We Don’t Know As Much As We Think We Do About the Economy, Part 2: A Slight Detour Into Politics
I recommended this podcast in which Jmes Manzi argued that the confidence we have in social science predictions depends upon the ability of the “scientist” to make accurate predictions about the future that are non-obvious and can be repeated.
One phenomenon he discusses is the way people react in economics if their predictions go wrong. Manzi said that, before the the $820 stimulus was passed, he said he didn’t know whether it would work — but he did know that its supporters would say it worked regardless of the data:
[At the time I said:] I don’t believe any of the folks making these confident assertions really know what the effect will be. And the only prediction I’ll make is this: I’ll predict that, in early 2011, you know, professor, famous economist X said: unemployment will be about x%, say 10 percentage points without the bill and 8% with the bill. When it gets to be 2011, if unemployment is 10%, here’s what that professor is going to say: You know, conditions were worse than we thought they were; so without the bill unemployment would have been 12%, not 10%. Now unemployment is 10%. See, I was right all along; it lowered it by 2 points. And that’s exactly what happened, of course. That’s exactly what the economist said. And it has nothing to do with Democrats versus Republicans, by the way. If John McCain had been President, it would have been Republican advisors, too. And what I said is you cannot know the counterfactual reliably.
The other thing stimulus supporters say is: it would have worked better if it had been bigger.
In other words: if the data don’t prove your policy successful, you always say the situation was worse than you had realized, and the cure should have been more extreme.
This takes place in politics as well. If your candidate loses, one side will say it was because he wasn’t moderate enough, and he frightened off undecideds. The other side will say it was because he wasn’t principled/hardline enough, and he lost the base.
Each side will always draw the lessons they want to draw, and a plausible case can generally be made. But generalizing from specific instances is well-nigh impossible. Moderate candidate x might do great while moderate candidate y tanks; hardline candidate a might wow the electorate while hardline candidate b loses them. If winning elections were always about providing candidates closer or further from the center, winning elections would be easy.
In the economic context, our inability to predict the future with perfect accuracy leads people like me to believe we should have less government involvement, because it is often hubris to believe your particular intervention will have the desired effect on the economy. Far better to leave decisions to the collective expertise of society, which in the aggregate knows far more than any set of people in a room in Washington D.C., no matter how smart and well-informed they may be.
In the context of politics, our inability to predict the future leads people like me to suggest that candidates simply advocate what they believe. (Shocking suggestion, I know.) If you can’t be sure how to manipulate people, how about not trying to manipulate them at all?
And maybe — just maybe — your sincerity will actually win them over. Even if not, at least you don’t have to remember what your positions are supposed to be. You can just remember what they actually are.
Ding.
Patterico (8b3905) — 1/27/2013 @ 1:23 pmI agree with the points you’ve made in this and your earlier post. However, you’re basically arguing for rationality and pragmatism and, as Walter Russell Mead recently explained, that means different things to different people depending on the geographic heritage/values with which they identify. It’s hard to escape that, even if you want to.
DRJ (a83b8b) — 1/27/2013 @ 1:24 pmplus romney was severely kneecapped by porky porky chris christie’s mancrush on obama’s pork wand
and between that and fox news’s 24/7 benghazi fetish… at the end of his campaign he didn’t even have a campaign anymore
this was not something he could have predicted
happyfeet (ce327d) — 1/27/2013 @ 1:25 pmplus at the end he lost his chief spokesperson sununu cause of he he was spooked by what sununu said about that greasy greasy lying colin powell coward – how colin powell was only supporting obama cause of race
which was of course, true
happyfeet (ce327d) — 1/27/2013 @ 1:28 pm
happyfeet (ce327d) — 1/27/2013 @ 1:28 pmheTo echo DRJ-the people in charge are from a place that accepts a crappy outcome as business as usual.What matters is holding power and keeping programs that employ people who support the power going. Think of Head Start; deomstreably worthless but it is part of the education complex that supports the machine. Obama’s state senate district is still the desperate slum it was the day he first took office. Recall Obama in the 2008 Dem debates when confronted with the idea that that raising mariginal tax rates cuts revenue, he quickly demurred that so what, it’s about fairness. Success doesn’t matter if your heart is in what they perceive as the right place. If the policy is a failure is immaterial and secondary to supporting the power structure of the machine.
Bugg (b32862) — 1/27/2013 @ 2:01 pmLefties are always moving the goalposts.
That way, they can never be pinned down for actual results or metrics.
The list of examples is endless, but let’s just take the recent example of Hillary Clinton saying she takes full responsibility for Benghazi right before she absolved herself from full responsibility for Benghazi.
She says “other people” failed to inform her of the S.O.S. cables from our Ambassador in Benghazi, yet she won’t tell us who these “other people” are because there really aren’t any “other people” to corroborate her story. (And with lefties, it is always the fault of “other people”—never themselves.)
All those shovel-ready projects that President Alinsky and Lunchpail Joe insisted were merely awaiting federal subsidies before they could commence, turned out to be non-existent projects. “I guess they weren’t as shovel-ready as we
pretendedthought.” Ok, but if the non-existent projects didn’t utilize the taxpayers monies appropriated for them, then where the hell is the money that wasn’t spent ? And if wasn’t spent, why do they need MORE money ?In any other job, a couple of guys who appropriate zillions of dollars for projects that are non-existant, end up in the unemployment line.
James Manzi’s piece actually illuminates Patterico’s thesis point, in the sense that when the liberal job report or GDP results are “unexpected” or “things were worse than we originally thought !,” it literally means in plain English, “We don’t know as much about the economy as we think we do.”
In medicine, the governing rule is “First, do no harm.”
If only the lefties weren’t so convinced of their own superhero qualities.
What’s scary is the way that K-12, universities, and grad schools are producing orthodox lefties who are convinced of their own superiority, as well as the inferiority of capitalism, and Judeo-Christian values, and American ideals, and the Constitution, and Mom, and apple pie.
Lefties don’t believe in track records. If they did, they’d become right wingers.
Elephant Stone (20b776) — 1/27/2013 @ 2:24 pm“Lefties are always moving the goalposts.”
Elephant Stone – Yes. Just look at a polemicist such as Paul Krugman. He can no longer reasonably call himself an economist. The hilarious thing about his work is policy which he wholeheartedly approves of in a Democrat Congress or presidency, you can you find a column of his denouncing or calling dangerous when Republicans are in power.
daleyrocks (bf33e9) — 1/27/2013 @ 5:27 pmspeaking of goalposts
now california is gonna “follow the wisdom of Joseph”
you can’t make this crap up
happyfeet (ce327d) — 1/27/2013 @ 5:35 pmHe is going to pay down debt and save money for tough times? All while speaking from the Bible.
JD (b63a52) — 1/27/2013 @ 5:44 pmi think in this version of the bible california’s dwindling population of two percenters are the cows what will stand there dumbly for seven years while a geriatric fascist milks their bountiful teats
happyfeet (ce327d) — 1/27/2013 @ 5:47 pm“pay down our debts and store up reserves against the leaner times that will surely come.”
Mr. Feets – Sounds like a plan long as the peoples of California doan need much dirty dirty lectricity or gazoline.
What could go wrong?
daleyrocks (bf33e9) — 1/27/2013 @ 5:49 pmi hope hope hope I can figure out a way not to be here to find out
happyfeet (ce327d) — 1/27/2013 @ 5:51 pm“i think in this version of the bible california’s dwindling population of two percenters are the cows what will stand there dumbly for seven years while a geriatric fascist milks their bountiful teats”
Mr. Feets – To prevent that, Mr. Gov. Brown needs to station the CA Nat’l Guard All Wimmins Valley Girl Combat Division on border to prevent people from leaving the state, for their own good of course.
daleyrocks (bf33e9) — 1/27/2013 @ 5:54 pmsurprisingly, ‘Betamax’ Brown gets it wrong, I know you’re shocked, more like Esau.
narciso (3fec35) — 1/27/2013 @ 5:54 pmfer sure fer sure Mr. daley
happyfeet (ce327d) — 1/27/2013 @ 5:59 pmIf winning elections were always about providing candidates closer or further from the center, winning elections would be easy.
It also involves other aspects of a person, like his (or her) personality, looks, demeanor. In particular, the sometimes rather subtle, if not intangible, quality known as charm or charisma of someone in the public eye.
In a similar vein — and I do admit that success or failure can transcend the boundaries of politics or government — but a society or community that is full of talented, skilled, resourceful people probably will always do well, or better than expected, even if managed by foolish officials (read: liberals/Democrats) or bogged down by a foolish ideology (read: much of what’s found throughout the modern industrialized and/or Western World). But, still, there are limits to that, since in some ways Argentina, for example, is no less self-destructive — due to the idiotic voting patterns of its populace — than a small struggling society in, say, Africa.
Mark (1c1145) — 1/27/2013 @ 6:11 pmOne might logically assume that making accurate predictions about the future would be the key to fame and fortune. Paul Ehrlich has done remarkably well by being consistently wrong about everything. My dog could do as well.
Bar Sinister (664312) — 1/28/2013 @ 7:24 am