By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

Wednesday, July 11th, 2012

I predict that in two short years, this modern-day Nostradamus will be given a bi-weekly column in the New York Times, in recognition of his predictions that Europe and Japan will overtake America; of massive hyperinflation of the dollar; and that ten years from now, “the phrase information economy will sound silly.”

– Patrick at Popehat

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27 Responses to “By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”

  1. #1 |  raptros-v76 | 

    I see what you did there.

  2. #2 |  Captain Noble | 

    Predictions are hard, especially about the future.

  3. #3 |  Patrick from Popehat | 

    My predictions are 100% correct.

  4. #4 |  C. S. P. Schofield | 

    “as the flaw in “Metcalfe’s law”–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other!”

    He neglected to consider that most of the people who have nothing to say aren’t aware of this, and consequently spend a great deal of time saying the nothing they have to say.

    In fact he is merely repeating something that (if I remember correctly) Thoreau said in WALDEN; that as miraculous as a telegraph connection between two distant cities may be (Thoreau, or whoever, named two cities, but I have forgotten them), it may be that the two cities have nothing to say to each-other. Which means that if he had remembered the source of his idea, he would also have known that he was about to make a fool of himself.

  5. #5 |  Leo | 

    I don’t get this post. Krugman didn’t say Europe and Japan were going to overtake America, and he didn’t say anything massive hyperinflation (plus, if I remember right, inflation did go up at the end of the 90s). And you can’t tell me you wouldn’t smirk at someone who said “information economy” out loud.

  6. #6 |  Johnny Clamboat | 

    I agree with Paulie Krugnuts. We need to triple down on central planning to fix the previous mistakes of central planners. The Broken Window Fallacy is just a fallacy, or something.

  7. #7 |  DJB | 

    He is now working very hard to get politicians to institute laws and regulations that will ensure his predictions come true.

  8. #8 |  Rick H. | 

    And you can’t tell me you wouldn’t smirk at someone who said “information economy” out loud.

    I wouldn’t, and I’m the sort of annoying asshole who pretty much wears a perpetual smirk.

  9. #9 |  Corey | 

    Credit where credit’s due, however, he did predict an oil price and agricultural price spike within 20 years of 1997, which we did see in 2008.

  10. #10 |  hilzoy fangirl | 

    Go team red!

    (Interestingly, at the time Krugman wrote that article, “team red” would have meant “communism” for most readers. Who could have predicted that change?)

  11. #11 |  Yizmo Gizmo | 

    I agree with Norman Mailer, the Internet is the biggest waste of
    time since masturbation was discovered…
    and I also think the US is in deep deep doo-doo unless they
    start making something (ie, products) real soon. It seems
    so obvious when you see it written, eh.

  12. #12 |  Rob | 

    Credit where credit’s due, however, he did predict an oil price and agricultural price spike within 20 years of 1997, which we did see in 2008.

    That’s like predicting that sometime in the future, another hurricane will hit the United States. The thing is, Krugnuts was wrong about its severity and the reaction to it; the internet did not cease to be an economic powerhouse because of the oil crunch. In fact, it may be argued that its economic importance increased as more people reacted to higher gas prices by telecommuting to work and shopping online rather than getting in their car and driving to work or the mall.

  13. #13 |  Other Sean | 

    “The growth of the Internet will slow drastically, as the flaw…becomes apparent: most people have nothing to say to each other!”

    That statement is shocking in the scope of what it reveals about Kurgman.

    You’ve got the casual scorn of the elitist, who never doubts that people outside of his own class are just a mass of quiescent proles.

    You’ve got the dismissive confidence of a man who controls some of what was then the scarce capital used to produce information, and who cannot believe that capital might be rendered obsolete by a new instrument he doesn’t like.

    You’ve got an “economist” who cannot even imagine how people might react when the transaction costs of social interaction is reduced near to zero.

    Being wrong was the least of his crimes!

  14. #14 |  Ghost | 

    Did y’all see the Mises scholar Pedro Schwartz take down Krugman to his face? It was on zero hedge. Too stoned to find the link right now. But find it and watch it. Don’t worry about the first couple minutes. It’s actually in English.

  15. #15 |  BamBam | 

    plus, if I remember right, inflation did go up at the end of the 90s

    Inflation always goes up by definition; deflation goes down.
    Do you mean to say the rate of inflation decreased?

    Inflation always increases, as that is what printing more money does by definition. Existing dollars are devalued because there are more of them in supply, thus it costs you more of those dollars to buy the same item. The cost of raw materials, labor, shipping, etc. isn’t necessarily the cause of increased prices.

  16. #16 |  CharlesWT | 

    Paul Krugman: “¡Acabad ya con esta crisis!

    (English starts ~9:10)

  17. #17 |  Mike T | 

    Credit where credit’s due, however, he did predict an oil price and agricultural price spike within 20 years of 1997, which we did see in 2008.

    I think I speak for everyone here when I say it takes a real psychic to predict that two markets which are simultaneously practically owned by government and subject to heavy speculator trading will have wild price fluctuation…

  18. #18 |  Ted S. | 

    I agree with Norman Mailer, the Internet is the biggest waste of
    time since masturbation was discovered…

    Masturbation is a waste of time?? ;-)

  19. #19 |  glasnost | 

    Smug wankery all around.

  20. #20 |  Boyd Durkin | 

    He might get his wish about “information economy” sounding silly. The US has few options as the result of their fiscal policies. So, they crank the PR machine that those crappy manufacturing jobs outsourced to India/China are awesome–as long as it’s you and your kids working them.

    If you wanted to kill a promising industry and bankrupt a nation, you’d have a hard time doing better than the last 20 years of policies from Washington D.C.

    That’s just my opinion. Others think better times are juuuuust around the corner if the USG can only spend 30 trillion more dollars this year.

  21. #21 |  Irving Washington | 

    The maddening thing about Krugman to me is that I have no confidence that he’s ever being sincere. He’s a very smart and accomplished academic, but his NYT pieces seem solely designed to shock. I don’t think he believes half of what he writes.

  22. #22 |  Brandon | 

    #21, the scary thing is he believes everything he writes.

  23. #23 |  DoubleU | 

    I agree with Norman Mailer, the Internet is the biggest waste of
    time since masturbation was discovered…

    But if you combined those two you can have a great and useful two minutes.

  24. #24 |  Z | 

    “massive hyperinflation of the dollar”

    We’re working on it!

  25. #25 |  AL | 

    Most of that article wasn’t that bad, and you did exaggerate some of Krugman’s already exaggerated claims. He didn’t say anything about hyperinflation, for one, positing a worst-case-scenario of 4% annual, which is not hyper. He also didn’t say Europe or Japan would overtake us, only that a mild recession here while they recover would undermine any notion that we’re far ahead of them economically.

    He did enormously underestimate the importance of the internet as you point out though. I guess the real lesson here is never underestimate the power of porn on the internet economy. People might not use the internet if “they have nothing to say to one another,” but you don’t need to say anything to one another to enjoy what the billion dollar+ porn industry is putting on the ‘nets.

  26. #26 |  Bob | 

    I gotta admit, back when the intertubes were just starting to see HTML, I didn’t think they’d amount to a hill of beans economically, either.

    And the people I worked with who did weren’t exactly producing a compelling argument. At the time, there was one company you could actually order anything from on the web, a pizza place in Santa Cruz. But of course, you couldn’t PAY for your pizza on the web, you paid the delivery person. Also, you STILL had to call and confirm your order after you made it. It was the most uselessly gratuitous use of a technology “Just because it’s there.” you could imagine. As a marketing ploy, it was great… but as an actual way to buy a pizza, not so much.

  27. #27 |  Leon Wolfeson | 

    The thing is…people frequently don’t have anything to say to each other, but that doesn’t stop them doing so anyway. Humans!

    (I freely admit I’m not a technophile, unlike many of the people working in creative media. My question is always “what is it useful for”)

    Krugman always gets these little details wrong.

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