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“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”

“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”

Apparently an actual statement by someone who wants to design our economy.

H/t to Kathleen:

Twitter - @kaymccaffrey - Krugman 1998

Here’s the link, and the full quote:

The growth of the Internet will slow drastically, 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! 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.

As far as I can tell, it’s for real.

But if not, it should be, as someone once said.


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Krugman (former Enron adviser) wrote this in 2002…

The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

People forget how monstrously wrong these “brights” are, and the havoc they wreck.

Krugman is to economics what Yes-sir Arafat was to world peace. I think at some point, the Nobel Prize people started inverting the whole idea.

    Krugman is of the economic school which teaches that everyone should be given a trillion dollars and a beachfront property in Hawaii… then left alone to fight to the death.

Oh there are lots of people with power who want to design the economy. Unfortunately they are usually about as prescient as this guy and that’s apart from the knowledge problem Hayek wrote about if they were wise. And without vested financial conflicts. explains that the feds have decided to reimagine federal revenue sharing to states and localities around restructuring to low carbon, Inclusive Competitiveness economies that take care of urban areas. Apparently yet another thing set up in the hurriedly passed but unread 2009 Stimulus Act.

But nobody sent us the memo explaining that or how it ties into all those education reforms as well. We might have protested. Or there’s the Global Cities Initiative being put on by Brookings and JP Morgan Chase (a thank you for bailout is pushing cronyism everywhere?) and it may be coming to a city near you soon. It just left Atlanta and the GCI road show hits Houston on May 15.

Seriously we always forget that all those former Marxists never learned to like markets. All these publicly funded Corporatist models are doing are giving business execs a real taste for collusion and collaboration with their supposed regulatory overlords. When rejecting all this as Marxism because it is not state ownership, it would be good to remember the historical progress part of Marx’s theory. It was tied to technology and a whole lot of former Marxists want state centralized planning around the idea that ICT and computers are the golden technology that would bring an era of milk and honey and leisure. Just like Uncles Karl and Friedrich wrote about so long ago.

If they get to use the regulatory powers of government to drive the cultural and historical visions that came with Marx’s dream, who actually owns the assets is of little real importance. At least as long as those owners are cooperative.

I was just reading some of the 20 year old blueprints this morning and realizing it’s no winder all these connected execs keep praising the Chinese model.

…most people have nothing to say to each other!

Krugman thinks people don’t talk when they have nothing to say? Sheesh, no excuse:

First, he’s an academic.

Second, he writes a commented blog.

Third, he’s married.

Fourth, I’m outa here before LIonesses tear me limb from limb.

Midwest Rhino | April 2, 2013 at 11:50 am

Krugman is just a tool of Big Government, defying the real laws of economics, enabling the big spenders. More than the economic world, the political world is changing with the borderless internet. Facebook, Google, Snopes, Wikipedia … all lean left and discreetly twist the digital world toward leftist propaganda, more efficiently than Krugman’s old screed.

I had my first web page in 1995, and always looked forward to the growing technology. Krugman is a blind pig, and was probably responding to the dotcom bubble. Worthless companies with no business plan would go public and soar 500%, merely by claiming internet status. Many smart people went bust trying to short them. But the impetus of that bubble was real, despite Krugman’s stupid statement.

    1. Facebook, Google, Snopes, Wikipedia … all lean left and discreetly twist the digital world toward leftist propaganda…

    Yet once upon a time, iirc, the tech community had a substantial libertarian streak, much of which has now gone outright left. A crucial question is how that kind of talented individual became alienated from conservatism.

    2. Krugman…was probably responding to the dotcom bubble.

    The bubble had just begun to inflate when K’s piece appeared in June 1998. During the following two years the NASDAQ almost tripled.

    3. But the impetus of that bubble was real, despite Krugman’s stupid statement.

    Exactly. Society was changed by the technology by which the Internet bubble was rationalized. The housing bubble, on the other hand…

      Midwest Rhino in reply to gs. | April 2, 2013 at 5:33 pm

      Yeah … I’m not in the tech field, but it seemed open source was a big deal, which is kinda libertarian. But those dreamy kids seem more susceptible to leftist propaganda, designed around mocking traditional America. Many still think Obama is working hard to deliver those promised unicorns.

      You’re right about the dotcom bubble mostly coming later, thanks for the chart. But AMZN and YHOO were already more than “ten baggers” by June 1998, and seemed pretty overpriced.

      There was still a big question whether AMZN could ever beat the bricks and mortars. They were taking a loss on every sale just to get market share. YHOO was just a search engine, and those were a dime a dozen and would probably just be utilities that couldn’t turn much profit … until Google somehow dominated, at least till now. AMZN is still losing money.

      But the influence of the internet grew steadily, despite stock price craziness. Housing is different, but both bubbles were probably mostly due to easy money policy. I remember three rate cuts in a row that skewered some short players. The Greenspan put was well established, and the players got rich, then bailed out.

        SoCalPatriot in reply to Midwest Rhino. | April 2, 2013 at 11:39 pm

        I’m not in the field either. I’m kind of an analog kind of guy. But I do know politics-fueled behavior. You are right, Midwest Rhino. The young people who supposedly ran with the internet ideas are anything but freedom loving, market oriented conservative types.

        I am very suspicious of the term “libertarian.” What it means in the open world is isolationist from a security and trade standpoint. A Ron Paul world that blames us for all the ills of the world and thinks that we can retreat into a “Fortress America” and be safe. The worst representative of “libertarian” was the weekly rants of their party spokes holes ripping George Bush, When the liberal insanity was all around strangling them.

        The young people are definately susceptible to leftist propaganda. They kick and scream when they have to pay for something (i.e. music)and want everything free and given to them, railing against the “establishment,” then vote for Stalinist thugs as political leaders. It could be two symptoms of the same illness. They crave “cool.”

        I do feel that the biggest contradiction is the high tech people (Google, Microsoft, et al) that pay lip service to freedom but embrace totalitarianism. I just don’t understand it.

Internet: “I get no respect.”

What a stupid analogy. The Internet is not simply a device, it is a marketplace.

“Today I’ve invited some of the smartest people in the country, some of the most imaginative and effective researchers in the country — some very smart people to talk about the challenge that I issued in my State of the Union address: to grow our economy, to create new jobs, to reignite a rising, thriving middle class by investing in one of our core strengths, and that’s American innovation,” said Obama.

Obama declared himself the “Scientist In Chief”.

Central planning economies do NOT innovate. Markets DO.

Be afraid. Be very afraid.

Krugman is an economic ass, Nobel Prize notwithstanding. The tax free internet is the glue holding our economy together against the onslaught of administrative socialism.

The proof of that is the fact that the states and feds are looking to tap that market through taxes, and thereby sticking a knife in it and any possibility of a quick recovery.

A priceless putdown of Krugman and his presumed authority on all things economic:

This guy is worse than incompetent: he’s truly nuts.