally, ironic article titled “Why most economists’ predictions are wrong,” filled with predictions that were… mostly wrong. Simon, sadly, had just passed away and so his appeared in the issue was by way of David Henderson’s remembrance of him.
This is from a recent reminiscence by Chris Alden, co-founder of the Red Herring, a now-defunct Silicon Valley publication for which I was the monthly economics columnist from 1997 to 2000. Alden goes on to list Krugman’s predictions, most of which, as he pointed out, didn’t pan out. Productivity growth didn’t fall, as Krugman predicted. Nor did the inflation rate go above 4 percent. Here’s the Krugman prediction that I found most “interesting”: “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 one prediction that did come about was the increase in the price of many raw materials. Krugman might have made money by taking the bet I offered him in that article. I think Alden goes a little too far in attributing the price increases solely to demand increases. The supply disruptions that Krugman predicted did occur.