Afternoon Must-Read: Paul Krugman vs. The Hax of Sol III: Inflation Forecasts Department

Paul Krugman: The Year of the Weasel:

Just a brief thought about what didn’t happen in 2013, and what did. What didn’t happen was the same as what didn’t happen in 2012, or 2011, or 2010. Inflation didn’t take off; bond vigilantes didn’t turn America (or any nation that borrows in its own currency) into Greece, Greece I tell you. What did happen was a significant change in what the usual suspects–the people who have been predicting soaring inflation and interest rates, year after year–were saying. Did they admit having been wrong? No, of course not. But their excuses shifted. Through 2011 and even through 2012, it was still mainly “just you wait!”–inflation was coming any day now, or maybe it was already here but sinister statisticians were faking the numbers. In 2013, however, it became “I never said that!”–declarations that they only said that inflation was a risk, not that it would necessarily happen, so the failure of inflation to materialize was no big deal.

This is, I’d argue, a significant development, because it gives us a new window into the nature of the disagreement. As late as last year you could view this as a legitimate contest between rival models. But we’ve now seen that one side of the debate not only refuses to take evidence into account, but tries to dodge personal responsibility for getting it wrong. This has gone from a test of ideas to a test of character, and a lot of people failed.