Kotlikoff Inspects the Mechanism
By Bryan Caplan
You might think this passage would be from Econ Journal Watch‘s “Inspecting the Mechanism” column, but you’d be wrong:
A recent experience says it all. I was asked to discuss three papers presented at a session of the American Economic Association meetings. Each of the papers was presented by a very prominent economist and each was regressing the interest rate on the deficit using different adjustments to the deficit and different time periods. Two of the economists were trying to show that deficits raised interest rates and one was trying to show the opposite.
In my comments, I pointed out that the exercise was nonsensical—that one could produce any desired effect of “the” deficit on interest rates by simply labeling receipts and payments to generate a deficit time series with the “right” (desired) statistical relationship. After the session concluded, each of the presenters came up to me to tell me they agreed entirely with me but that they were running their regressions in order to counteract regressions showing the opposite effect. In effect they were saying, “I’m doing this because he’s doing this.”
This isn’t economics. This is sophistry and a sorry commentary on our profession. Moreover, it is incredibly dangerous at a time when the true deficit, the growth in the fiscal gap, is monumental. If established academic economists won’t focus on fundamentals, who will? My hope lies with new economic Ph.D.s. They are beholden to no one, not even to their past selves, and are free to join the child—the hero of The Emperor’s New Clothes—in shouting “He’s naked!”
The actual source: Laurence Kotlikoff in the latest issue of the Economist’s Voice.
Dan Klein may think he’s just a voice crying in the wilderness, but I’m starting to think that his candor is making a difference.