Nobel Prize-wining scholar confesses that he was wrong about inflation

Professor Paul Krugman at the City University of New York, a scholar who won a Nobel Prize in economics, confessed openly over his wrong predictions about inflation. The professor, an opinion columnist at The New York Times, acknowledged in an op-ed titled “I Was Wrong About Inflation” on Wednesday (local time) that he made a mistake of applying economic models of the past to the contemporary era.

Professor Krugman argued last year that inflation will not be as part of a future scenario that may unfold as a result of U.S. President Joe Biden’s pump-priming policy worth 1.9 trillion dollars in response to the COVID-19 pandemic. According to his arguments, when it comes to inflation, there is nothing to be scared of. He maintained that even after a large-scale public investment is made to boost the economy, it will involve no inflation risks, which is seen by the globe as a new normal. Nevertheless, the United States has seen the highest inflation rates in 41 years with a giant step of the 0.75-percent key interest rate taken for the first time in 28 years.

Professor Krugman said, “Nobody will believe this, but in the aftermath of the 2008 crisis, standard economic models performed pretty well, and I felt comfortable applying those models in 2021. But in retrospect I should have realized that, in the face of the new world created by Covid-19, that kind of extrapolation wasn’t a safe bet.” However, he considered that inflation may already have reached its peak or will do soon.

The New York Times posted eight op-eds written by eight columnists including Professor Krugman on Wednesday with the underlying theme of “I Was Wrong About.”


chaewani@donga.com