I stumbled across this remarkable interview with the liberal economist Alan Blinder the other day and I had to share it with readers at What's Wrong with the World. It is remarkable for the arrogance on display and for the trap Blinder falls into -- the same trap he claims for his opponents. Here he is talking about President Obama's stimulus:
...The second example of that is the stimulus bill, which has been vilified by Republicans. It’s said it didn’t create any jobs, which if you think about it for 30 seconds, it’d be impossible to spend that much money without creating any jobs.
DM: How much of this do you think has to do with people’s difficulty with reasoning counterfactually? So you see the economy, which isn’t that great, and conclude “Well TARP and the stimulus must not have worked.”
AB: I think that’s a very major part of it. In his book, Thinking, Fast and Slow, my colleague Daniel Kahneman has this concept he called WYSIATI – “what you see is all there is.” If you believe the only thing there is is what you see, what you see is that all these things were done and the economy went pretty poorly anyway. What you don’t see is how poorly it would have done without any of these actions being taken. A principal objective of this narrative [in the book] is to combat WYSIATI.
Now there is lot to unpack here, but I'm particularly amused by Professor Blinder's notion that "it’d be impossible to spend that much money [that we spent on the stimulus] without creating any jobs."
The reason this is so amusing, of course, is that Professor Blinder forgets his own advice to remember what else there might be besides "what we see". In this case, of course, there is the fact that all those jobs "created" by the stimulus bill (and technically, the bill did create some jobs -- the government hired people to administer American Recovery and Reinvestment Act (ARRA) funds and businesses might have hired a couple of folks as well to fill government purchases made via ARRA funds), might have had a corresponding loss in the private sector as the government had to borrow billions of dollars it didn't have to spend all those stimulus funds. In other words, Professor Blinder forgets about the "hidden" costs of the stimulus in the form of future higher taxes (to pay for all that borrowing) and/or the possibility that the large government deficits will crowd out investment dollars (less of a concern given Treasuries strong position in global markets). Or there is the possibility that folks were just shifted around in the economy -- one stimulus study found that the jobs that were filled with ARRA funds weren't filled with folks from the unemployment line but came from other businesses.
Regardless of all this, at the very least you would think Blinder wouldn't embarass himself in such an interview when there are plenty of very smart economists and analysts who have looked at this question and have presented arguments against the stimulus.
The interview also takes a swipe at those thinkers who played a role in the financial crisis (through their promotion of sub-prime lending). Just like with the stimulus, Blinder displays intellectual arrogance and is apparently ignorant of serious work that has been done by smart folks who disagree with him.
Professor Blinder should know better -- he once wrote a book called Hard Heads, Soft Hearts whose premise was that liberal economists shouldn't abandon their profession's rigorous standards and empirical methods when arguing for a particular policy, but should let the best economic thinking guide their conclusions. Apparently, working for the Obama Administration has clouded the good professor's hard hard and softened his heart to mush!
HT: Sonic Charmer