I remember reading about the idea of pundits as “counterindicators” (evidence in favor of the opposite of whatever they were saying) a few years ago, and I’ve been fascinated ever since. I’m sure this isn’t truly statistically significant, but a study showed that pundits did worse than random at predicting future outcomes (less than 33% given three choices for example).
This makes me wonder, can one rationally begin with the fact that Bill Kristol, Amity Shlaes, and Dan Senor signed an anti-quantitative easing letter, and conclude that quantitative easing is probably a good idea? I am completely serious about this. And a less speculative question: if the actual economists who signed the letter are on the up-and-up, why did they let Bill Kristol, Amity Shlaes, and Dan Senor sign it too?
Try to put yourself in their shoes. Suppose there was a subject you were an expert on and that you decided to be a signatory on an open letter to some important body about the issue. Suppose that by some strange chance ill Kristol, Amity Shlaes, and Dan Senor agreed with you and wanted to be signatories as well. Would you still sign the letter if their names were on it? I would not.
Omnes Omnibus
In this hypothetical, have I recently received a traumatic brain injury? It is an important question.
liberal
I think a fiscal stimulus would be great for the economy, but I fail to see what QE is going to do. I understand what it’s supposed to do, but despite the support of people like Krugman as the only available tool, I can’t see much upside, and there’s a possible downside (asset price inflation).
The Grand Panjandrum
Iz r neocons learning?
Ash Can
I’d think twice about laying my own credibility on the line like that, that’s for sure.
Loneoak
Can I sign it in someone else’s name? Like “Tunch Forever” or “Baba Booey”?
beltane
Barry Ritzholtz had a very good piece about this at The Big Picture yesterday. Some of his commenters who had been on the fence about QE2 were sold on the idea after seeing the signatories of that letter. It’s a veritable Who’s Who of failed prognosticating.
cleek
assuming the economists themselves aren’t acting as biased pundits seems like a big mistake. IMO, “economist” just means “someone who will advocate for whatever political outcome his employer wants, using jargon that nobody understands based on models which don’t model anything approaching reality. a Mercenary Tarot Card Reader.”
also, i’d like to see some numbers on the historical accuracy of predictions by economists. i suspect it won’t be any better than 33%, either.
WyldPirate
But, but..those clowns are important conservative voices–as well as being self-important assholes. The expression of their opinion is their right as self-important conservative assholes regardless of their expertise.
beltane
@Loneoak: Please don’t bring Tunch into this. The only proper thing to do when signing a letter of this quality is to use such respected names as Jack Mehoff, I.P. Daily, and Mike Hunt.
Bllackfrancis
“ill Kristol” for typo of the year (that’s not really a typo)
Says the man who inputs his comment name with a typo. Irony is my iPhone.
jwb
We do know that Kristol has an almost perfect record of bad prediction. We can conclude that if he says that QE will hurt the economy, then it will not. It may not solve the problem, but it certainly won’t have a negative impact.
Sean
“ill Kristol” works for me.
Emily L. Hauser/ellaesther
Suppose that by some strange chance ill Kristol, Amity Shlaes, and Dan Senor
So Kristol is going by his hip-hop name now?
MattF
I would guess that the “signing chain” works the other way– You start with Bill Kristol deciding that ‘X’ needs to be done, he recruits Amity Shlaes and Dan Senor. The three then scan their address books for economists who will go along. ‘DougJ’ isn’t going to be asked.
Emily L. Hauser/ellaesther
And, more to the point: No, no I would not.
In the world of Israel/Palestine advocacy, I have on more than one occasion been in a circumstance where I’m speaking or writing or signing or being-part-of and I see who else is on the panel/in the publication/on the petition and I just want to go: uh…are people going to think I’m like that guy now? ‘Cause that guy’s an idiot and an asshat!
PeakVT
@beltane: I’d go with either Heywood Jablome or Bernie Madoff. No, wait, the last guy is real and alive. Scratch that one.
Redshift
I wouldn’t sign alongside those clowns, but I wouldn’t take it as a definite contraindication, either (though with Kristol, I’d be sorely tempted.) Punditry rewards outrageousness — they’ll forget a hundred times you were dead wrong but celebrate forever the one really off the wall prediction you got right, so there’s little upside to making sober predictions that are well-supported by the facts at hand.
Hmm, but then there’s the fact that conservative pundits are additionally rewarded for supporting the party line, which is pretty much always wrong, and further rewarded for outrageous pro-conservative positions…
On further consideration, I take it back. If three or more of those bozos get together, the result is pretty much guaranteed to be the wrong answer. If they’re helpful enough to do in for a simple yes-or-no question, the opposite must be right.
djheru
@Emily L. Hauser/ellaesther: I believe his proper hip-hop name is “Ill Cristal”
rcareaga
For many years a right-wing state senator (assemblyman?) named H.L. Richardson used to weigh in on just about every statewide ballot initiative in every California election. Saved me the time of studying the issues: I merely looked for his name in the issues pamphlet and voted the other way, confident that I was on the side of the angels.
Emily L. Hauser/ellaesther
@djheru: /rimshot
Barkley G
You are on fire with you last two posts Doug. Keep up the mean spirited banter
catclub
@beltane:
One of the guys Ritholtz points out to laugh at wrote “DOW 36000,”… in 2000. Perfect anti-timing.
Felanius Kootea (formerly Salt and freshly ground black people)
Yup, the same way in stats that an area under the ROC curve of 0.2 is effectively the same as an AUC of 0.8. If you consistently and accurately predict the opposite of reality, what you say can be used to measure reality by flipping your yeses to nos and vice-versa.
El Cid
Delong points out that it’s not so much that those economists opposed QE2*
It’s that the arguments the signatories are using are contradicting prior scholarship with whom many of them do not disagree, and others who don’t seem to be aware why what they are saying is any different than long-held arguments.
Including the sorts of people who cite Milton Friedman as an authority on monetarism, and they’re now saying things in contradiction to Friedman’s own basic positions.
Much of the discussion I see and hear of this nature, particularly the faux intellectual conservatives, is their version of Say’s law: the problem is not the lack of demand because consumers either cannot or will not consume enough; it’s that government policies are restricting or discouraging businesses from investing and expanding and producing more, because SHUT UP.
*By QE2 I’m referring to the financial policy, not the cruise ship. Those of course remind Kristol where he first met his greatest love, Sarah Palin.
gg
Sean wrote: ““ill Kristol” works for me.”
Me, too! You can’t spell “Bill” without getting “ill”, and you can’t spell Kristol without a big chunk of “stool”.
Matt in HB
I have an incredible amount of cognitive dissonance due to the appearance of Seth Klarman’s name on that letter. He’s a brilliant investor, and not a known hack. His seems to be exactly the situation described by DougJ. Why would one hop into that clown car?
mikefromArlington
I think some have MAJOR investments in China right now, not in the U.S. marketplace, as Asia is where expansion is happening right now.
If our labor forces and economy get a boost by increased wages in the U.S., their investments wouldn’t get the bang for the buck they are hoping for. As others pointed out yesterday to my rhetorical statement,
a lower dollar will increase domestic production, increase our working class wages and shift the balance of trade to favor our country directly, not just multinational businesses.
Tom Hilton
Hey, the Firebaggers hate it too. How could Jane Hamsher and Amity Shlaes both be wrong?
[/snark]
BR
DougJ:
I’ve been doing a lot of reading about QE2 and QE1 and lots of other stuff the Fed is doing. I’ve concluded that it isn’t terrible, but it probably won’t help either.
We really need fiscal stimulus and the only reason we have monetary stimulus is that we can’t get shit through congress.
Hawes
I feel perfectly comfortable using Kristol and Shlaes as counter-indicators. Kristol has almost literally never been right about anything and Shlaes….
Well, I heard David Kennedy, the Stanford prof who wrote the Oxford history of the Great Depression, answer a question on Ms. Shlaes: “I can only say that this was not the work of an historian or an economist and leave it at that.”
BR
Oh, and one other thing. As the brilliant Nicole Foss likes to point out, people start crowing about inflation when deflation is starting. We’re entering another economic downturn, and deflation will reign. So yeah, these idiots are all contrary indicators.
Sentient Puddle
@cleek:
Actually, it would be somewhere around 180%.
(In the vein of Paul Samuelson, who one said “Wall Street indexes predicted nine out of the last five recessions.”)
Agoraphobic Kleptomaniac
Pundits have no idea on this QE2. It’s like asking them about RNA transcription errors and its evolutionary theory implications. They’re clueless and the rest is handwaving and guessing.
ThatLeftTurnInABQ
@El Cid:
They would rather rule in a conservative Hell than serve in a liberal Heaven. Milton Friedman’s Satan as it were, only this version of Paradise Lost is a dark comedy. First as tragedy, then as farce.
LongHairedWeirdo
Well… letting pundits sign a letter that economists are signing bugs me. I have enough scientific ethics that my feeling is that, unless you truly *get* the science (or math), even if you’re guessing right, you’re still wrong.
Um.
What I mean is, I don’t really get quantum mechanics. If I assert that the Copenhagen interpretation (things exist only as a cloud of probabilities, until the wave form is collapsed by observation) is valid, I’m wrong – even if it’s perfectly valid.
That is to say: Anyone talking out of their ass is wrong. Even if they crap out a gold nugget, it’s still *shit* – they just proved they’re stupid enough to swallow gold nuggets.
And that is, in fact, one of the biggest problems the country is facing. The Republicans don’t actually think low taxes and light regulations are good for the *country*. They’re good for Republican donors. Republicans then talk out of their asses about why low taxes are good for everyone. And soon enough, people figure no way so many people could be repeating such bullshit if it wasn’t true. So they believe it.
But they’re all talking out of their asses.
Ben JB
I think there’s a serious issue at the heart of this: we’re not all expert in everything, so we have to choose whom to trust as experts and whom to disregard.
And while I doubt that Kristol, Shlaes, and Senor are ever going to be right about anything, I think it’s a fine line between “his track record on predictions is terrible” and “this will really piss off the other side.” We can differentiate, but maybe it’s best to be careful with the former argument.
Captain Goto
@LongHairedWeirdo: THIS.
DanF
I think that if I were circulating a paper on the value of taking a dump once daily, I still wouldn’t let them sign it. Although I would allow my name to published on a treatise about shit, I will not allow it to be published along side the names Bill Kristol, Amity Shlaes, and/or Dan Senor. I have my standards.
Steve M.
You lost me already, Felix.
mikefromArlington
Add the foreign governments of China, Russia, Germany and the European Union to that group.
Bernanke and Obama are possibly making our workforce and our products stronger and more competitive and the right wing and the rest of the world is in a hissy fit.
Linda Featheringill
@BR:
I’ve been reading about it too. I am not an economist but it looks to me like the paper on a good chunk of the federal debt will stay in the country [a good thing] and it might nudge the inflation rate up a hair [not a problem].
If, and this is a big if, the real problem is deflation, then QE2 is not big enough to stave it off.
But all of this is just speculation on my part.
It looks like I agree with you: QE2 probably won’t hurt much and probably won’t help much, either.
Short Bus Bully
“ill Kristol” = “pwnage”
And a simple typo sets off another interwebz revolution. Viva la revolucion!
BR
@Linda Featheringill:
Agreed.
And the funny thing about Palin screaming about it (causing the wingnut brigade to scream about it) is that she almost perfectly timed the dollar’s bottom. (Since then it’s been steadily rising vs. the Euro, and is looking likely to continue for at least a couple of months by which time QE2 will be over.)
El Cid
@Steve M.:
You could interpret that as ‘among the set of right-leaning technocrats, these were a group which were impressive’.
I mean, Thomas Sowell would be outside that category.
Nylund
@cleek:
That is like saying that Physicists are people who make bombs to kill people. Yes, its sorta true for some, but you can’t generalize for all. Some physicists don’t even do things remotely related to bombs.
Economist is a much broader term than people realize. A lot of economists don’t even work with anything related to GDP, Monetary Policy, unemployment etc. I can think of a lot of great work done in econ in a variety of fields, game theory, econometrics, etc. that I can’t even imagine how one could use that to justify a political position.
Oh that Heckman, totally shilling for the GOP when he came up with the Heckman correction so he could deal with selection bias when analyzing treatment effects!
For a certain subset of economists, the critique you make is valid, but it cannot be generalized. Its just that this subset are also the ones most visible you see on TV, etc.
Please don’t malign everyone.
Alwhite
Bartcop posts here sometime I think – he runs an old screen cap on his site once in a while from a study done comparing a chimpanzee’s prognostications to those of paid pundits. The ape did better than almost any of the paid pea-wits. I’ll post a copy if I can find it.
elm
Can Bill Kristol create an idea so bad that even he cannot sign an open letter promoting it?
New Yorker
Of course. Bill Kristol is a moron who has done more damage to this country than anyone not in an official position of power has done in a long time. He is fundamentally unsuited to make policy judgments of any kind, so one should be predisposed towards anything he doesn’t like, since it is probably the right decision.
El Cid
One of the missions of the Federal Reserve, as of amendments to its founding Act added in 1977, is that its monetary policies be used in part to support “maximum employment”.
Republicans and rightists have always hated this, and will be pushing to remove that part of the Fed’s mission.
So, fuck the unemployed and the labor market’s relation to monetary policies anyway, because obviously the Fed can only be motivated by the purest seeking of economic rationalism for the benefit of all by the invisible fist.
El Cid
@New Yorker: Amity Shlaes is a complete joke, has never been anything close to being a scholar, and is a complete liar on the topic of economics and the history and causes of the Great Depression.
But, since she’s a right wing hack, there’s no reason not to have given her decent amounts of establishmentarian media exposure.
DougJ
@elm:
Good question.
joe from Lowell
They think it’s a good idea for the Fed to promote growth, now that the 2010 elections are over.
joe from Lowell
@liberal:
We need higher inflation. Not 1979-era inflation, but something up in the 3-4% range (from the 1-2% range it’s been lately). Here’s why:
1. It would increase the nominal value of all of those underwater mortgages, while their payoff amounts remain the same, thus allowing them to rise above water. A stagnant housing/construction market is one of the main reasons for our slow economic growth over the past year. Bringing a lot of houses up above the water line would also reduce defaults, making those toxic assets less toxic, and causing our banks to act like banks again (see #3, below).
2. It would reduce the real-dollar value of the enormous national debt we’ve built up. Our current national debt is at $13.7 trillion dollars. If we bump up inflation by two points – say, from 1.8% to 3.8% – over a decade-long period, it will reduce the real dollar value of that accumulated debt by the equivalent of $3.7 trillion, without raising taxes.
3. Banks are sitting on their money instead of investing it in the economy. With inflation below 2%, they’re happy to earn peanuts in exchange for zero risk. If inflation went up, it would motivate them to start putting that money into business loans and other investments that help the economy. Hoarding by the financial sector has been another driven our the slow growth we’ve seen.
Just to give people a sense of what I’m talking about, a 3-4% inflation rate would be below what we had in years line 1986, 1988, and 1990 – not exactly an era of economic agony.
Sly
@joe from Lowell:
All good points. But we’re not going to get 3-4% with the current QE framework. The Fed would have to buy trillions of securities to do that. The fear is that QE2 will have some appreciable impact on unemployment and little in the way of inflation or dollar devaluation, and the hawks on the FOMC will have some of the wind taken out of their sails.
Republicans gambled on obstructing any growth and won some impressive gains. They’re not about to stop now, after the electorate rewarded them for it. And as El Cid noted, they’re just going to get more and more brazen about it.
Brachiator
Oh Hell No!
And we seriously need a pundit ostracism rule. If a pundit makes a series of predictions that turn out to be spectacularly wrong, the pundit should not be allowed to write a column or appear in any public place for one year.
joe from Lowell
Well, I put out the goldbug bait, and it’s still there.
I guess this place is clean.