The Nobel laureate has already made a number of misconceptions about the BTC
Nobel Prize-winning economist Paul Krugman remains wrong about Bitcoin. This is revealed in an analysis by Kyle Torpey published recently in reason, which reveals that most of what Krugman has said about Bitcoin over the years has been misleading, inaccurate, or completely wrong.
Krugman is also famous for another colossal mistake. In 1998, he claimed that the impact of the internet on the economy would be no greater than that of the fax machine.
It should be remembered that it is unusual to have the ability to predict how the future will evolve and, in particular, how new innovations will change the world, and Krugman probably does not have this ability.
Paul Krugman’s Bitcoin Errors
He made his first Bitcoin misinterpretation in 2011, when he assumed that any new Bitcoin-based currency standard would be vulnerable to money hoarding, deflation and depression. It is now quite clear that such a standard not only does not exist, it cannot exist, because Bitcoin has clearly demonstrated that it can coexist within the current standard without competing with inflationary fiat currencies.
The second mistake he made was in 2013, when he stated that creating Bitcoin requires wasting real resources. In reality, “creating Bitcoin” could theoretically require even a ridiculous amount of electricity, as was the case, for example, in 2009, when a few common computers around the world were sufficient to extract Bitcoin.
Of course, Bitcoin’s power consumption has increased a lot over time, but not because it’s necessary. It’s just the result of an arbitrary decision by miners, who could also be induced to consume less without causing real problems to Bitcoin itself. Furthermore, since Krugman in 2013 generically referred to a “virtual currency”, there are nowadays several cryptocurrencies that have negligible energy consumption.
In 2013, he made other decidedly contestable claims. For example, he claimed that Bitcoin appeared to have been designed as a weapon designed to harm central banks and money-issuing banks and to harm the ability of states to collect taxes. Now, eight years later, we can safely say that none of this turned out to be true.
In 2015, he claimed that the problem Bitcoin was trying to solve was not one of great economic importance. By now, however, it is clear that for many holders of fiat currency savings the money is highly inflated, like the Venezuelan Bolivar, and it is noted that the problem is indeed of enormous economic importance. Furthermore, the inflation problem is also becoming relevant again in the US.
Krugman probably has a strong ideological bias against Bitcoin because of its libertarian nature. Indeed, the economist is a well-known supporter of Social Democratic policies, so much so that he explicitly supported Democratic candidate Hillary Clinton in the 2016 US presidential race.
To be fair, over the years he has always been in favor of the free market, but he is also a well-known Keynesian who evidently prefers a strong state role in some areas.
Finally, it should be remembered that he is well known for his often critical and opposing views, so much so that he did not even support President Obama’s Democratic administration.