Monday, October 26, 2009
Who's Being Dogmatic?
My op ed in the San Diego Union-Tribune generated some hate mail. The best was this:
(1) After passage of the Obama stimulus package, unemployment is now higher than they predicted (a) with the stimulus and even (b) without the stimulus. In other words, we are now in a situation that is even worse than what Obama's economic team used to scare people into supporting the stimulus.
(2) Even though TARP was pushed through with the promise of getting banks lending again, lending was at an all-time high when TARP was passed, and since has plummeted 12% in less than a year.
I didn't mention this in the op ed, but since he brought it up:
(3) As far as the Great Depression goes, we see that the period of the greatest federal intervention into the US economy (at least during peacetime) was also by far the worst economic performance in US history.
So my question is this: What would the empirical evidence have to look like, in order for my pessimism about government intervention to be well-founded, rather than dogmatic?
And notice that for my correspondent, he uses a priori theory to explain away the ostensible failure of the stimulus and TARP. He relies on the trusty counterfactual: Even though the objective measures got worse after his programs passed, nonetheless he is confident that things would have been even worse had the government done nothing.
Maybe the guy is right; I'm certainly not knocking a priori theory in economics. But it's a bit absurd for him to criticize me for clinging to dogma in this case.
Mr. Murphy, in your article published in the San Diego Union Sunday Oct. 25,2009 the first conclusion you come to is that the Obama economic stimulus was a failure and you use the predictions of the administration to support this conclusion. Predictions of anyone do not substantiate anything other that the predictions were wrong. Your second point was that TARP was not needed because business loan activity decreased after Oct 2008 when the rescue was initiated. Oct. 2008 was when the banking almost came to a complete halt whether tarp was introduced or not, so it seem obvious that loan activity would decline, that fact doesn't tell us anything about TARP. I think you come to your conclusions from a dogma and no real interest in the truth. Any small understanding of the great depression will give you actual facts of what government intervention does. I get tired of reading editorials in the Union Tribune with no real facts to support the opinion.I put the bold in the above. What's funny is that in my op ed, I pointed out:
(1) After passage of the Obama stimulus package, unemployment is now higher than they predicted (a) with the stimulus and even (b) without the stimulus. In other words, we are now in a situation that is even worse than what Obama's economic team used to scare people into supporting the stimulus.
(2) Even though TARP was pushed through with the promise of getting banks lending again, lending was at an all-time high when TARP was passed, and since has plummeted 12% in less than a year.
I didn't mention this in the op ed, but since he brought it up:
(3) As far as the Great Depression goes, we see that the period of the greatest federal intervention into the US economy (at least during peacetime) was also by far the worst economic performance in US history.
So my question is this: What would the empirical evidence have to look like, in order for my pessimism about government intervention to be well-founded, rather than dogmatic?
And notice that for my correspondent, he uses a priori theory to explain away the ostensible failure of the stimulus and TARP. He relies on the trusty counterfactual: Even though the objective measures got worse after his programs passed, nonetheless he is confident that things would have been even worse had the government done nothing.
Maybe the guy is right; I'm certainly not knocking a priori theory in economics. But it's a bit absurd for him to criticize me for clinging to dogma in this case.
Comments:
Bob - IN case you missed it, here's might response to the editors regarding your column in the San Diego Union Trib:
Editors
Your editorial page on Sunday (10/25/09) presented a wake-up call in the form of Mr. Murphy's column: "Is the Recession Really Ending?" A great article by an economist with some interesing ideas. His suggeston that "A more free-market approach" to our economic problems might have yielded better results is a breath of fresh air. More like that please.
Brian Erickson
Keep up the good work.
Editors
Your editorial page on Sunday (10/25/09) presented a wake-up call in the form of Mr. Murphy's column: "Is the Recession Really Ending?" A great article by an economist with some interesing ideas. His suggeston that "A more free-market approach" to our economic problems might have yielded better results is a breath of fresh air. More like that please.
Brian Erickson
Keep up the good work.
This is what frustrates me so much about economic policy in practice. You shell out $800B (or whatever it was) and then claim, "Oh it would have been much worse had we not". Really? How does anybody make that claim? Since economics isn't true "science" in the sense that you can create an experimental framework, control the variables and conduct the experiment over and over again, all we're left with is political posturing and hand waving arguments.
What really would have happened had no bailout occurred? Would unemployment be 20%? Would we all have become zombies?
What really would have happened had no bailout occurred? Would unemployment be 20%? Would we all have become zombies?
Bob,
Saying something would have been worse had it not been done is completely ridiculous. That's like saying if I didn't throw water on that grease fire, it would have been much worse.
You were right. The problem is statist never admit what they did was wrong. It either hasn't taken effect yet or they haven't done enough. Luckily for them, the free market doesn't die easily. Eventually the free market fights back and they say "see, it worked". Unfortunately, although it has come back, it is no where near as robust as it should be.
Saying something would have been worse had it not been done is completely ridiculous. That's like saying if I didn't throw water on that grease fire, it would have been much worse.
You were right. The problem is statist never admit what they did was wrong. It either hasn't taken effect yet or they haven't done enough. Luckily for them, the free market doesn't die easily. Eventually the free market fights back and they say "see, it worked". Unfortunately, although it has come back, it is no where near as robust as it should be.
Bob,
You have to keep in mind that the "empirical evidence" he has in mind contrary to your dogma, is the counterposing dogma he learned in school and from the media that the Feds saved everyone from the Great Depression v1.0. It's not like he was e-waving some charts with competing data in your face.
This guy either knows A LOT about you and your beliefs to have identified you as a dogmatist from one op-ed, or else he's using it as a convenient way of avoiding addressing your arguments.
I am guessing it is the latter.
You have to keep in mind that the "empirical evidence" he has in mind contrary to your dogma, is the counterposing dogma he learned in school and from the media that the Feds saved everyone from the Great Depression v1.0. It's not like he was e-waving some charts with competing data in your face.
This guy either knows A LOT about you and your beliefs to have identified you as a dogmatist from one op-ed, or else he's using it as a convenient way of avoiding addressing your arguments.
I am guessing it is the latter.
Bob, well said.
I agree with Taylor; the real problem is that we must battle with models of reality that people carry around in their heads, and that they are reluctant to revise (much less admit might be wrong).
I agree with Taylor; the real problem is that we must battle with models of reality that people carry around in their heads, and that they are reluctant to revise (much less admit might be wrong).
That respondent is one dumb SOB. Neither program worked, counter to their predictions, therefore the damn solutions didn't work. I'm about ready to slap some of these idiots.
The Los Angeles Dodgers didn't lose to the Phillies. If the series had been best of nine, they will win it yet.
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