An interesting exchange between John Quiggin and Jonathan Chait on right-wing agnotology — that is, culturally-induced ignorance or doubt. ...Here Paul Krugman is talking about the right wing in general, especially Tea Party types, but the paragraph on economic statistics could easily be applied to the Shadow Stats website and its cult members followers.
I mean, I see it all the time on economic statistics: point out that inflation remains fairly low, that the Fed isn’t really printing money, whatever, and you get accusations that the data are being falsified, that you yourself are cherry-picking by using the same measures you’ve always used, whatever. There really is epistemic closure: if the facts don’t support certain prejudices, that’s because They are hiding the truth, which we true believers know.
Friday, February 18, 2011
Shadow Stats
From Paul Krugman, Nobel-laureate in economics:
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The Fed is facilitating monetary expansion. That is not money printing per se, but the the separation is not as meaningful as PK is suggesting.
ReplyDeleteInflation is not low. The essentials of middle class life (housing, education and health care) are - even after the housing collapse - well off the established trend line. Wages are not rising in a commensurate manner. My milk may not be much more expensive, but I'll need a quarter of a million to send one kid to college.
This is why the CPI is not as useful as it should be. Credit is directed at commodities (college, for example) and that good rises to include the available credit. Inflation is a very complicated matter.
When I was studying econ in grad school my professor titled a survey course "the use and abuse of economic data". He presented a very strong case that governments - all governments - throughout time have used data, in whatever form it may come, as a propaganda tool. The average citizen does not have the foundational knowledge to understand how differing means of collecting and processing data can produce dramatically different outcomes.
That is to say, there is nothing "right wing" about skepticism towards economic data. Shadow Stats is a useful competitor to the government data. Those of us not drunk on the silly left-right dichotomy have observed a widening gap between reality and data for a long, long time. It did not start with Obama or Bush. As things have become worse, the data has been managed to hide the diminishing standard of living.
I've recently returned home from 12 years in Asia (Singapore and Hong Kong). I am shocked and saddened at how strongly our standard of living has diminished. What we are doing is not working. Worse yet, policy discussions, even at elite levels, are mud throwing contests. Each group self-identifies as the antithesis to their perceived ideological enemies. Wall Street and the plutocracy surely benefit.
The use of pejoratives and shaming as a means of discourse is not, well, useful. The Tea Party followers have legitimate concerns. The standard of living is falling. The state is rapidly expanding. We do not get a fair basket of goods for taxes paid. The government is ineffective and hostile.
The US is literally dieing before our eyes.
Duuuude, I was all "+1" on your great post until the melodramatic last line...even though in many ways I agree...Strangely, I think back to the summer Olympics in Athens when a US men's relay team had an anchor who, in the final stretch took the time to turn around to the second place runner and gesture for him to hurry up. At that moment, I thought "this is the beginning of the decline."
ReplyDeleteWhile agree that the CPI is not altogether useful - that it fails to measure a number of important areas where the credit bubble has spawned other bubbles - your measures and the constant gold-buck (Beck-ian) refrain about the evil Fed "printing money" and the impending Weimar-style inflation, also miss a rather HUGE and significant point: most, if not all, of the Fed's "printing" is aimed at the Banks and it is essentially filling an invisible hole which is the result of the annihilation of huge stores of "money" in the form of Toxic Assets.
ReplyDeleteThat's the real story, and the real bailout. For those keeping score at home, the TALF is now authorized to swap up to $1 Trillion in US Treasuries in exchange for worthless crap - AKA "complex financial products. That doesn't include the worthless "complex financial products" that we've already "bailed out" via AIG insurance payouts. Contrast that with the Fannie and Freddie Bailouts - which are at this point estimated to rise to $250Billion - that's 1/4 of the private label toxic-asset bailout.
The real reason inflation in the classic 'printing press' fashion isn't an issue is that the Fed can't print fast enough to replace what is being destroyed - all of which is the result of unregulated and over-leveraged "complex financial products" which are "manufactured" by our finance sector - and account for something like 40% of our GNP.
The entire Weimar meme is a load of BS brought on by the people who are interested in making sure the spigot is shut off just as soon as we've finished bailing them out - lest we start getting ideas about needing to tax some of their gains to pay for this boondoggle.
Whew...ok, now, I have more coffee in me and I'm a tad calmer...let's try again with fewer typos!
ReplyDelete- "gold bug" not "gold-buck".
- I agree that our standard of living is declining, and although it's gradual, it is shocking if you step out of it or away from it for any period of time.
- I think JJT is spot-on about the statistics being misleading and the gap between what they purport to measure (reality) and what they do measure is distressing and growing.
- The fundamental problem - and this really goes back a long long way - at least four presidencies - is that the wage gap is increasing. The tech boom helped, but like housing, it was a bubble and not real growth. Any real productivity gains are not shared broadly in our society - the profits of those gains go almost entirely to the top. Trickle down isn't really trickle down, it's table scraps.
The reason the 'agnotology' of the right works is, to paraphrase Clarke, "any sufficiently advance technology is indistinguishable from magic"; that is, people certainly know and feel in their gut that they are being impoverished - that their standard of living is declining. But the mechanics by which this is being accomplished are obfuscated and inaccessible to them - they can't really read the data critically for themselves and grasp it - they don't have the latin - and they need the high priests to parse it for them. The high priests of Faux are quite happy to point the fingers at targets that suit them, facts be damned.
In this kind of universe, I think shadow statistics is useful to some extent - it at least presents a contrast. Their UE numbers are significantly better at reflecting reality than the BLS numbers I think.
It's very sad to watch.
ReplyDeleteWhilst in Singapore I paid 9.7% in taxes. I rode mass transit (did not own a car). Streets are clean and perfectly safe. There is no underclass. The hospitals are excellent. The schools are incredible. The people are civilized. Coming home to America was like a punch in the face. We're un-developing.
I'm going back to Singapore.
Its OK. There will not be a revolt. We're a peaceful, unarmed people with no history of violence.
ReplyDeleteRegarding the CPI being not useful... This is argument by misdirection (this sounds more harsh than it is), and I'll make my point by analogy. I cover labor market data, and, increasingly I'm running into arguments that the labor data is inaccurate, hasn't kept up with market shifts, and isn't following the shift in job categories in certain segments of the labor market. Fine. But the advocates of this view are basically arguing out of theory, and not fact. Even if they believe that professional employment in certain areas, such as tech, is better than it seems, the supporting evidence is weak. What they want to do is take disparate elements in the labor market, combine them to create a new category that will likely have better numbers. But that doesn't change the fundamentals, just the perspective. I really feel the attack on the CPI has a similar problem.
ReplyDelete@Anon - the issue I have with the CPI is this: we exclude some categories which are really very very important: food and energy. Consumer sensitivity to hikes in these areas is significant. I understand why volatile elements are excluded, but it's reasonable to critique the CPI for missing their impact.
ReplyDeleteI know the style of argument you describe: it's the one offered to counter the lowered standard of living by the Cato/Mercatus types who say that the gains in small electronic devices, along with Microwaves and Dishwashers offset all the other losses and so we are all vastly vastly richer than before. It's a bit of cherry picking, and strives to ignore the huge and growing gap.
Montpellier said...
ReplyDelete"the issue I have with the CPI is this: we exclude some categories which are really very very important: food and energy."
Ugh! Food and energy do NOT get excluded from the CPI! They only get excluded from the "core CPI". The Bureau of Labor Statistics reports both, so anyone can compare them.
The CPI (including food and energy) and the core CPI (excluding food and energy) track each other quite nicely, except that the latter is less volatile.
(For the record, the Fed actually tracks core PCE, not core CPI.)
To be fair, data sets have been "smoothed" so that even $5 gas will not be inflationary because you will substitute cooking oil instead of gas for fuel. Let's at least be fair here.
ReplyDeleteJames, Great topic. Remember in 2004-2007 when we were all screaming that inflation was eating us alive but the CPI was was not showing it due to things like Owner's Equivalent Rent and hedonic adjustments?
ReplyDeleteNow that we are in a declining money supply environment the CPI does not account for affordability. The issue seems to be distrust of the government by the currently out of power factions. Though the statistics are manipulated for smoothing or making "Real" purposes, the true manipulation is in the hand of the beholder.
Whether it is the Fed, Obama or sarah palin there is always going to be a spin. We need to understand this and call them out on it. That is the greatest failure of the MSM in our time.
"Inflation" doesn't exist, except double digit increases in: college costs, food costs, gas costs, commodity costs, health care insurance costs, and everything else that a middle class family pays for every month.
ReplyDeleteExcept housing. That is cratering, thats for sure.
If you want to say that everything is peachy because the Fed says it is, that is your perogative. But it shows deep, deep ignorance of the world around you, just so you can hump a "nobel laureate" (you're drool shows when you do that).
Come on Anon 7:59; he had to do a little research to learn how fast an average human walks. Is that not indicative of base ignorance? The only way it couldn't be base ignorance is if he's never walked in his life. My guess: he's obese.
ReplyDeleteSorry James - yes, and that is what I meant - core CPI
ReplyDelete"if not all, of the Fed's "printing" is aimed at the Banks and it is essentially filling an invisible hole which is the result of the annihilation of huge stores of "money" in the form of Toxic Assets."
ReplyDeleteAnd how will the Fed control inflation when foreign Nation cease to do exchange with Americans settled in USD denominated asset. China will still trade with the US in the future, they just want alot more dollars for their productivity or maybe a settle the trades in Euro, Yuan, or another currency with backing. China already began to do bilateral trade with Russia without using USD anymore.
That's where the real inflation will hit the US. Just as the World Reserve currency allowed Americans to live beyond their means for decades without inflation so will inflation hit them overnight when the USD loses its status.
For everybody that thinks this is not possible...you must have been asleep as China voiced not only much concern but Geithner, Clinton and Obama traveled to China more than 10 times in the last year to promise them that the USD is in good standing...
http://www.wtffinance.com/2011/01/geithner-criticizes-china/
Hello,
ReplyDeleteMy name is Kimberly and I work with Apartment Talk over at Aspen Square Management. I just wanted to personally congratulate you on receiving our Top 45 Real Estate Blog Award! All of us over at Apartment Talk have recently put together list of our favorite 45 real estate blogs and sites, and your blog was picked as one those favorites! We created the list based on what we feel are the most useful and entertaining blogs about the real estate and apartment industry. There is a special page dedicated to all the winners. In this special page is a paragraph written about your site in particular, so I urge you to please check it out!
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We have also made a small web award (a graphic that indicates your blog has been chosen as a Top 45 Real Estate Blog), visit here for the code to your award so you can easily copy and paste to add the graphic to your blog if you choose!
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Thanks so much, and thank you for continuing to be a great resource in real estate!
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Marketing Communication Specialist
Apartment Talk,
Aspen Square Management
Interesting tweet from Ryan Avent today:
ReplyDeleteWashington is the only Case-Shiller market where home prices are back to pre-Lehman levels. San Diego and Denver were there, but fell back.
Anyone seen these numbers?
Oboe - yes, DC is at 186.18 rose +0.4% for the month and 4.1% YOY. The bottom was 2 years ago when it hit 165 & change.
ReplyDelete"Anon said...DC is at 186.18 rose +0.4% for the month and 4.1% YOY. The bottom was 2 years ago when it hit 165 & change."
ReplyDeleteB...But...BUT...just last summer NONPARTISAN told me:
"And now it is time to Watch-and-Learn again - beginning August 2010, you will see a RAPID decline in home prices resume - there will be no immunozone. Bring it on.
May 15, 2010 7:37 AM"
CAW, CAW, CAW, CAW, CAW!!!! BWAHAHAHAHAHAHAHA!!!!
Hi there,
ReplyDeleteI was wondering if you have any advertising options available? I'm looking to highlight some real estate and renovating information. Let me know if this is a possibility and I would be happy to share details.
Thank you,
Christina
Leslie said...
ReplyDelete"Come on Anon 7:59; he had to do a little research to learn how fast an average human walks. Is that not indicative of base ignorance? The only way it couldn't be base ignorance is if he's never walked in his life. My guess: he's obese."
Hi Leslie, you sound like a sock puppet since you've always posted as Anonymous and Pussy in the past. I am not obese. I've walked plenty in my life. I even ran cross-country in college, but had to give it up due to tendinitis in my right knee. Although I live in the suburbs today, I did lots of city walking when I lived in Honolulu. Although I knew how long it took me to walk from one end of Waikiki to another, or from Ala Moana Center to downtown, I never did an MPH calculation. Even if I did know my speed, it would tell me nothing about average speed since I walk faster than most people. Crosswalks also have a nasty habit of screwing up walking speed calculations.
Go eat your doughnuts at the George Mason University Dunkin' Donuts, like you do every day.
Anonymous said...
ReplyDelete"If you want to say that everything is peachy because the Fed says it is, that is your perogative."
Actually, inflation data is published by the Bureau of Labor Statistics, not the Fed.
@James:
ReplyDeleteEND THE BLS!!!
;)