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David G
02-29-2016, 11:31 AM
http://ineteconomics.org/ideas-papers/blog/forecasting-models-and-sanders-program-controversy#.VtRmeqdG-NQ.twitter

(http://ineteconomics.org/ideas-papers/blog/forecasting-models-and-sanders-program-controversy#.VtRmeqdG-NQ.twitter)

The Romer/Romer letter to Professor Gerald Friedman (http://ineteconomics.org/uploads/general/romer-and-romer-evaluation-of-friedman1.pdf) marks a turning point. It concedes that there are indeed important issues at stake when evaluating the (http://www.nytimes.com/2016/02/27/upshot/uncovering-the-bad-math-or-logic-behind-bernie-sanderss-economic-plan.html?rref=collection%2Fsectioncollection%2Fup shot&action=click&contentCollection=upshot&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=sectionfront&mtrref=undefined&gwh=D2BFEBF1E39FB8AFD07706DDFE27A917&gwt=pay)proposed economic policies (http://www.nytimes.com/2016/02/27/upshot/uncovering-the-bad-math-or-logic-behind-bernie-sanderss-economic-plan.html?rref=collection%2Fsectioncollection%2Fup shot&action=click&contentCollection=upshot&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=sectionfront&mtrref=undefined&gwh=D2BFEBF1E39FB8AFD07706DDFE27A917&gwt=pay) of Presidential Candidate Bernie Sanders. These issues go beyond the political debate and should be discussed seriously between and among professional economists.

All forecasting models embody theoretical views. All involve making assumptions about the shape of the world, and about those features, which can, and cannot, safely be neglected. This is true of the models the Romers favor, as well as of Professor Friedman’s, as it would be true of mine. So each model deserves to be scrutinized.

In the case of the models favored by the Romers, we have the experience of forecasting from the outset of the Great Financial Crisis, which was marked by a famous exercise in early 2009 known as the Romer-Bernstein forecast. According to this forecast (a) the economy would have recovered on its own, in full and with no assistance from government, by 2014, (b) the only effect of the entire stimulus package would be to accelerate the date of full recovery by about six months, and (c) by 2016, the economy would actually be performing worse than if there had been no stimulus at all, since the greater “burden” of the government debt would push up interest rates and depress business investment relative to the full employment level.

It’s fair to say that this forecast was not borne out: the economy did not fully recover even with the ARRA, and there is no sign of “crowding out,” even now. The idea that the economy is now worse off than it would have been without any Obama program is, to most people, I imagine, quite strange. These facts should prompt a careful look at the modeling strategy that the Romers espouse.

I attach here the manuscript version of Chapter 10 from my 2014 book, The End of Normal, “Broken Baselines and Failed Forecasts,” which discusses these issues in (I hope) accessible detail.

It should be noted that these issues, while important, do not bear on whether economists should try to discourage American voters from supporting the Sanders program. In the real world, forecasts are a very weak guide to policy; when attempting to make major changes the right strategy is to proceed and to take up the challenge of obstacles or changing circumstances as they arise. That is, after all, what Roosevelt did in the New Deal and what Lyndon Johnson did in the 1960s. Neither one could have proceeded if today’s economists had been around at that time.

Durnik
02-29-2016, 11:44 AM
tldr, matters little.

Congress sets the budget, the President sets the tone. I've been pretty good with the Irish man's tone - liking that of 'the socialist jew from new yawk' just fine so far, too!

Meanwhile, Hillary's tone (ntm _all_ the Repubs!).. sets my teeth on edge & makes my hair stand up.

Ok, I read the last line (it's how I am.. ;-)) -


Neither one could have proceeded if today’s economists had been around at that time.

'zactly.

bobby

Too Little Time
02-29-2016, 12:53 PM
All forecasting models embody theoretical views. All involve making assumptions about the shape of the world, and about those features, which can, and cannot, safely be neglected. This is true of the models the Romers favor, as well as of Professor Friedman’s, as it would be true of mine. So each model deserves to be scrutinized.
Yea. I glanced at chapter 10:


But a computer model based on experience cannot predict outcomes more serious than anything already seen. CBO – and every other modeler using this approach – was stuck in the gilded cage of statistical history.
The nice thing about game playing is that you get a much better view of just how far out past experience the future can be.

David G
02-29-2016, 03:54 PM
tldr, matters little.

Congress sets the budget, the President sets the tone. I've been pretty good with the Irish man's tone - liking that of 'the socialist jew from new yawk' just fine so far, too!

Meanwhile, Hillary's tone (ntm _all_ the Repubs!).. sets my teeth on edge & makes my hair stand up.

Ok, I read the last line (it's how I am.. ;-)) -



'zactly.

bobby

Couldn't disagree more. It is thru false narratives - created by the uber-greedy, and given covering fire by misguided economists - that we allow ourselves to drift too far toward the laissez-faire for optimum economic performance, and optimum social health.

Durnik
03-01-2016, 11:47 AM
Ok David - I read (completely) your post - & reread mine & your comment - which, except for the "Couldn't disagree more", I completely agree with.

Meaning.. just what are you getting at that I'm not seeing? Or, what of what I said do you 'Couldn't disagree more' with?

My point (short n sweet) is that, barring math errors or outright lies, the President's (economic) plan sets the tone for what he sees as best for the country - & I'm good with Bernie's stated 'tone'.

This line -


In the real world, forecasts are a very weak guide to policy; when attempting to make major changes the right strategy is to proceed and to take up the challenge of obstacles or changing circumstances as they arise.

being of particular importance.

bobby