One of the powerful disciplines of science is the requirement that the validity of a theory is judged by how well it makes predictions. For example, the physical laws of motion are incredibly well validated by their ability to make very precise and accurate long-term predictions of the motion of the planets. The virtue of this discipline is that it allows theories to be both validated and refuted. This separates science from faith. Indeed, any well-constructed prediction ought to have clear measures of success or failure. Unfortunately, this discipline is difficult to apply to the social sciences. Nonetheless, difficulty in application does not render this approach useless.In January of 2009, a President Barack Obama economic team following predictions for unemployment both with and without the President’s stimulus package. The web site Innocent Bystanders has reproduced the Administration’s graph along with actual data from the Bureau of Labor Statistics. The graph is shown below:
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The key prediction was if the stimulus were not passed unemployment would peek at 9% while with the stimulus package the unemployment would not exceeded 8%. In actuality, the maximum unemployment peaked over 10% and has persisted much longer than predicted. According the the Administration, at this point we should have 7.5% unemployment rather than 9.9%. Most discouraging at this point, is that newest prediction of the Administration predicts unemployment lingering above 8% through 2012, falling at a slower rate than the Administration expected for unemployment with no stimulus package. One hopes that this prognostication will not be an under prediction.The facts above are not disputed, however their interpretation certainly is. Indeed, President Obama himself has said: “If the just say no crowd had won out..if we had done things the way they wanted to go, wed be in a deeper world of hurt than we are right now.”Consider the three possible outcomes of the stimulus package with respect to the unemployment predictions. If the unemployment rate dropped faster than predicted, then the President and his Administration would have justifiably crowed about their success. If the unemployment rate largely followed the original Obama Administration predictions, even with fairly broad margins of error, the Administration could have persuasively argued that their policies worked as expected. Now that the unemployment rate has soared past the original predictions, the Administration is arguing that the economy would have been worst had their been no stimulus package.The key thesis here is that regardless of the actual economic situation, the Administration supporters will argue that the stimulus package was beneficial. There is no possible outcome, (positive, neutral, or negative) that could, in their eyes, have demonstrated that the stimulus package has failed. The value of the stimulus has become a matter of faith separated from the facts. If you don’t agree with this conclusion, ask an Administration supporter, what set of economic facts would have been evidence that the stimulus did not work.
This entry was posted on Sunday, May 23rd, 2010 at 8:08 am and is filed under Economics, Politics, Social Commentary. You can follow any responses to this entry through the RSS 2.0 feed.
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The Success of the Stimulus Package is a Matter of Faith
One of the powerful disciplines of science is the requirement that the validity of a theory is judged by how well it makes predictions. For example, the physical laws of motion are incredibly well validated by their ability to make very precise and accurate long-term predictions of the motion of the planets. The virtue of this discipline is that it allows theories to be both validated and refuted. This separates science from faith. Indeed, any well-constructed prediction ought to have clear measures of success or failure. Unfortunately, this discipline is difficult to apply to the social sciences. Nonetheless, difficulty in application does not render this approach useless.In January of 2009, a President Barack Obama economic team following predictions for unemployment both with and without the President’s stimulus package. The web site Innocent Bystanders has reproduced the Administration’s graph along with actual data from the Bureau of Labor Statistics. The graph is shown below:
The key prediction was if the stimulus were not passed unemployment would peek at 9% while with the stimulus package the unemployment would not exceeded 8%. In actuality, the maximum unemployment peaked over 10% and has persisted much longer than predicted. According the the Administration, at this point we should have 7.5% unemployment rather than 9.9%. Most discouraging at this point, is that newest prediction of the Administration predicts unemployment lingering above 8% through 2012, falling at a slower rate than the Administration expected for unemployment with no stimulus package. One hopes that this prognostication will not be an under prediction.The facts above are not disputed, however their interpretation certainly is. Indeed, President Obama himself has said: “If the just say no crowd had won out..if we had done things the way they wanted to go, wed be in a deeper world of hurt than we are right now.”Consider the three possible outcomes of the stimulus package with respect to the unemployment predictions. If the unemployment rate dropped faster than predicted, then the President and his Administration would have justifiably crowed about their success. If the unemployment rate largely followed the original Obama Administration predictions, even with fairly broad margins of error, the Administration could have persuasively argued that their policies worked as expected. Now that the unemployment rate has soared past the original predictions, the Administration is arguing that the economy would have been worst had their been no stimulus package.The key thesis here is that regardless of the actual economic situation, the Administration supporters will argue that the stimulus package was beneficial. There is no possible outcome, (positive, neutral, or negative) that could, in their eyes, have demonstrated that the stimulus package has failed. The value of the stimulus has become a matter of faith separated from the facts. If you don’t agree with this conclusion, ask an Administration supporter, what set of economic facts would have been evidence that the stimulus did not work.
This entry was posted on Sunday, May 23rd, 2010 at 8:08 am and is filed under Economics, Politics, Social Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.