Paul Krugman: The Prophet of Socialism
A prophet who has been consistently wrong.


Donald L. Luskin

Editor’s Note: This article is excerpted from Donald Luskin’s new book, I Am John Galt.

Christiane Amanpour’s eyes darted back and forth in fear, and her mouth twisted in disgust, because she could see where this was going. A guest on her Sunday-morning political talk show, ABC’s This Week, was getting dangerously overexcited, and something very regrettable was about to happen.

She could see that he was winding himself up as he talked about how a recent deficit-reduction panel hadn’t been “brave enough” — because it failed to endorse the idea of expert panels that would determine what medical services government-funded care wouldn’t pay for. When Obamacare was still being debated in Congress, Sarah Palin had created a media sensation by calling them “death panels,” causing most liberals who supported Obamacare to quickly distance themselves from any idea of rationing care as being tantamount to murder.

Cut to Amanpour’s horrified face. Cut back to the guest. Then it happened.

The guest said, “Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes.”

It was all the more horrifying because the guest was not a conservative, not an opponent of Obamacare. This guest was an avid liberal, a partisan Democrat, and an enthusiastic supporter of government-run health care. He was endorsing death panels, not warning about them. He was saying death panels are a good thing. And it was even more horrifying because of who this guest was. This was no fringe lefty wearing a tinfoil hat, churning out underground newspapers in his parents’ basement. This was an economics professor at Princeton, one of the country’s most prestigious universities. This was the winner of the Nobel Prize in economics, the highest honor the profession can bestow. This was a columnist for the New York Times, the most influential newspaper in the world. This was Paul Krugman, live, on national television, endorsing government control over life and death. And while we’re at it, let’s raise taxes on those who are permitted to live.

Who exactly does Paul Krugman think he is? He’d like to think he’s John Maynard Keynes, the venerated British economist who created the intellectual framework for modern government intervention in the economy. Keynes is something of a cult figure for modern liberal economists like Krugman, who read his texts with exegetical fervor. But Krugman will never live up to Keynes. However politicized his economic theories, Keynes’s predictions were so astute that he made himself wealthy as a speculator. Economics is called “the dismal science,” but as we’ll see, Krugman’s predictions are so laughably bad his economics should be called the abysmal pseudo-science.

Most critiques of Krugman as a public intellectual begin with what is apparently an obligatory disclaimer, usually in the very first sentence — something to the effect that Krugman is a very accomplished and well-respected economist. Then comes the “But . . .” and the critique proceeds in earnest, often scathingly.

But why concede this honor to Krugman? So what if he won the Nobel Prize? The real test of Krugman’s mettle as an economist is the accuracy of his economic forecasting. The fact is that, with about three decades of evidence now in, Krugman’s track record, to use a technical term favored by economists, sucks.

He’s not always candid about this. But once, under the pressure of a televised debate with conservative talk-show host Bill O’Reilly, Krugman blurted out an understated if truthful self-evaluation: “Compare me . . . compare me, uh, with anyone else, and I think you’ll see that my forecasting record is not great.”

The most egregious example of “not great” is Krugman’s utterly incorrect 1982 prediction that inflation would soar. He made this prediction from no less lofty a perch than the White House, as staff member of the Council of Economic Advisers in the first Reagan administration. In a memo titled “The Inflation Time Bomb” Krugman wrote with co-author Lawrence Summers, “We believe that it is reasonable to expect a significant reacceleration of inflation . . . at least 5 percentage points to future increases in consumer prices. . . . This estimate is conservative.”

It also turned out to be hilariously, side-splittingly, knee-slappingly, rolling-on-the-floor wrong. Except for a tiny uptick the very next month, inflation didn’t rise; it fell. Four years later, it had fallen to 1.18 percent, a rate so low as to border on deflation.