Must-Read: Paul Krugman: The Decade Behind
Must-Read: Paul Krugman attempts to keep his score. I detect no minimization of errors, and no ex post moving of goalposts in a convenient direction:
The Decade Behind: “Almost 10 years…. It began with the diagnosis of a housing bubble, whose bursting I knew would be bad but had no idea would be this bad…:
…I find myself thinking about what I got right and what I got wrong…. Dean Baker, in particular, was both much earlier and much more forceful. Still… my first crisis article did, I think, add value by pointing out the huge difference in price behavior between building-constrained states and others…. Since then, what have I been right about and what have I been wrong about? Things I got right: 1. The housing bubble: It’s very much worth remembering just how much bubble denial there was, and how much it was politically driven…. 2. Inflation, or the lack thereof…. 3. Interest rates: No crowding out…. 4. Austerity hurts: A lot of people who should have known better bought into the confidence fairy, or at least accepted the notion that multipliers were fairly small…. 5. Inadequate stimulus: I warned, early and often, that the ARRA was hugely inadequate…. 6. Internal devaluation is nasty, brutish, and long…. 7. Obamacare is workable….
Things I got wrong: 1. The scale of the disaster…. 2. Deflation: I thought that Japanese-style deflation was an imminent risk in all depressed economies…. 3. Euro crackup…. I vastly overestimated the risk of breakup, because I got the political economy wrong…. 4. Liquidity effects on sovereign debt: Finally, I’m sorry to say that I completely missed the important of liquidity and cash shortages in driving bond prices in the euro area…. Although I have definitely been fallible, I think I did OK — mainly because I never let fashionable worries divert me from basic macroeconomics, and always tried to apply the lessons of history.