(Early) Monday Smackdown/Hoisted: John Cogan, Tobias Cwik, John Taylor, and Volker Wieland's Reputational Bet on Fiscal Policy Is Due, and They Are Bankrupt...
Apropos of Simon Johnson's, Charlie Steindel's, and my... distaste... for the 3%/year growth fake forecasts of Cogan, Hubbard, Taylor, and Warsh...
Let me say that in Taylor's case, at least, this type of bullshit misrepresentation of what we know and what the evidence says has now been going on for a very long time:
I, at least, am as tired of it as are the more senior real economists who are John Taylor's peers.
Why John Taylor thinks he is still entitled to call himself an "economist" is beyond me. It has been beyond me for eight years:
Hoisted from the Archives from May 1, 2009: John Cogan, Tobias Cwik, John Taylor, and Volker Wieland's Reputational Bet on Fiscal Policy Is Due, and They Are Bankrupt http://www.bradford-delong.com/2013/02/john-cogan-tobias-cwik-john-taylor-and-volker-wielands-reputational-bet-on-fiscal-policy-is-due-and-they-are-bankrupt.html: In March I got a note from Ward Hanson asking me to come down here to Stanford and talk about:
the impact of the Stimulus Bill on jobs creation... the contrast between the Romer/Bernstein estimates of the benefits of the stimulus plan versus... Cogan, Taylor et al. that estimate/argue that there will be very little benefit.... I've got agreement from the "Taylor group" to present, as well as Martin Giles of the Economist Magazine to serve as a moderator...
So I said yes. And Tuesday afternoon I sat down to reread Romer and Bernstein (2009), which I had read before, and Cogan, Cwik, Taylor, and Wieland (2009), which I had not, and I ran into a problem. On page 2 Cogan et al. write that their Figure 1 shows how Romer and Bernstein think government spending affects the economy along with:
exactly the same policy change... in another study... by one of us [John Taylor]... the results are vastly different.... [T]he Romer-Bernstein estimates apparently fail a simple robustness test, being far different from existing published results of another model...
This surprised me. I had talked to Christy. I had talked to Jared. I knew that their intention had been to pull standard models off the shelf and use them.
So I dug—and found that Cogan et al.’s claim of “exactly the same policy change” was simply wrong. Romer-Bernstein model an increase in government spending with the Federal Reserve expanding and keeping on expanding the money supply in order to keep the short-term Treasury Bill interest rate the same. Taylor (1993) models an increase in government spending with the Federal Reserve contracting the real money supply to push the short-term Treasury Bill interest rate up over time as unemployment falls and inflation creeps up. There is no “robustness” problem with Romer-Bernstein at all: the results are different because the policy changes are different.
“Geez,” my first thought was, “this is embarrassing—none of four coauthors of Cogan actually read Romer-Bernstein. Sloppy.” Then I got to page 5 of Cogan: “Romer and Bernstein assume that the Federal Reserve pegs the interest rate—the federal funds rate—at the current level of zero...” Cogan et al. know perfectly well that the policy changes are not “exactly the same.” They just say they are.
I am sorry. In Europe that gets you four red cards. In America that gets you sent to the showers. The first intellectual responsibility of critique is to accurately present what you are critiquing. When Cogan et al. learn that they can come back into the game. But not until then...
The offer that if Cogan, Taylor, and company shape up and recall intellectual standards they can come back into the game is now withdrawn...
