Krugman admits economists were wrong

 About free trade and globalization:

Paul Krugman has never suffered fools gladly. The Nobel Prize-winning economist rose to international fame—and a coveted space on the New York Times op-ed page—by lacerating his intellectual opponents in the most withering way. In a series of books and articles beginning in the 1990s, Krugman branded just about everybody who questioned the rapid pace of globalization a fool who didn’t understand economics very well. “Silly” was a word Krugman used a lot to describe pundits who raised fears of economic competition from other nations, especially China. Don’t worry about it, he said: Free trade will have only minor impact on your prosperity.

Now Krugman has come out and admitted, offhandedly, that his own understanding of economics has been seriously deficient as well. In a recent essay titled “What Economists (Including Me) Got Wrong About Globalization,” adapted from a forthcoming book on inequality, Krugman writes that he and other mainstream economists “missed a crucial part of the story” in failing to realize that globalization would lead to “hyperglobalization” and huge economic and social upheaval, particularly of the industrial middle class in America. And many of these working-class communities have been hit hard by Chinese competition, which economists made a “major mistake” in underestimating, Krugman says.

It was quite a “whoops” moment, considering all the ruined American communities and displaced millions of workers we’ve seen in the interim. 

Notice that they still haven’t admitted that they’re wrong about immigration and debt. But they still think you should listen to them, instead of the contrarian economists who have repeatedly been proven correct by events. It will be particularly amusing if he cites my labor mobility argument against free trade. I tend to doubt he will credit it properly….

What I find infuriating, though, is the way their own simple mainstream GDP models quite clearly predicted what will happen in a trade war between the USA and China. Any nation with a seriously negative balance of trade will automatically benefit from reduced trade and therefore win the trade war because a reduction in trade increases the (X-M) total. Reduce imports, increase GDP. The relationship is basic math.