Montana Politics

Poli-Scientific Method

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I realize my blogging is increasingly being inspired by what goes on on the the comments section. I’m alright with that – there have been some though-through comments, and some of the ideas are worth looking at without having to scroll through dozens of comments.

One recurring theme – how do we know there is any difference between the two parties? How do we know that Democrats wouldn’t have made all the same idiotic decisions that were made under Bush?

In science, when we trying to determine something like this, we use the scientific method, we try to control one variable. That’s of course harder in politics than in a lab, but the last few years Obama et al. performed a nice little experiment. They proposed two infrastructure investment-heavy, Keynesian style stimulus packages. Both had a Democratic president, high unemployment in need of some stimulus, but in the face of a high deficit. The difference (or Independent Variable) is the House of Representatives. The first time, the stimulus passed, because there was a Democratic House. The second time, with a Republican House, no such luck.

So, elections make a difference for legislation. Is that legislation effective? Well, here I have a personal bias, because I was personally employed in some of those stimulus projects. But don’t just trust me, ask Mother Jones.

The only real conclusion? We need Democrats, we need the most liberal Democrats we can get and keep. And to get them, we need to vote.

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The Polish Wolf

28 Comments

  • There is indeed something to that but it is troubling at the same time. The problem is that you use Democrats like darts while you wear blindfolds, throwing them and hoping that you win a prize. You do not discipline, as you have no organization, consequently you find yourself in the untenable position of having to throw the dart again because if you don’t, the carny is going to shut down the show. I have run that metaphor to death. I mean that you fear republicans so much that a shitty democrat looks good to you because of the shine.

    The point, non-metaphorical, is that you can’t do politics on hope and fear. You need some power, and hoping for the best is not power.

    Worse yet, when your people are in power, you fall asleep. As evidence, I offer your stimulus boogaloo, referenced in your writing, Obama left that track and got on another train (new metaphor!), and now we are in double dip.

    Democrats are more useful as opposition to power, sort of. You’re kind of ‘meh’. In power, you are dangerous, due to the asleep at the wheel factor.

  • without addressing the root causes of our economic crisis, any amount of stimulus is destined to come and go and leave us in the same mess that 30 years of class warfare has brought us. Democrats have not proven themselves capable of even articulating how we’ve gotten to this point. instead we get more wars, half-ass stimulus bandaids, and a president that’s raking in more money from Wall Street than the entire GOP field of clowndidates.

    • Nothing in that makes sense from a fact-based perspective, lizard. If class warfare and inequality are the cause of our sluggish economic growth, then there should be some correspondence between global inequality and economic growth. Relatively equal countries like Japan and the E.U. ought to be growing faster than the US and China, which are relatively unequal. No such correspondence is observable, indicating that the root cause of our economic difficulties is not in fact inequality, whatever other ills that inequality brings (and I’ll be the first to admit they are myriad).

      The cause of our slow economic recovery is partially the nature of the beast – while GDP’s are quick to spring back, unemployment is more stubborn (loot at data from the 1930’s if you don’t believe me). It is also partially a failure of the government to be more actively involved in combating unemployment specifically, rather than relying on GDP growth alone to create jobs.

      • no, i wouldn’t expect that comment to make sense to someone coming from a democrat-based perspective. long-term trends that underly a 30 year squeeze regardless of the party in power can’t be processed through that particular lens.

        real growth would require re-inflating consumer spending, and that’s not gonna happen in this current climate of austerity, especially considering priming that pump in the last few decades has required reckless credit and short-sighted American consumers burying themselves in debt. and even if the great American engine of consumption could be revved back up, ultimately it’s not sustainable.

        • More people might listen to your point of view, lizard, if you were more hopeful. You say the only chance at real growth is inflating consumer spending, and that that option is not sustainable, either. So, you don’t really offer any solutions.

          But more importantly, you don’t offer any reason for me to believe what you are saying. I think Dave is atrociously wrong on this matter, but you’ll note that he at least defends his point with facts. You see, it simply doesn’t make sense, and that’s not from a Democratic party perspective. Financial inequality is not a good predictor of economic growth. The most unequal countries in the world often have very high growth rates – China, Brazil, etc. Your entire rationale, then, has no validation. Merely accusing me of partisanship doesn’t help your case any.

          Nor is consumption even a perfect predictor of economic growth. Productivity can increase much faster than consumption – the result is often a positive balance of trade. Indeed, if some lost American economic consumption were replaced by an increase in Chinese and Indian consumption, the global economic system would be a good deal more stable.

  • I refuse to even consider the partisan angles of fiscal policy in the question of “did the stimulus work?” An aggregation of the views of many very smart economists only leads to the conclusion that there is no way to know. Yes, yes, there are Keynesians who build the story that “things would have been worse” against the Austrian School members who say it made things worse. Both schools lack the requisite counterfactual universe to test the hypothesis. Ergo, applying the scientific method to macro-economics is impossible (and I’m aware you haven’t done this here.)

    So I know you bemoan the lack of action for what you and you’re ilk consider good policy. Certainly linking to Keven Drum (whom I respect BTW) should raise your internal confirmation bias antennae. But if we look at public choice theory, when the facts don’t support the hypothesis, maybe the politics of tapping on the breaks makes a bit more sense than (it would appear) you would give it credit.

    Regardless of counterproductive cynicism practiced by both parties, sometimes the debate must needs more vigorous engagement – at which point someone has to urge “don’t just do something, stand there!”

    Will electing liberal democrats really make for good policy?

  • Did someone just say that we cannot evaluate results? As in a libertarian whose philosophy fails each time implemented? Who says we just haven’t implemented it properly? Giving advice now on how we can’t judge because we don’t know what would have happened in the absence of what wa done?

    Priceless.

  • My point was more aimed at those who argue that Democrats to not advance a liberal agenda, not at those who would argue that a liberal agenda is not what we need. From the latter, I’ve seen insufficient intelligent argument of late.

    There is little dispute over some simple economic facts – in the short term, infrastructure investment is more effective stimulus than direct payments, and tax breaks are almost useless (in the short term). Moreover, it is easy to see that the US has huge gaps in physical infrastructure compared to our chief economic competitors. Additionally, we have a lower population density than China, India, Japan, or the EU, meaning that efficient physical infrastructure is harder to develop on a private basis.

    So, we know infrastructure investment provides the greatest multiplier effect for stimulus dollars, and that we need infrastructure anyway; thus, a greater investment in infrastructure would seem positive, so long as borrowing is cheap, and Democrats have demonstrated that they can provide that.

    • PW – the mere fact that Democrats have promoted some infrastructure investment is evidence towards your case that they are pursuing a progressive agenda, but it is a slim reed. I could bury you with evidence to the contrary but will spare you the litany.

      It is well understood by anyone with two eyes that tax cuts are not only not an unefficient means of stimulating the economy, but are not even useful. The notion that government is a counterforce to economic growth has never been borne out. We’ve witnessed the tax cut agenda at work now for thirty years,p and it has done nothing but create pools of wealth that are chasing quick-hit returns. Far from reinvesting, that money has fled the country and even now is pursuing elaborate financial instruments instead of building factories. Tax cuts are counter-growth.

      Government is the greatest wealth creation machine around. Again no litany. High marginal tax rates, giving wealth harvesters the option of avoiding them by investing in PP&E, create steady growth and broad wealth distribution.

      This is Econ 101, but currently not the meme. We have to endure the Randian era, the collapse and depression hopefully avoid military repression of dissent (fascism), and rebuild. It will take a whole lotta time to undo what has been done to us.

  • We don’t know if the multiplier effect even exists. There are some major works on it that are noteworthy. Christina and David Romer made their names studying stimulus and found that nominal government spending had a multiplier of less than 1 while tax cuts had a multiplier between 1.1 and 1.3. Robert Barro of Harvard has done the most reconstructive work on spending multipliers during WWII and concluded that spending then had a multiplier of .5 – in other words it was actually quite negative. If we look at economists who have actually put dollars to data the range is remarkably uncertain ranging from .3 to 1.5 times stimulus. There is no consensus backed up by data that is consistent.

    The best example is what happened to the economy in 1946 – 1948. Keynesians predicted that by reducing the federal spending by more than 50% after the war that the country would face extremely high unemployment and would see GDP fall precipitously. But it didn’t happen at all. After a rather small increase in unemployment right after the war the economy began to grow very rapidly. Now, I know this isn’t dispositive because there were a great number of other factors in place such as huge pent-up demand after rationing and supply shortages caused by the war as well as a near 25% national savings rate during the war (there was nothing to buy.) But one would think that if the multiplier were as significant as economist think there would have been much more downward pressure on aggregate demand if the multiplier was very significant. It just didn’t happen.

    The conventional wisdom is that the multiplier exists. But it simply hasn’t been proven. Hear is a Barro & Redlick column on their work.

    I’m not saying that it doesn’t exist. I’m saying that it’s simply theory at this point and anyone who embraces it as fact is doing what Hayek call “scientism.”

  • Dave – Even if there were no multiplier effect, there are still at least two good reasons to take part in infrastructure investment.

    First, GDP isn’t really the problem. According to GDP growth, the recession is over. However, infrastructure investment almost always requires hiring people, and almost never can be outsourced. Thus, it is the most reliable and direct way to support American jobs. Lowering taxes or making direct payments opens up the possibility that the money in question will be spent on imported goods or not spent at all. Indeed, every other kind of stimulus relies completely on the multiplier effect or even less well understood methods to have any effect on job creation.

    Secondly, beyond creating jobs immediately, infrastructure investment continues to pay for itself. It is clear that the US lags far behind Europe in terms of physical infrastructure, especially on a per-square mile basis, and China is rapidly catching up. It is thus unlikely that we have reached the point of diminishing returns for physical infrastructre investment, and further investment is advisable.

  • Polish Wolf, there is a reason that no Dems are campaigning on their support for Obamas stimulus (spending) bill – it didn’t work.

    Unemployment went up, and the USA is now going into debt at the rate of more than $140,000,000 per hour.

  • Unemployment went up? Well, yes, Eric, it did, after the stimulus was passed. But only a third of it had actually gone into effect one year later, and as the last two thirds were spent, unemployment leveled off and started to decrease, as it is doing now.

    And if the debt is still going up at such a rate per hour, surely it’s not caused by the stimulus, because that money has already been spent. It could be caused by having an unsustainable tax structure, a costly war, and a much larger public debt that in 2000, but we can thank George W. Bush et al. for much of that.

  • I’m pretty hard pressed to believe that GDP isn’t a problem and so should you too. Economists of all stripes agree that the rate of growth isn’t sufficient to increase jobs adequately to even keep up with population growth. And I would mention that looking at the “unemployment rate” is highly misleading. The labor force participation rate is at 40 year lows hence the divisor of the unemployment rate is smaller yielding a smaller Unemployment Rate. GDP growth is everything and more important that it be higher as productivity increases.

    Secondly, I agree that infrastructure spending can be economically good. But there are a lot of “ifs” in that. First, not all infrastructure is equal. Secondly, decisions at the federal level are often laden with pork and, what economists call, leakage. Third, while engineers (who have an interest in promoting the notion that the infrastructure is failing) have called for better infrastructure for as long as we remember, the surprising amount of success we have based on our infrastructure base argues that the problem is less that the conventional wisdom has it.

    Last, yes, infrastructure spending does create jobs. But do those jobs actually change the structural problems of the economy or simply disappear when the work is completed? Thus, and many will argue, that infrastructure spending will increase GDP temporarily but will not address, what economist Arnold Kling calls, Patterns of Specialized Sustainable Trade (PSST) – or changing the skill set of workers to compete globally.

    My feeling, and perhaps unfairly, is that a call for electing “liberal democrats” is as fraught with as much tribalism as the anti-government call from the right. What really is needed is a debate built more on real consequential outcomes with a long term perspective. I still think that you’re buying the multiplier argument in your response which is affected more for political expediency that it is for optimizing policy.

  • “GDP growth is everything”

    That’s exactly the problem with the current model – GDP growth isn’t everything. There are countries with much slower GDP growth than the US that nonetheless have lower unemployment rates. Italy, for example, has had a painfully slow GDP growth rate for years, but has nonetheless managed to post lower unemployment rates than the US. Canada’s GDP growth is nearly the same as that of the US, but it has managed a lower unemployment rate and lower public debt. Much has to do with the structure of an economy – whether GDP growth spurs job creation or not.

    Moreover, in terms of social cohesion and government budgets, unemployment is far more important to combat than low GDP. A person doubling their contribution to GDP from forty to eighty thousand may be good for the economy, but a person becoming newly employed for the same forty thousand dollar contribution to GDP is going have a much bigger impact that government expenditures (since they will likely be leaving some kind of public assistance) and will also do more to increase overall satisfaction with the state of society and disenfranchisement. The costly riots in Spain and Greece are not caused by people making forty thousand a year and wanting eighty – they are caused by too many people not having any work at all. In many cases, the economics costs caused by people suffering from long term unemployment – from uncompensated care at hospitals to costs for public assistance and in the justice system – are greater than the cost of hiring them to perform a job would be.

  • Let’s do a little though experiment. Let’s draft everyone in the country into the the military. Effectively, we get 0% unemployment but no food to eat. Italy, in case you haven’t been paying attention, is screwed. They have far more government employees and people on public pensions than all of the northern European countries and soon will have much higher unemployment if they raise the retirement age and enact other austerity reforms. The unemployment rate is a poor surrogate for economic health.

    So let’s take a look at your comparisons but put Italy against Canada. Italy’s GDP lagged but employment was bolstered by a higher percent of GDP spending by the government. Canada, on the other hand, had stronger GDP growth but reduced the amount of government spending as a percentage of GDP. What are the results? Italy is on the brink of financial collapse and Canada has been improving its national balance sheet. So, I will concede that at some point GDP is distorted by government intervention (and, to a lesser extent, income distribution) so becomes less relevant. The quality of GDP is likely more important (which brings me back to PSST.) But GDP is a much better surrogate for economic health than is the unemployment rate (and I would say that the labor force participation rate is better yet.)

    Looking at unemployment in a vacuum is folly. You can tell me that GDP doesn’t matter but them you not only disagree with me you disagree with Paul Krugman, Mark Zandi, Brad DeLong, and every other notable Keynesian (including Keynes himself) on the planet. When Keynesians say that the economy needs more “aggregate demand” what do you imagine they’re talking about? They’re talking about the level of economic activity – which they commonly measure in terms of GDP.

    I’m having a real difficult time with you line of argument. First you imply that multipliers exist. Then you say that is irrelevant because we need infrastructure development and, consequently, the jobs are nice. The you tell me that GDP growth isn’t important but jobs are (and give a data point in Italy that is increasingly suspect) which flies in the face of every Keynesian tenet of economic theory ever discussed. Which leads back to the wobbly Keynes assertion of the value of fiscal stimulus and why liberals are so much better. It’s built on a non-proven premise. And all I seem to get from you is that my focus on data points is faulty.

    I think it’s incumbent on you to tell me why I’m wrong about long term thinking and the problems in the economics for what you argue. It’s way past time to put partisanship’s head on a spire and start thinking about root causes.

  • Hrmm that was weird, my comment got eaten. Anyway I wanted to say that it is nice to know that an individual else also mentioned this as I had trouble finding the exact same info elsewhere. This was the very first place that told me the answer. Thanks.

  • Interesting approach towards this. What are your thoughts on expansion on a global scale? People obviously get frustrated when it begins to affect them locally. I’ll be around soon to check out your response.

  • Greetings! I’ve been following your blog for some time now and finally got the bravery to go ahead and give you a shout out from Lubbock Tx! Just wanted to tell you keep up the good work!

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