How I Lost My Macro Religion

Apparently some macro engineers have opted to have fun with statistics (see the two references cited by G. Mankiw in his post
http://gregmankiw.blogspot.com/2008/09/fun-with-statistics.html).
Unfortunately Tyler Cowen and others have lost their sense of humor: they condemn Donald Luskin who laughs at those that are having fun with statistics.

Arnold's observation on climate change suggests that Sarah Palin may have been influenced by Robert Hall's view as well.

Arnold,

I know you're a Mencius Moldbug fan. Did you read his latest article on how modern economists should be considered astrologists? I found it very convincing. What was your take?

Why is macroeconomic theory so bad? Because 200 years ago, David Ricardo and Henry Thornton convinced people that paper money can have value even if it has no backing. Ever since, when tight money conditions have caused recessions, their followers have argued that there is no point in increasing the money supply by x%, because that will only increase the price of groceries by x%. The necessary new money was not issued and the recessions continued, with mainstream economists insisting that the market will correct itself if left alone. Small wonder that dissident views were spawned, including those built on silly tautologies like Y=C+I+G, or MV=Py.

The first step macroeconomists must take is to recognize that the dollar is not fiat money. The value of the dollar is equal to the value of the assets backing those dollars. If more dollars are needed to ease tight money conditions, those dollars can safely be issued as long as the Fed's assets increase in step with the number of dollars.

"there are scientific arguments that would justify a strong long-term relationship": not really. It's a logarithmic dependence so once CO2 concentrations are as high as they now are, increasing them further would, by itslef, have a negligible influence. All the climate modelling of which you read is an exercise in fiddling with purported amplifiers to introduce some positive feedback. And the measured temperatures seem to be potentially so biased, and actually so fudged, that they cast little light on the business.

Post hoc ergo propter hoc is the eternal comeback in both scientific and mechanical macro, because we can't replay the world a different way and see what "would have" happened.

It's a very effective counter when you're looking at brief periods (let's call it micromacro) with no comparative or control element.

But:

1. That comeback is much less convincing when comparing outcomes from two sets of policies

A. Over a long period
and
B. When those policies are consistently and systematically different

2. Arnold is exactly right that (long-term) correlational data can quite effectively disprove a theory. (Likewise, Mankiw stipulates to this in his "Growth of Nations.")

i.e.: Growth in Europe and the US have been the same over decades, while tax rates have been massively different (40% versus 28% of GDP).

i.e. 2: Since WWII, growth under Democratic presidents has been far greater.

These facts quite effectively disprove the theory that Republican/supply-side/trickle-down policies cause greater/faster economic growth.

Aside: on the two "equality" studies that Mankiw post-hoc pooh-poohs.

Dems deliver less rich/poor inequality: Blinder's point is that everyone is better off under Democratic policies. The equality is a wonderful (causally connected?) bonus.

Pubs deliver less male/female inequality: women appear to have done relatively better under 'pubs because working-class men have done so poorly under same.

You're really almost reveling here in your ignorance of how physical science is done. The data never "prove" anything in the sense you're looking for; they are merely compatible with or incompatible with this description or that.

Coinciding high CO2 levels and temperatures shouldn't convince you, and that you would even feel the need to say that they don't shows a contempt for physical science and physical scientists. Get it though your head: nowhere in the scientific literature is the coincidence in itself treated as evidence.

Climate models are based on physics that we know to be very good in predicting myriad phenomena, combined (of course) in somewhat of a novel way to attack this problem. These models are the missing bits, in addition to the high CO2 levels and measured temperatures and rates of warming (rates are important), that should have you convinced. That some economists have in the past made lousy models does not in any way mean that physicists and atmospheric scientists cannot make good ones, and it is, again, contemptuous of you to suggest otherwise. Just what flaw are you seeing in GCMs that the experts are not? Or will you simply admit that you are being irrational and superstitious.

Doesn't Bryan Caplan say that the ignorant should simply admit that they are not entitled to an opinion? Maybe that advice should be taken.

Roth:

If Europe and US GDP growth has been equivalent while tax rates differ, and if US GDP growth during Democrat presidential terms has been greater, this neither proves nor disproves anything. In order to "disprove" supply-side theory one would have to hold all other factors equal. This is why econometrics is BS.

One could just as easily deduce from the information you have provided that i) American productivity is less dependent on tax regimes than that of Europeans, and ii) the party affiliation of the President has little to do with economic growth (which would not be surprising given that little, if anything, in the Constitution gives the President any ability to affect economic fundamentals.)

Kalafut:

Baloney, blarney, and balderdash. "Climate models are based on physics that we know to be very good in predicting myriad phenomena, combined (of course) in somewhat of a novel way to attack this problem," you say. This statement rests on a definition of "very good" so liberal as to be virtually devoid of meaning. Climate models to date have excluded variables of potentially astronomical import, such as the effect of solar variation on cosmic ray-influenced low-level cloud formation. None of the models that have been fitted to past results have been at all predictive, and all of the models that predict future warming do so based not on a CO2-warming link but instead on a "positive feedback effect" for which there is absolutely no scientific basis whatsoever.
Economists creating multivariable models of economic growth and physicists creating multivariable models of climate change have at least one thing in common: neither is engaged in anything remotely approaching scientific research. The scientific method is a systematized model for inductive reasoning that rests on 3 legs: i) a testable hypothesis, ii) testing of that hypothesis through rigorous and controlled data collection, and iii) replication of test results by other scientists. A model can not be "peer tested" because regardless of who pushes the Enter key, the model is the same (does not satisfy (iii)) and furthermore a model is not a "test" of a real-world hypothesis because model results are not "data" (does not satisfy (ii)).

The relationship of CO2 and sunlight can be tested in controlled conditions; there is well-accepted evidence that CO2 absorbs some wavelengths of electromagnetic radiation but not others. From this it can be inferred that CO2 can potentially have some effect on climate. What that effect is has never been tested. There is no further scientific (hypothesis-tested-by-real-world-data-collected-under-controlled-conditions) evidence from which any additional information can be determined regarding the relationship between CO2 and climate, including the sign (+/-).