Right now both supporters and critics of the recently signed $787 billion stimulus package seem to be saying: “History will show we were right and you were wrong.” On the one hand, Democrats are hoping that history will cause Obama to be regarded much as FDR has been seen by many–i. e., as one who stepped in to rescue the economy after the opposition party had failed. On the other hand, many critics are predicting that disastrous results will lead us sorely to regret the measure. It has also been suggested on this forum that outspoken critics will have made a strategic error if it turns out that the package “worked.”
All this discussion leads to an interesting and very difficult question: How will we be able to determine, one way or the other, whether or not the plan “worked”? More specifically, consider these interrelated questions:
First, at what point, if any, will we be able to make a judgment? Many (perhaps most) economic prognosticators agree that the economy will turn around eventually anyway, although the time frame for that has been estimated at anywhere from late 2009 to several years from now. So will there be some point in time when anyone will be able to say definitively that the economy has recovered faster than it would have without the package, or that it has failed to do so?
If and when the economy turns around, or if and when it fails to do so, will we be able to draw any conclusion about the stimulus package’s role in that? Will we be able simply to assume that correlation equals causation, that post hoc ergo propter hoc?
The economy could get better or worse because of factors other than the stimulus package. For instance, what if there were a costly terrorist attack about eight months into the new president’s term? (It has happened before.) How will we be able to sort out the effects of the stimulus from the effects of such other factors, whether good or bad? If some unexpected disaster intervenes and the economy continues to go south, will we still be able to conclude that the package failed? Or if there are some unexpected positive contingencies (e. g., technological breakthroughs beyond the foreseen) that lead to great growth, will we still be able to conclude that the package succeeded?
What specific effects will be looking for? Will we merely look for what Bastiat called the “seen” effects–the possibilities that were made possible by the measure? Or will we also be able to discern the “unseen” effects–those effects, positive or negative, that would have happened if the measure had not been enacted but which are no longer possible? For example, if the measure results in $x billion being spent on some project that employs y people, will that alone be “proof” of success? If that’s our only criterion, then it’s apparent to me, at least, that the plan will be regarded as a resounding success. But will that tell the whole story?
If we’re experiencing a wage-price spiral in another year or two, will or should that be taken into consideration in evaluating whether the package “worked”?
What criteria will Slowtwitch posters use in their inevitable “I told you so” threads?
Is history a proper method for rendering verdicts on measures like this one at all? If so, just how should one use history?
I hope someone can shed some light on these questions, because personally I’m perplexed as to what people mean when they say: “We’ll see whether or not it works.”
This is politics Rob, and has nothing to do with measurable success or failure.
It is similar to several posts I’ve seen in here, some I hope were tongue-in-cheek but weren’t in pink. One commented that the economics of the 90s were due to Bush’s actions just before he left office. And the recession we are in now is merely a part of the economic cycle. Partisans take credit for the good stuff, and either blame others for the bad, or claim it is a natural process.
This is the Lavendar Rob. Rational thought has been banned here for quite some time.
“Republicans: it’s not Obama’s doing. It’s because of what Bush left behind.”
Depending on which “it” is under discussion, the Democrats might be saying that too!
Francois, with your mathematical expertise I figured you’d be giving us a sophisticated answer involving Bayesian probability calculations or some such.
my mathematical expertise tells me that there are way too many variables to keep track off, way too much uncertainty, the human factor to include, and that modeling this would be a total waste of time.
Moreover, you know that no metrics used will be satisfactory to everyone. You could always find something to say a metric is not appropriate.
That’s pretty much what I’ve been thinking. As you could probably glean from my post, I’m very skeptical about the idea that there will be any clear-cut “verdict of history” on this plan. Nevertheless, most people are talking as if they expect one!
I’ve been doing a lot of publicity for the book ‘the black swan’ but you’ll get some interesting opinion by reading it, definitely going in this direction.
Fooled by randomness might be the better one, either way, this entire conversation about whether it will work or not or how we might know if it did is a waste of bytes. Those that have staked that the presidents an idiot would never ever acknowledge that should this work it would be as a result of his intervention or the programs of intervention. Equally those on the other side supporting it, will say, be it in 09, 10, 11, 12 or even longer when the upturn is sighted “this is all as a result of the funding of infrastructure and other investment projects”.
I can not believe that someone would stick a post up here given the daily character assasination attempts on Obama and expect some form of civilised intelligent debate about how one would tell if it works…
I’m sorry, I didn’t read your post…I don’t have to because they are going to tell us how it is working AND be transparent about it http://www.recovery.gov/
While there are some good reasons for wanting to know what specific projects will be receiving the ARRA funds, as recovery.gov tells us, that will not (as you know) tell us whether or not ARRA has worked. (That’s the very point I raised in #4.)
I think “cognitive dissonance” will be at work, since both proponents and opponents will tend to interpret whatever happens as falling in line with their previous beliefs on the subject.
When the rapid speed at which Obama is presenting “new” programs. I give him till the end of the summer. Normally, he would deserve more time, but with the latest budget outline of a $1.75 TRILLION deficiet in 2010 and with stimulus package along with an 8.3% increase in spending in the bill passed yesterday by the house - He owns it. If you are going to be this BOLD and remake America, we need tangible results and we need them soon…So the measurements are…
DOW - 10,000 by June. This is 35%-40% back…the market is about the future - Plenty of time for everyone to feel comfy.
Banks - They should be stable with all the trillions pumped into the money supply.
Unemployment - 8%, you can’t spend trillions and not stop unemployement dead in its tracks. If it grows then we should have just printed the money and made deposits in citizens bank accounts.
Inflation - 3%, downward pressures should end
Interest Rates - Fed should increase by then because we are worried about the economy heating up.
Housing - foreclosure rates should be back to historical levels.
Oversight - Since the Obama team is keen on blaming “fat cats”; I expect there to be some arrests of those that broke the law. I also expect that certain politicians be censured for their role in this mess and they be put before a panel of citizens so that we can ask them hard questions (I know this is pipe dream)
GDP - moving to the positive for 2009
Other policy stuff:
Documented plan on how he will reduce spending to fit in his priorities.
The buck stops with him now…He has the ball. If we are gonna spend, spend, spend then I expect a stronger country. With this audacity, we cannot afford to give him 2-3 years for results.
More seriously the answer will lie with whose answering.
Personally it would take a near direct “Cause and effect” relationship for me personally to believe that this bill had or will have any truly positive effect.
First will be argument on time frame. Sure we could print money like made and everything would be GREAT…for a little while. In fact I recently read an article that the the CBO numbers showed positive numbers short term from the stimulus, 1-3 years but negative numbers long term, 5-10 years.
Second will be the same argument, probably from the same crowds, of “Natural” vs “Man made” recovery. Again I think this leans anti stimulus because I’ve heard several predictions ranging from late 2009 to late 2010 PRIOR to the stimulus even being released. Considering on 64% of the stimulus will be in place by sept 30th of 2010…I’m guessing the impact will be minimal. So in essence if we see a turn around anytime before 1stQ 2011 it’s likely not a “Stimulus” turn around IMO.
Third, sorry, this package simply isn’t “Stimulus”. It’s mostly “Pet projects”. With a mere 14.6% being spent on infrastructure spending and almost no broad based tax cuts, majority being narrowly placed “Tax relief” what’s left is mostly “Welfare”. In fact a full 27.7% is pure welfare, IMO, and that’s not including any of the 82.1B “Tax credit” program. Figuring 50% of that will be going to people that pay no taxes in first place one could easily however the “Welfare” portion of the bill around 33%.
I know that’s why I answered later “More seriously”. Short answer, I think this will be another “Global warming” or “Abortion” argument. Whether it’s right or worked won’t be know or agreed upon. By the time it is know, it might be too late.
Just to be clear: You’re saying that in order for you to regard the measure as a success, it would be necessary for all of these things to occur?
A few specific questions: Regarding inflation, you say, rather ambiguously, “3%, downward pressures should end.” Is that 3% a minimum or a maximum? If the inflation rate by the end of the summer is higher than that, would that be an indicator of success or failure? Are you saying that if the arrests and censures you expect don’t happen, the package will have failed? (On the surface, that wouldn’t seem to have anything to do with the package.) If unexpected events not related to the package come up, as I suggested in my initial post, would you revise your criteria to account for them?
“Personally it would take a near direct ‘Cause and effect’ relationship for me personally to believe that this bill had or will have any truly positive effect.”
But what does that mean? How could you ever tell whether or not there is a direct cause-and-effect relationship? Besides, even if you could establish definitively that the measure caused positive effects, how would you establish that it didn’t also cause negative ones, or vice versa?
I’m not getting in to whether this will work or not but I am not sure showing a strong statistical link from one to the other is necessarily the right measure.
PUblic health in areas such as a diabetes, obesity and smoking cessation all cost significant sums of money and the results will not be seen for 2, 5, 10, 15 or even longer.
If a cash saving in 10/11 on lung cancer treatments or podiatry associated with diabetes needed to be demonstrated to show the value of a particular course of public health policy, we would do nothing.
I’m not saying that the converse is true and that because it might be to hard to prove dont try, but issues like public health spending and crime prevention are ridiculously difficult to prove, this is the same…
