‘Establishment economics’ strikes back in campaign sideshow

[Uncle Joe]

Fortunately, the economics profession has so discredited itself with its failure to anticipate the financial crisis, to properly analyze or cope with the recession that followed, or to figure out a way to stimulate economic growth in its wake that their voices now are like that proverbial tree falling in an uninhabited forest — no one is listening.

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A considered response to this objection might well be LMAO, but it is clearly another sign of the political establishment’s determination to marshal its resources against any insurgent candidate who defies the reigning conservative orthodoxy in economics.

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But the cavalier dismissal of the Sanders plan without offering any evidence to support its rejection shows why the Vermont senator routinely directs his fury not only against “establishment politics,” but also against “establishment economics.”

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For what it’s worth, there are some left-leaning economists who support Sanders. Thomas Piketty, the French economist whose 2014 best-seller “Capital in the Twenty-First Century” galvanized the discussion of inequality in this country, sees Sanders as a harbinger of a transformational change in the U.S. even if he falls short in this year’s effort of beating “the Clinton machine.”

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But voters, to the extent they pay any attention at all to this sideshow, may decide that Sanders makes more sense than those orthodox economists who have guided us into the current mess of inequality, underemployment and rampant poverty.

http://www.marketwatch.com/story/mainstream-democratic-economists-join-effort-to-discredit-bernie-sanders-2016-02-19

This is a good article, well worth the read.

[Uncle Joe]

1. The Pious Attacks on Bernie Sanders’s “Fuzzy” Economics

Far too much of the Democratic primary has been consumed with determining the boundaries of what is and is not serious. Four former chairs of the Council of Economic Advisers under Presidents Clinton and Obama provided the latest example this week, writing an open letter to castigate a fellow economist, Gerald Friedman of the University of Massachusetts-Amherst.

Friedman conducted a study of how the economy would react over the next ten years if Bernie Sanders’s entire program—free college, universal health care, new infrastructure spending, an expanded Social Security, the works—were adopted. And it included some very optimistic numbers: the creation of 26 million jobs over the next ten years, annual economic growth of 5.3 percent, and a return of the labor force participation rate back to 1999 levels. The Sanders campaign didn’t appear to solicit the Friedman study, but it has been citing it to the media.

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I don’t feel it necessary to defend Friedman, though it’s worth pointing out that his economic growth numbers would simply eliminate the GDP gap that was created by the Great Recession and was never filled in the subsequent years of slow growth—which should be the goal of public policy, however “extreme” it sounds. What I do want to challenge is the idea that there’s one serious, evidence-based way to perform economic forecasting.

The truth is that most economic forecasts that look several years into the future are flawed, almost by definition. This is a sprawling country with countless different economic inputs and knock-on effects that are incredibly difficult to accurately predict with a model. Unexpected exogenous events and misinterpreted implications can make forecasts vary sharply with reality, no matter how carefully they’re constructed. There’s no right or wrong way to divine results from policies, and saying so actually makes you look far less evidence-based than you think. The best example of this comes from the reports of these four CEA chairs themselves.

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What’s more troubling is how Democratic mainstream economists use these tactics to boot anyone not preaching from the incrementalist gospel out of the serious club. There are problems with Friedman’s projections; it’s unlikely that we will regain the same labor force participation as the late 1990s when the population now is so much older, for example. But the ferocity of the response—from people who have spent their careers making flawed economic forecasts—suggests that the real issue here is that the establishment is uncomfortable with the more far-reaching aspects of the Sanders economic agenda.

Instead of going point by point on those agenda items, the CEA chairs decided to argue from authority, dismissing Friedman’s numbers as prima facie absurd. This “do you know who I am?” style of argument, first off, is just a bad look if the goal is to persuade. But it also ignores how there is no real authority when it comes to making decade-long economic forecasts. Some humility on that front would be in order.


https://newrepublic.com/article/130157/pious-attacks-bernie-sanderss-fuzzy-economics