Krugman's Phony Disaster

Paul Krugman penned an unusually dishonest editorial recently, When Prophecy Fails, in which he chastises the "economic doomsday prophets" for there being no catastrophe coinciding with the fiscal cliff negotiations.

It is an absurd piece because even Paul Krugman must know that those he considers to be "doomsday prophets" are primarily of the Austrian School of economics, and the reason followers of that school see economic hardship increasing has little to do with kabuki negotiations taking place in Washington that won't have any effect on solving the fiscal problems of the United States.

While economists cannot predict politicians and their decisions, there was little reason for anyone to predict that there would be anything other than some variant on the dominant Keynesian model resulting from the negotiations. As it turns out, there were some superficial proposed cuts in spending and a small tax increase on the top income earners, but nothing that would indicate a desire to balance the budget.

When the fiscal cliff negotiations failed to significantly accelerate the collapse of the economy, something no Austrian had reason to predict, Krugman seized the opportunity to say "see, these negotiations failed to significantly accelerate the collapse of the economy."

Some would say that Paul Krugman should know better, but his purpose in writing that was not to convey economic information from the author to the reader. His purpose, as is the case with most of his columns, is political, to lend support to the establishment economic model by virtue of his name and prestige through a straw man attack on an alternate economic model.

Prophecy did not fail. There was no prophecy to fail, except in the political and not economic imagination of Paul Krugman himself. Only those economists who subscribe to the mainstream view, and not the "doomsday prophets", were at all concerned about the fiscal cliff model.