The Center for Geoeconomic Studies Destroys Paul Krugman
Paul Krugman has a lofty platform. He has a massive megaphone and an epic echo chamber. He has a Nobel Prize for economics. Does any of this mean we should listen to him? If you buy into this from Nassim Nicholas Taleb or the following, no.
When Friedrich von Hayek became a Nobel Laureate in economics in 1974 he said: “The Nobel Prize confers on an individual an authority which in economics no man ought to possess.” The truth of this is demonstrated daily by the case of Paul Krugman.
And some more evidence (there’s lots) that we’d be well advised to ignore Krugman? How about something from The Center for Geoeconomic Studies (associated with the Council on Foreign Relations) which shows he chose to cherry-pick his facts in order to “demonstrate” the “Icelandic Post-Crisis Miracle.”
We showed that Krugman’s “miracle” was merely an artifact of comparing changes in Iceland’s real GDP with that of Estonia, Ireland, and Latvia since the strategically chosen 4th quarter of 2007.
Why did Krugman choose the 4th quarter of 2007? Because starting with any other quarter would have ruined his story. Based on the GDP data available at the time he made his figure (which have since been revised), Iceland’s GDP had fallen a whopping 5 percentage points between Q3 and Q4. By starting his story in Q4 Krugman managed to lop that off, making Iceland look much better.
We showed that the miracle story collapses as the starting date for the comparison is backed up. What we find is a simple story of large booms and busts in Estonia and Latvia, and much smaller booms and busts in Iceland and Ireland.
Ah, the question of economics (and government): what’s your baseline?
The Center initially showed how Krugman constructed his false-miracle in 2010, but now he’s dragging the issue back to the surface. So what’s the real Krugman agenda?
Once again, Krugman has relied on a Potemkin-Village graphic to illustrate his wider claim, which is that Icelanders derive unambiguous net benefits from their government obliging them to hold and transact in a national currency that their trading partners will not accept. (80% of Greeks consistently reject going back to such a state.)
Liberal economists: choosing facts that support their positions, ignoring those that don’t.