For The Greater Good

Poor Megan McArdle. Always a bridesmaid and never a bride, intellectually speaking.

The economist equivalent of a brawl is going on between Paul Krugman and the guys at Marginal Revolution. I'm not going to pile into the dispute directly--I prefer both the style and substance of Marginal Revolution, but am well aware that Paul Krugman has forgotten more economics than I will ever know.

Of course McArdle will not address an actual argument; that takes effort.

However, I will note that the commenters Paul Krugman sends to other sites harbor a very strange faith in his predictive powers. When other economists dispute something that Paul Krugman has said, they tend to rejoinder that the reason Paul Krugman is obviously a more reliable source than this crappy ideological hack they're speaking to is that, unlike YOU, Paul Krugman has gotten things right over and over.

But it takes no effort to accuse Mr. Krugman of sending commenters to other sites. Or to say that if you ever get anything wrong then obviously you're not reliable. McArdle gets almost everything wrong and is very unreliable but almost everyone has different standards for the other side than they have for themselves.

What is so strange about this belief--aside from the collective hyperlocal amnesia that prevents them from remembering that yes, even the great Paul Krugman has made some bloomers in his time--is that the examples of his Nostradamus-like powers are not, in fact, at all special. Chief among them--the sort of Ur prediction upon which he has apparently made his reputation--is "calling" the housing bubble in 2003.

This is chief to McArdle because it is one of the few things she did not get wrong, and since she free rides off the intellectual efforts of others (in this case Pam Woodall, as she mentions below), that's not exactly a brilliant achievement. This is the woman who said that the US would not have a recession, after all.

Contra the fuzzy recollections of his readers, this is not an example of unusual foresight unparalleled in the world of journalism. I called the housing bubble a full year earlier than he did, in 2002. The Economist was writing about the global housing bubble even earlier than that, thanks to Pam Woodall's fearsome analytic talents.

This is obviously not a sign that I am possessed of near-superhuman foresight, because while I foresaw the collapse, I did not foresee it leading to a run on the money markets, or any of the other specific events of 2008. Neither, as far as I am aware, did Paul Krugman. Nor, for that matter, Nouriel Roubini, who was predicting a crisis, to be sure, but a completely different crisis from the one we actually got, one that would be triggered by America's persistent current account deficits and dollar devaluation.

McArdle believed what she was told. Krugman based his analysis on the information he had at the time. To compare the two is the worst sort of preening.

So far, none of the people who have urged me to recognize Krugman's superior analytic abilities on the grounds that he called the housing bubble, have changed their minds and agreed with me when I informed them that I "called" it even earlier than their sage. Nor have they switched their allegiance to The Economist, which has been quite sharp about Krugman in its time.

I get the feeling that Krugman himself rather encourages this touching faith in his unusual forecasting abilities, and more generally, the notion that the only reason he is such a flaming jerk to economists he disagrees with is that they really are, every one of them, too stupid to count to twenty with their shoes on. His latest response to Marginal Revolution is a case in point:

I plead innocent. I only treat people as mendacious idiots if they are mendacious idiots.

Seriously: I have some big disagreements with Ken Rogoff, but if you use the little search box up there on the upper right and enter "Rogoff" I think you'll find that I have always treated him with respect. On the other hand, enter "Heritage" and you'll find me pretty scornful -- but with very good reason! And I always document what I'm saying.

This is true, as far as it goes: in my recollection, he always has been pretty respectful to Ken Rogoff.

But allow me to suggest--gently, gently!--that this might not be quite the whole story. For those of Krugman's readers who are not familiar with Ken Rogoff's oeuvre beyond what they have read of it on Paul Krugman's blog, it's worth noting that Ken Rogoff has not, in the past, been shy about shredding Nobel Prizewinners who made the mistake of going all Defcon 1 in Professor Rogoff's vicinity. And that it's generally agreed that the last time this happened, he got by far the better of the argument.

Paul Krugman is a brilliant man with a very fine memory. Though this angle probably eludes most of his readers, I doubt it's eluded him.

It's all about austerity and Keynesian economics. McArdle believes that a consumer spending-based economy will recover by slashing spending and Krugman does not. It should be obvious who is right but McArdle doesn't care about right or wrong. It might be wrong to lie and obfuscate but she has no choice--if liberals control the direction of the economy the entire financial industry will collapse.

She just chose the lesser evil.