1. Russ complains about politicization of macroeconomic projections:
He cites the Congressional Budget Office reports calculating the effect of the stimulus package...The CBO gnomes simply went back to their earlier stimulus prediction and plugged the latest figures into the model. “They had of course forecast the number of jobs that the stimulus would create based on the amount of spending,” Mr. Roberts says. “They just redid the estimate. They just redid the forecast."
I wouldn't be quite so hard on the CBO. It's their job to forecast the effect of policy. They have to choose a model in order to do that. And it's their job to evaluate the impact of policy. They have to choose a model to do that. And of course they're going to choose the same model, even if that makes the evaluation job just a repeat of the forecasting job. I do wish, however, that the CBO would try some various alternative models, and show the differing estimates for the different models. That would be better than what they currently do.
I think a better example of politicization of policy projections was given not by Russ, but by Kyle Peterson, who wrote up the interview for the WSJ. Peterson cited Gerald Friedman's projection of the impact of Bernie Sanders' spending plans. Friedman also could have incorporated model uncertainty, and explored the sensitivity of his projections to his key modeling assumptions. And unlike the CBO, he didn't have a deadline, and no one made him come up with a single point estimate to feed to the media. And some of the people who defended Friedman's paper from criticism definitely turned it into a political issue.
So I think Russ is on point here. There's lots of politicization of policy projections.
2. Peterson (the interviewer) cites a recent survey by Haidt and Randazzo, showing politicization of economists' policy views. This is really interesting. Similar surveys I've seen in the past haven't shown a lot of politicization. A more rigorous analysis found a statistically significant amount of politicization, though the size of the effect didn't look that large to me. So I'd like to see the numbers Haidt and Randazzo get. Anyway, it's an interesting ongoing debate.
3. Russ highlights the continuing intellectual stalemate in macroeconomics:
The old saw in science is that progress comes one funeral at a time, as disciples of old theories die off. Economics doesn’t work that way. “There’s still Keynesians. There’s still monetarists. There’s still Austrians. Still arguing about it. And the worst part to me is that everybody looks at the other side and goes ‘What a moron!’ ” Mr. Roberts says. “That’s not how you debate science.”
Russ is right. But it's very important to draw a distinction between macroeconomics and other fields here. The main difference isn't in the methods used (although there are some differences there too), it's in the type of data used to validate the models. Unlike most econ fields, macro relies mostly entirely on time-series and cross-country data, both of which are notoriously unreliable. And it's very hard, if not impossible, to find natural experiments in macro. That's why none of the main "schools" of macro thought have been killed off yet. In other areas of econ, there's much more data-driven consensus, especially recently.
I think it's important to always make this distinction in the media. Macro is econ's glamour division, unfortunately, so it's important to remind people that the bulk of econ is in a very different place.
4. Russ makes a great point about econ and the media:
If economists can’t even agree about the past, why are they so eager to predict the future? “All the incentives push us toward overconfidence and to ignore humility—to ignore the buts and the what-ifs and the caveats,” Mr. Roberts says. “You want to be on the front page of The Wall Street Journal? Of course you do. So you make a bold claim.” Being a skeptic gets you on page A9.
Absolutely right. The media usually hypes bold claims. It also likes to report arguments, even where none should exist. This is known as "opinions on the shape of the Earth differ" journalism. This happens in fields like physics - people love to write articles with headlines like "Do we need to rewrite general relativity?". But in physics that's harmless and fun, because the people who make GPS systems are going to keep on using general relativity. In econ, it might not be so harmless, because policy is probably more influenced by public opinion, and public opinion can be swayed by the news.
5. Russ makes another good point about specification search:
Modern computers spit out statistical regressions so fast that researchers can fit some conclusion around whatever figures they happen to have. “When you run lots of regressions instead of just doing one, the assumptions of classical statistics don’t hold anymore,” Mr. Roberts says. “If there’s a 1 in 20 chance you’ll find something by pure randomness, and you run 20 regressions, you can find one—and you’ll convince yourself that that’s the one that’s true.”...“You don’t know how many times I did statistical analysis desperately trying to find an effect,” Mr. Roberts says. “Because if I didn’t find an effect I tossed the paper in the garbage.”
Yep. This is a big problem, and probably a lot bigger than in the past, thanks to technology. Most of science, not just econ, is grappling with this problem. It's not just social science, either - bio is having similar issues.
6. Russ calls for more humility on the part of economists:
Roberts is saying that economists ought to be humble about what they know—and forthright about what they don’t...When the White House calls to ask how many jobs its agenda will create, what should the humble economist say? “One answer,” Mr. Roberts suggests, “is to say, ‘Well we can’t answer those questions. But here are some things we think could happen, and here’s our best guess of what the likelihood is.” That wouldn’t lend itself to partisan point-scoring. The advantage is it might be honest.
I agree completely. People are really good at understanding point estimates, but bad at understanding confidence intervals, and really bad at understanding confidence intervals that arise from model uncertainty. "Humility" is just a way of saying that economists should express more uncertainty in public pronouncements, even if their political ideologies push them toward presenting an attitude of confident certainty. A "one-handed economist" is exactly what we have too much of these days. Dang it, Harry Truman!
7. Russ does say one thing I disagree with pretty strongly:
Economists also look for natural experiments—instances when some variable is changed by an external event. A famous example is the 1990 study concluding that the influx of Cubans from the Mariel boatlift didn’t hurt prospects for Miami’s native workers. Yet researchers still must make subjective choices, such as which cities to use as a control group.
Harvard’s George Borjas re-examined the Mariel data last year and insisted that the original findings were wrong. Then Giovanni Peri and Vasil Yasenov of the University of California, Davis retorted that Mr. Borjas’s rebuttal was flawed. The war of attrition continues. To Mr. Roberts, this indicates something deeper than detached analysis at work. “There’s no way George Borjas or Peri are going to do a study and find the opposite of what they found over the last 10 years,” he says. “It’s just not going to happen. Doesn’t happen. That’s not a knock on them.”
It might be fun and eyeball-grabbing to report that "opinions on the shape of the Earth differ," but that doesn't mean it's a good thing. Yes, it's always possible to find That One Guy who loudly and consistently disagrees with the empirical consensus. That doesn't mean there's no consensus. In the case of immigration, That One Guy is Borjas, but just because he's outspoken and consistent doesn't mean that we need to give his opinion or his papers anywhere close to the same weight we give to the copious researchers and studies who find the opposite.
Anyway, it's a great interview write-up, and I'd like to see the full transcript. Overall, I'm in agreement with Russ, but I'll continue to try to convince him of the power of empirical research!
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