The Fever Swamps of Ricochet; or, How Not to Talk About Macroeconomics

 

Ricochet is a great place to discuss all sorts of things. Guns, for example. When it comes to firearms, Ricochetti — in contrast to the left-leaning media — know what they are talking about, can cite relevant facts and figures, and discuss the issues calmly and reasonably.

Unfortunately, when it comes to macroeconomics, all too often the roles are reversed. Which is a shame, because leftist approaches to the macroeconomy are disastrous, and we need conservative policies to turn things around. It helps no one when otherwise excellent Ricochet conversation turn to economic matters and begin to resemble the fever swamps that characterize leftist discussion of firearms.

I see three problematic trends in recent Ricochet threads.

1. Ignorance. When a reporter, pundit, or politician can’t distinguish between automatic and semi-automatic weapons, we rightly consider that ignorance disqualifying. If you haven’t bothered to do your homework on basic questions, why should we trust your policy prescriptions? Similarly on economic matters: If you haven’t bothered to learn some basic mechanics of how, say, an inflation index is constructed, and the tradeoffs involved, your other claims won’t be very persuasive — even if they may be right. I’m not saying you should shut up and listen to the experts, but you should be honest — first and foremost with yourself — about the limits of what you know and be willing to learn more.

2. Non-falsifiable claims. One of the challenging things about discussing guns with a lefty is that the evidence doesn’t seem to matter. Do more guns cause less crime? Impossible — that’s counter to my intuition! And if you happen to get through on that point, you often run up against a wall: So what if it’s true — children are dying! Don’t bother me with data. A number of commenters on Ricochet have, sadly, taken such a non-falsifiable approach to macroeconomic matters, especially in support of the idea that inflation is understated by official figures. And worse, some Ricochetti will tell you that the data must not only be faulty, but indeed manufactured to produce “the government’s” desired outcome. Aside from the fact that there are thousands of individuals and dozens of agencies involved in the dissemination of the data, consider: do you trust government statistics on crime and gun ownership? After all, it’s the same government and it has as much incentive to doctor those statistics as the economic ones.

3. Ends justifying means. After the Newtown school shooting, I remarked to a liberal friend that I found it disgusting how gun control advocates were exploiting the tragedy to push unrelated measures, things that never would have prevented the tragedy in the first place. He took umbrage at that. If we don’t take advantage of the fact that people are emotional about the issue now, these measures will never get passed! These are the right things to do, so there’s nothing wrong with leveraging voter ignorance to achieve them. This kind of pandering comes from the same impulse as Dan Rather’s reliance on fraudulent documents in reporting, and the “fake but accurate” defense. That a narrative is consistent with your prejudices — or voter prejudices — doesn’t make it true. Your personal experience is true for you, but that doesn’t mean you’ve perceived it accurately, or understood it in context, or that it reflects a larger reality. Of course, to win political battles, we need to tell stories of how the economy is affecting people. Of course, to win political battles we need to tap into voter perceptions and voter experience, not rely entirely on voter reasoning. But does that mean we should craft all our stories to exploit voter ignorance? To what extent are we supposed to subordinate the evidence to the narrative? As conservatives, let’s make sure that our narratives reinforce the truth rather than contradict it — whether on gun policy, foreign policy, or economic policy. Otherwise, just as Democrats have failed to persuade voters on guns, we will fail to persuade voters on the disasters of leftist economic policy, and on the promise of conservative approaches to make things better for them and their families.

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  1. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Like?

    • #1
  2. skipsul Inactive
    skipsul
    @skipsul

    I know that I’ve learned more Macro from knowledgeable Ricos than elsewhere.  After some none-too-subtle corrections (read:  being told in unmistakable terms that I was wrong and how) when I first joined Ricochet I’ve decided to keep my trap shut on macro issues.  Know what you know, but more importantly learn to recognize when you’re flying blind.

    • #2
  3. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    This is a fair criticism.  I will make a conscious effort to avoid doing this in the future.

    • #3
  4. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    So here’s a question: how  does  one become more educated, as quickly as possible, in the basics of macroeconomics?

    All of my education in economics is purely informal, and the arguments I understand best are microeconomic ones. Can you do macroeconomics by applying microeconomic principles to a large population?

    • #4
  5. Franco Member
    Franco
    @Franco

    Great points all. The common thread here is that we are arguing with more than belief systems, we argue with people who desperatly cling to something they want to believe. “Yeah, but still” is another way of putting it. 

    Son of Spengler: Of course, to win political battles, we need to tap into voter perceptions, and voter experience, and not rely entirely on voter reasoning. But does that mean we should craft all our stories to exploit voter ignorance? To what extent are we supposed to subordinate the evidence to the narrative? As conservatives, let’s make sure that our narratives reinforce the truth, and don’t contradict it — whether on gun policy, foreign policy, or economic policy. Otherwise, just as Democrats have failed to persuade voters on guns, we will fail to persuade voters on the disasters of leftist economic policy, and on the promise of conservative approaches to make things better for them and their families.

     This has been happening continually from Republican establishmentarians. They join the narrative and thus perpetuate it. The very fact that they can’t see the folly in this disqualifies them as political generals.

    • #5
  6. user_1938 Inactive
    user_1938
    @AaronMiller

    Son of Spengler: Do you trust government statistics on crime and gun ownership? After all, it’s the same government, and it has as much incentive to doctor those statistics as the economic ones.

    A fair point. But I’m not sure the two are exactly equal. Economic statistics are generally more abstract, interdependent, or otherwise difficult to measure, so they are easier to skew. And is anything more significant to voting patterns than the general state of the economy?

    • #6
  7. Mike H Coolidge
    Mike H
    @MikeH

    I’ve heard that macroeconomics is mostly magic, and no one really understands it, including the economists that study it; they just pretend to. And by magic, I mean everyone is probably wrong.

    • #7
  8. user_989419 Inactive
    user_989419
    @ProbableCause

    Fair enough.

    Now, for those of you who do the commendable work of patiently explaining these macroeconomic mechanisms, the pill is much easier to swallow without being told, “if you disagree with this, you’re a fever swamp dwelling conspiracy theorist.”  It may be true.  But it’s not persuasive to insult the person you’re trying to educate.

    Also, recognize that it’s normal and helpful to reconcile data with personal experience.  Granted, we need to grasp that a single data point does not make a trend.  But experience and data serve to check one another.  It’s fair to ask, “why doesn’t my experience match the data?”

    Finally, no I don’t completely trust government statistics on crime and gun ownership.  Do you trust the government statistics being collected by the VA?  I agree we shouldn’t dismiss them out of hand, “because the government manipulates everything!,” but neither should we accept them blindly.  It’s fair game to examine the collection methods, compilation and formulas, not assuming but at least checking for manipulation, and also for natural limitations.

    • #8
  9. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Mike H:

    I’ve heard that macroeconomics is mostly magic, and no one really understands it, including the economists that study it; they just pretend to. And by magic, I mean everyone is probably wrong.

    Heh. Mr Rattler is a U-of-C-trained economist, and I think all of us here know what that means. I once asked him, in a fit of frustration, “Does macroeconomics even exist?” He eventually answered with a qualified “Yes”. But he had to think about it.

    • #9
  10. EJHill Podcaster
    EJHill
    @EJHill

    Nobody finds solace in macroeconomics in a microeconomic world.

    Employment numbers? Nobody worries about the millions. Am I working? My brother? Your son-in-law? That’s what’s important.

    The CPI? No, the CFU – the Car Fill Up. That index hurts. So does the $100 doctor visit when you know you’re kid has poison ivy but the doctor won’t call in for a $4 prescription for Prednisone because the feds aren’t interested in cost control – just price control and people control.

    Statistical measurements, to a point, are irrelevant to life and politics. It’s like arguments over batting average or on base percentage. WHIP v ERA. WAR stats! (UGH!) Did you win?

    I happily wear the badge of ignorance in that miserable science.

    • #10
  11. Tuck Inactive
    Tuck
    @Tuck

    “…And worse, some Ricochetti will tell you that the data must not only be faulty, but indeed manufactured…”

    In general, I agree with your post, although I have some quibbles with parts of it.   But mainly the part above.

    I don’t particularly trust any of the numbers coming out of DC.  Robert Rector had a nice piece over at NR on the veracity of poverty numbers:

    “…Given these facts, how does the Census Bureau conclude that more than 40 million Americans are poor? …in counting income, the Census Bureau ignores almost the entire welfare state….”

    He’s goes into a great deal more detail on how the Gov’t’s poverty numbers are largely a fiction.  This does indeed call all the other Gov’t stats into question, although it doesn’t prove that they’re questionable.

    But it does refute your argument that they couldn’t be bogus, because a great number of people are involved. 

    As for the notion that there’s a lot more inflation around than is reported it’s hardly a fever-swamp notion.

    Looking for inflation? Try asset prices.

    “Pretty much all assets have been going up in price for some time and many of these have now become expensive – some even very expensive: global stocks have increased 50% over the past two years and valuation in several key markets is starting to look stretched. High-yield spreads are trading only marginally above the spreads prevalent ahead of the financial crisis. Government bonds in peripheral bond markets have had a remarkable performance – 10-year Spanish yields  are now at 2.65%, the lowest level in 200 years. In core government bond markets, German 10-year government yields at 1.25% are close to the lows during the euro debt crisis.”

    These prices are not included in inflation indices, even though research has shown that they’re more responsive to inflation:

    “We have also shown that share prices fully absorb monetary shocks within half a year, while house prices, consumer prices and the GDP deflator first absorb these shocks after a decade. Considering the long lag between policy and inflation, using the money growth rate as an inflation indicator can hence be beneficial for the policy maker.”

    That paper’s hosted on a Federal Reserve computer, btw.

    • #11
  12. Z in MT Member
    Z in MT
    @ZinMT

    Spengler,

    I don’t know if you are familiar with the HedgeEye YouTube series “Real Conversations”.  This series has been an eye opener for me concerning monetary policy.  There are a large cadre of successful professional hedge fund types that understand macroeconomics and the implications of Fed policy and how inflation is measured that are just as concerned about potential inflation as your “fever swamp dwelling conspiracy theory” types.

    • #12
  13. user_1938 Inactive
    user_1938
    @AaronMiller

    Probable Cause: Also, recognize that it’s normal and helpful to reconcile data with personal experience.  Granted, we need to grasp that a single data point does not make a trend.  But experience and data serve to check one another.  It’s fair to ask, “why doesn’t my experience match the data?”

    Seconded. Statistics never match the rich context of anecdotes. Statistics and personal experience must always be balanced with one another. 

    • #13
  14. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Aaron Miller:

    Son of Spengler: Do you trust government statistics on crime and gun ownership? After all, it’s the same government, and it has as much incentive to doctor those statistics as the economic ones.

    A fair point. But I’m not sure the two are exactly equal. Economic statistics are generally more abstract, interdependent, or otherwise difficult to measure, so they are easier to skew. And is anything more significant to voting patterns than the general state of the economy?

    I concede that economic statistics will be easier to skew, because they use more assumptions and extrapolations. WRT voting patterns, I guess crime is more local, and can do more at the local level to affect voter perceptions. So much of our economic activity acts at a distance today. The national crime trends I had in mind were primarily related to the drug war, where statistics could be used to justify escalation and power grabs. But in retrospect, I see that this was among my weaker points.

    • #14
  15. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Mike H:

    I’ve heard that macroeconomics is mostly magic, and no one really understands it, including the economists that study it; they just pretend to. And by magic, I mean everyone is probably wrong.

    Well, I’m sure everyone is wrong, to some degree. Macroeconomics is not anywhere near as robust as, say, Newtonian physics. But over time, a set of concepts and tools has been developed that does a reasonably good job of explaining and predicting economic outcomes. Some of the tools are appropriate for some circumstances and not others. (“All models are wrong; some are useful.”) And certainly, at the boundaries of knowledge, you will find economists who are bad empiricists, or are just plain wrong. But I think it’s an exaggeration to dismiss the entire discipline.

    • #15
  16. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Probable Cause:

    Fair enough.

    Now, for those of you who do the commendable work of patiently explaining these macroeconomic mechanisms, the pill is much easier to swallow without being told, “if you disagree with this, you’re a fever swamp dwelling conspiracy theorist.” It may be true. But it’s not persuasive to insult the person you’re trying to educate.

    Also, recognize that it’s normal and helpful to reconcile data with personal experience. Granted, we need to grasp that a single data point does not make a trend. But experience and data serve to check one another. It’s fair to ask, “why doesn’t my experience match the data?”

    Finally, no I don’t completely trust government statistics on crime and gun ownership. Do you trust the government statistics being collected by the VA? I agree we shouldn’t dismiss them out of hand, “because the government manipulates everything!,” but neither should we accept them blindly. It’s fair game to examine the collection methods, compilation and formulas, not assuming but at least checking for manipulation, and also for natural limitations.

     Well said.

    • #16
  17. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    EJHill:

    Nobody finds solace in macroeconomics in a microeconomic world.

    Employment numbers? Nobody worries about the millions. Am I working? My brother? Your son-in-law? That’s what’s important.

    The CPI? No, the CFU – the Car Fill Up. That index hurts. So does the $100 doctor visit when you know you’re kid has poison ivy but the doctor won’t call in for a $4 prescription for Prednisone because the feds aren’t interested in cost control – just price control and people control.

    Statistical measurements, to a point, are irrelevant to life and politics. It’s like arguments over batting average or on base percentage. WHIP v ERA. WAR stats! (UGH!) Did you win?

    I happily wear the badge of ignorance in that miserable science.

     If a liberal came to you and said, “I don’t know anything about guns, and I’m proud of it. There’s no reason anyone should own one, and they should all be banned.” — how would you react?

    • #17
  18. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Tuck: “…And worse, some Ricochetti will tell you that the data must not only be faulty, but indeed manufactured…” In general, I agree with your post, although I have some quibbles with parts of it. But mainly the part above.

     Your points are well taken. Allow me to clarify some of what I was trying to say.

    I was trying to contrast faulty data — compiled in good faith, but perhaps using bad collection methods, or flawed calculation methodologies, or even ideologically-driven questions of what to measure — vs. data that were manufactured to achieve a desired outcome. In the former, we can argue about ways to improve things. But if you assume that all discrepancies must be attributable to the latter, you’re effectively saying the whole enterprise is garbage, because it was produced in bad faith, and you’re tarring everyone involved as dishonest. That happens periodically — for example, when census data were faked before the 2012 election — but it’s implausible to think that it’s common. Think of all the people who would need to be in on the conspiracy. Word would get out, as it did in this case.

    • #18
  19. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Tuck: Robert Rector had a nice piece over at NR on the veracity of poverty numbers:

    I think this is a good example of how we should be critical of government figures. After understanding how they are compiled, and understanding the methodological tradeoffs, we can make meaningful criticisms of specific methodological approaches. We can compare and contrast, etc. Not all government statistics are equal, in part because not all government agencies are equally professional and nonpartisan.

    • #19
  20. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Z in MT: I don’t know if you are familiar with the HedgeEye YouTube series “Real Conversations”. …. There are a large cadre of successful professional hedge fund types that understand macroeconomics and the implications of Fed policy and how inflation is measured that are just as concerned about potential inflation as your “fever swamp dwelling conspiracy theory” types.

     I’m not familiar with it, and look forward to checking it out.

    FWIW, you can count me among those who are concerned about potential acceleration of inflation. My criticism is not with those who are concerned about it, it’s with people who dismiss the fact that the figures show it hasn’t yet happened. That includes people who (a) resort to some shadow calculation with methodological flaws, to “refute” the official numbers; (b) see anomalies between the figures and some other measure, and insist that their preferred measure trumps all; and (c) insist their own perceptions are dispositive, so the figures must be wrong. I am especially critical of people who attribute any anomalies to a concerted government effort to hide the truth.

    • #20
  21. Ryan M Member
    Ryan M
    @RyanM

    Goodness.  You can count me among the “economics semi-buffs” (i.e. I read the classics and listen to econTalk) who don’t really know anything about macro-economics.  Honestly, my policy thus far has been to operate as if there is really no such thing as macro-economics; it is an attempt to take something that is ridiculously complex and pin it down.  Like putting a glove on the invisible hand.  You may snag a finger or two by sheer luck, but you don’t have the whole picture, and that really isn’t enough for attempted “tinkering.”  So all of my arguments are for microeconomic policy and leaving everything else alone!  That approach seems to work pretty well for a small-government libertarian-type conservatism.

    • #21
  22. Son of Spengler Contributor
    Son of Spengler
    @SonofSpengler

    Midget Faded Rattlesnake: So here’s a question: how does one become more educated, as quickly as possible, in the basics of macroeconomics?

     You could start by marrying an economist….. There are some good online courses (Coursera, MIT Open Courseware) and even Khan Academy vids.

    Midget Faded Rattlesnake: Can you do macroeconomics by applying microeconomic principles to a large population?

     Unfortunately not, even though a number of concepts are analogous and knowing micro helps. Micro is, at bottom, about how people make choices in the presence of scarcity. Macro is more about how government and banking policy can affect economic outcomes. Macro is built on a micro foundation, because “classical” economics is all micro. Under various boundary conditions, macro models will simplify to micro equivalents.

    • #22
  23. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Son of Spengler:

    Midget Faded Rattlesnake: So here’s a question: how does one become more educated, as quickly as possible, in the basics of macroeconomics?

    You could start by marrying an economist…..

    Heh. He’s great at math and microeconomic arguments, but he never fell in love with the macro stuff. I could probably get educated faster through Khan Academy vids than by trying to worm it out of him. Everyone specializes.

    Now he works in finance. As far as I can tell, to the extent he thinks about macroeconomic policy for his work, he thinks of it as a blank, brute given to be factored into various algorithms, not anything whose efficacy he wants to analyze any more than he absolutely has to.

    • #23
  24. Tuck Inactive
    Tuck
    @Tuck

    Son of Spengler: Think of all the people who would need to be in on the conspiracy. Word would get out, as it did in this case.

     Indeed.  We’re not quite Argentina, yet.

    And as I said, I agree with your overall point.  There’s an argument to be made, it just needs to rely on facts and logic.

    • #24
  25. EJHill Podcaster
    EJHill
    @EJHill

    Son of Spengler: If a liberal came to you and said, “I don’t know anything about guns, and I’m proud of it. There’s no reason anyone should own one, and they should all be banned.” — how would you react?

    I know no one should be proud of their ignorance, but on the other hand, economics is not a “hard” knowledge. Economists act more as high priests of their pet theories. Paul Krugman and Arthur Laffer are accredited in the same field. But they both can’t be correct.

    The gun analogy is limited in its usefulness. You find two kinds of activists on the left. The first are there because they simply see no usefulness. The second because they have had a tragic first hand, life-altering experience with it. The former group could go several lifetimes without ever having their life impacted by the presence of firearms. No one can say the same of economics. Everyone has a personal economy.

    While my ownership of a firearm has no impact on anyone as long as I remain in control and do no unlawful action, I am not insulated from government economists.

    • #25
  26. Tuck Inactive
    Tuck
    @Tuck

    Son of Spengler: I am especially critical of people who attribute any anomalies to a concerted government effort to hide the truth.

     Here’s an anecdote you may find enlightening:

    “…Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI “to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children’s toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly ‘distorted'” by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.”

    “I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland’s board of directors. I was welcomed to the lectern with, “Now it’s time to see what Mike is going to throw out of the CPI this month.”…

    “I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending—or “distorted”—price change. Stripping these items from the price statistic revealed the truth—and confirmed that I was right all along about the actual rate of inflation….”

    So he removed whichever numbers were necessary so he could get to the number he “knew” to be “right”.  If you did that with a stock portfolio as a fund manager, you’d be guilty of fraud.

    The author is “Mike Bryan, vice president and senior economist in the Atlanta Fed’s research department”, and that anecdote is from the Atlanta Fed’s macroblog.  The article is titled “Torturing CPI Data until They Confess: Observations on Alternative Measures of Inflation (Part 1)”.

    The fact that there’s “a concerted government effort to hide the truth” about inflation is indisputable, you can read all about it on the Fed’s own web sites.

    The question is, what are the real rates?  How far off the manufactured ones?  Probably not too far, I suspect. Not like Argentina, yet.

    • #26
  27. FloppyDisk90 Member
    FloppyDisk90
    @FloppyDisk90

    @26:

     http://www.bls.gov/cpi/cpiqa.htm

    • #27
  28. EThompson Inactive
    EThompson
    @EThompson

    Which is a shame, because leftist approaches to the macroeconomy are disastrous, and we need conservative policies to turn things around. It helps no one when otherwise excellent Ricochet conversation turns to economic matters, and begins to resemble the fever swamps that characterize leftist discussion of firearms.

    You’re preaching to the choir, sir. A lot of the anti-micro feedback is cleverly hidden within individual member support of certain milquetoast political candidates and overreaching religious institutions coupled with a dislike for private equity businessmen, the Yankees, or the Patriots.

    • #28
  29. Carol Member
    Carol
    @

    Is this related to Jim P.’s criticism of Amity Schlae’s column on NRO today about inflation? I am no economist but, I am inflamed by those who continue to tell us there is no inflation, because I buy the groceries. They argue that say, electronics and cell phones are cheaper, but I don’t buy flat screen TVs and new laptops once a week. Lower housing prices only help if you are in the market for a house. Better cars, even better fuel economy don’t help when I have to fill up my old car once a week at $3.89. We replaced the gutters in the front of our house 4 years ago due to some drainage issues. Two years later, called the same company for the back of the house, the estimate came, and the price ( same linear feet ) was doubled. This must be a mistake, I say. No, they say – aluminum prices are way up. So, when they say there is no inflation, I  hear ” who you gonna believe, me or your lying eyes?”

    • #29
  30. Ryan M Member
    Ryan M
    @RyanM

    Son of Spengler:

    Midget Faded Rattlesnake: Can you do macroeconomics by applying microeconomic principles to a large population?

    Unfortunately not, even though a number of concepts are analogous and knowing micro helps. Micro is, at bottom, about how people make choices in the presence of scarcity. Macro is more about how government and banking policy can affect economic outcomes. Macro is built on a micro foundation, because “classical” economics is all micro. Under various boundary conditions, macro models will simplify to micro equivalents.

     Oh, I don’t know.  This is exactly how liberals do macro-economics!  Take what works on a small scale, and just make it huge.  You know, that’s why their economic policies work out so well.  And then, when you try to argue with them, they come back at you with small-scale examples.  Even when they think they aren’t, by citing tiny little countries, or stuff like “obamacare worked in MA.”  

    (oh, p.s. I’m being facetious)

    • #30
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