[lbo-talk] James Galbraith, anxious (was C. Romer and J. Bernstein: Job impact of the AARP)

Shane Taylor shane.taylor at verizon.net
Tue Jan 20 08:26:31 PST 2009


[An email excerpted by TNR's The Plank:]

The key point in this jumps out of the figure that Paul [Krugman] posted.

How do we know that unemployment would peak at 9 percent in the absence of any action? We don't. It's a guess. Essentially, it's a guess made by a technician with a computer.

True, the figure is well within the range of modern historical experience: The peak in October 1982 was near eleven percent (though with a more honest count of the unemployed).

But if you believe that we are in an historic crisis, then the conventional methods of forecasting--playing the averages from the postwar statistical record--are inappropriate. Honest, but inappropriate.

...

For my part, when I compare this situation to 1929, I'm not making a rhetorical point, or exaggerating for flair. It's what I think. It's what the specialists I talk to think. And have thought, since at least early last summer, long before the crisis took over the campaign.

What is happening here, is the application of routine post-war econometric modeling and budget procedures to the present situation.

If we are in a crisis, and out-of-the-postwar range, then the routine methods are going to be radically wrong. Not just off by 0.3 percent. Off by a great deal, and for much longer.

<http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/01/10/team-obama-exlpains-stimulus-krugman-galbraith-not-buying.aspx>



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