Tech people have been passing around this 1998 quote from Paul Krugman where he compared the Internet to a fax machine:
“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.”
The reason people are dredging up this old quote is that Krugman jokingly said Bitcoin is Evil. He doesn’t think it’s evil, but he is sceptical that Bitcoin can be a real store of money, and actually work as a currency.
As a way to discredit his thoughts on Bitcoin everyone is passing around that old quote about the Internet. The implication is See! He was wrong once! Thereforehence, he is a bozo and you shouldn’t listen to him!
We emailed Krugman for a comment on the quote and here’s his explanation:
Well, two things.
First, look at the whole piece. It was a thing for the Times magazine’s 100th anniversary, written as if by someone looking back from 2098, so the point was to be fun and provocative, not to engage in careful forecasting; I mean, there are lines in there about St. Petersburg having more skyscrapers than New York, which was not a prediction, just a thought-provoker.
But the main point is that I don’t claim any special expertise in technology — I almost never make technological forecasts, and the only reason there was stuff like that in the 98 piece was because the assignment required that I do that sort of thing. The issues about Bitcoin, however, are not technological! Everyone agrees that it’s technically very sweet. But does it work as money? That’s a very different kind of question.
And the fact that people are throwing around my 98 quote actually shows that they don’t get this point — that they’re confusing technology with monetary economics.