Not my idea of a good time.
Anyway, BD Keller linked to an excellent post today that is way more articulate than I about why evidence based monetary policy is so hard to come by.
On economic experimental models:
Think of a good experimental design: randomised control variables, holding everything else constant, etc. Now think of the worst possible experimental design. Imagine something that engineers or psychologists might dream up over beers for a laugh, or to illustrate what not to do. That's what economists face. It's as if our lab assistants (the fiscal and monetary authorities) were deliberately trying to make our (economists') lives as hard as possible. They do this, of course, not to spite us, but to try to make everyone else's lives as easy as possible. To get a good experimental design for economists, both the fiscal and monetary authorities would need to be malevolent.Makes sense, but given this, I do wish they'd stop saying their predictions with such authority.
A field of knowledge is considered scientific to the degree that it can predict outcomes. The infamous Stimulus Graph predicted unemployment as a result of passing the Stimulus versus what unemployment would be if the Stimulus were not passed. Actual unemployment was higher than both predicted Stimulus unemployment and predicted non-Stimulus unemployment. This failure to accurately predict unemployment has had at least two consequences.
ReplyDeleteFirst, it has shown the public at large that while economists may consider themselves scientists, there is a reason for juxtaposing the words "voodoo" and "economics." Second, those who claim that spending money on a given government program will have a given result are discredited. Better to not spend the money.