Tuesday, August 3, 2010

Geithner as Bozo

While serious macro tracking data suggests that the economy is headed into the second leg of a downturn (see here and here), Treasury Secretary Geithner in an Op-Ed in today's NYT is "welcoming us to the recovery."

To support his case and justify Obama interventions in the economy, Geithner uses a study by Blinder and Zandi:

According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.
Yes, the same Blinder-Zandi paper that was blown to smithereens by John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Schultz Senior Fellow in Economics at the Hoover Institution for its poor modeling and methodology. Taylor concluded:
...how can one then argue that policy interventions worked, when, in fact, viewed in their entirety they caused the problem?

1 comment:

  1. I'm not sure if the link you provided the right link from John Taylor.

    Did you mean this link:

    or this one:

    Despite Taylor is still a Keynesian all the same, his point about the accuracy of measuring the effect of interventions is well taken.

    But, you can't wrap a mathematical model or coefficient around opportunity cost. So, I reject the premise of a macro model in a world of uncertainty and scarcity.