Thanks to Paul Krugman, my life is starting to resemble Groundhog Day. Essentially, every morning, when I pull up the New York Times on my BlackBerry, right after opening my eyes, I find myself reading the same article, from the same person, day in and day out -- just like Bill Murray found himself reliving the same terrible day over and over again.
Meet Punxsutawney Paul
The source of this madness, of course, is Paul Krugman, an intensely left-wing economist who seems convinced of his own omniscience. Lately, Krugman has been spouting off about what he thinks are the very specific reasons that fiscal stimulus failed, why Democrats are blowing it, and why Republicans are the largest entity standing between Americans and a decently healthy economy. And he's been doing this quite a lot.
Here are just a few snippets from his recent articles:
|"Falling Into the Chasm"||10/24/10||"America needed a much stronger program than what it actually got... This isn't 20-20 hindsight: the inadequacy of the stimulus was obvious from the beginning….What we do know is that the inadequacy of the stimulus has been a political catastrophe."|
|"British Fashion Victims"||10/21/10||"[P]remature fiscal austerity will lead to a renewed economic slump."|
|"Hey, Small Spender"||10/10/10||"[T]hat has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need."|
|"The End of the Tunnel"||10/07/10||"When people ask why the Obama stimulus didn't accomplish more, one good response is to ask, what stimulus?"|
|"Things Could Be Worse"||9/09/10||"If the Republicans go beyond obstruction to actually setting policy…we'll be on our way to economic performance that makes Japan look like the promised land."|
|"This Is Not a Recovery"||8/26/10||"In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small."|
There are a few problems here that I'd like to confront. First, I'm getting pretty tired of reading the same article over and over again. Mr. Krugman, please try a fresh angle.
Second (and far more significantly), while I fully believe that everybody is entitled to their own opinion, I, like most rational observers, also believe that no one can possibly know everything there is to know about something as complex as the U.S. economy.
Overconfidence in action
While Krugman is more qualified than most to provide commentary on the subject (at least, he is if you're swayed by a long career spent in classrooms), he seems to lack the basic intellectual humility necessary for effective thinking and writing.
No one -- even economists -- fully understands how a complex, adaptive system like the U.S. economy really works. Yet that's precisely what Krugman is selling here with his excessively definitive stance on the issue.
How many times do we need to be burned by economists (of any political stripe) and their lousy, confidence-laden predictions to learn that economists don't really know what they're talking about? How is it possible that Krugman can analyze the same economic history everyone else is looking at and come to the right conclusion, while everyone else is dead wrong?
Answer: It's not a science
The answer lies in the core of what an economist really studies. A science, by definition, is a body of knowledge that can provide the requisite conditions to replicate certain results repeatedly. If I mix two vials of this green stuff with one vial of the blue stuff, I know I'll get three vials of purple stuff … and so forth. But that isn't how economic theory works. If anything, economics is a pseudo-science that offers results that are only occasionally predictable, but never certain.
A true scientific understanding of the economy would require the ability to read the future. Krugman can't do so. He may know more about what has worked in the past (which might be helpful if the past were always like the future), but his guess is as good as mine when it comes to predicting the next five years, five months, or five days.
This is precisely what makes the existence of someone like Krugman particularly dangerous. He has the name, the brand, and the resume to sound like a credible authority on tea-leaf reading. He has the confidence and the knowledge to write convincingly on the subject, too. And he clearly has a conduit via the New York Times. But he obviously lacks the modesty to understand that even the most cogent of economic analysis is problematic, at best.
End this waking nightmare
I'm not an economist; I'm an investor. I couldn't really care less about whether the Obama administration is following the righteous, economic path to prosperity or not (mostly because I don't know what that path is -- and I know that nobody else does, either). My primary mission is to try to figure out ways to make money based on the probabilistic outcome of certain events.
Krugman undoubtedly doesn't supply that kind of knowledge. Instead, he seems solely concerned with banging his head on a table, trying to convince the world that his particular brand of economic policy is the right kind. My best counsel is to be careful incorporating his advice into your own. His guess is, after all, just as good as yours.