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Surely you’re joking Mister Krugman

July 28, 2009

For the sake of full disclosure, I’ll publish here my notes from a talk that Prof. (and most recent Nobel Laureate) Paul Krugman gave at KSU in March of 2007.

Title “Will there be a dollar crisis?”

He puts the odds of a sharp dollar plunge at 4-to-1.
He expects people will soon have a “Willie Coyote moment”.
Stein’s law: “If something can’t go on for ever, then it will stop”.

This was then put into mathematical language with a differential equation and a few graphs.

However, PK also talked about the possibility of a statistical illusion, dark matter hypothesis: maybe it’s not so bad, maybe it’s actually much worse, etc…. Nobody knows. But he sticks to the 4:1 prediction.

Also if plunge happens it won’t be as bad as in Argentina: pain level at 50%. It would be worse for Japanese and the Chinese.

I got the impression that he was struggling to get a sharp catastrophic event out of a smooth mathematical model where things must just flow to equilibrium.

In any case, the whole thing was quite pleasant and entertaining. A lot of “mysteries” and “unexplained data” which doesn’t fit the theory, unheard-of, etc…Only one thing is sure: we’re doomed.

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