The Corner

The Pretense of Knowledge: September 2012 Job Numbers Edition

James Pethokoukis has an updated version of the chart the Obama administration released back in 2009 to help sell the stimulus bill. The original chart came from a January 2009 report about the impact of the stimulus by economists Christina Romer and Jared Bernstein, showing projected unemployment with and without the proposed spending bill. As you can see, the prediction (dark blue line) was that if the stimulus plan was passed, the unemployment rate would top off in mid-2009 at 8 percent, it would drop to 7 percent by the third quarter of 2010 to reach a 5.6 percent level in September 2012. Obviously, when you look at the actual results (red line), that didn’t happen.

There are many running theories about why the plan failed: No one knew how bad the recession was, the stimulus was poorly designed, the stimulus was too small, stimulus spending can’t work, politics gets in the way, and so on.

My position is that stimulus is never the way to go. First, economists don’t agree about whether government spending is capable of jump starting a declining economy, even in the short run. In addition, even if one believes that the stimulus can boost economic growth in the short run, it requires that the fiscal stimulus be “timely, targeted and temporary,” according to Larry Summers. But that’s rarely the case, since there are many factors that get in the way of proper implementation: Spending bills are mostly designed, because of politics or other factors, in ways that prevent them from having anywhere near the promised impacts.

That’s reality. And yet, as I have explained before, over and over again, the same policies that failed in the past find advocates for their implementation once again. The belief that the government can get it right this time is a powerful force — even among those who are willing to admit that government policies have failed in the past.

The main lesson from this chart is that the pretense of knowledge is a powerful thing. Despite what we think, we know much less than we claim we know. Thus, we should take economic predictions (especially when used for political reasons) with a grain of salt. 

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Most Popular

U.S.

The Gun-Control Debate Could Break America

Last night, the nation witnessed what looked a lot like an extended version of the famous “two minutes hate” from George Orwell’s novel 1984. During a CNN town hall on gun control, a furious crowd of Americans jeered at two conservatives, Marco Rubio and Dana Loesch, who stood in defense of the Second ... Read More
Religion

Billy Graham: Neither Prophet nor Theologian

Asked in 1972 if he believed in miracles, Billy Graham answered: Yes, Jesus performed some and there are many "miracles around us today, including television and airplanes." Graham was no theologian. Neither was he a prophet. Jesus said "a prophet hath no honor in his own country." Prophets take adversarial ... Read More
Film & TV

Why We Can’t Have Wakanda

SPOILERS AHEAD Black Panther is a really good movie that lives up to the hype in just about every way. Surely someone at Marvel Studios had an early doubt, reading the script and thinking: “Wait, we’re going to have hundreds of African warriors in brightly colored tribal garb, using ancient weapons, ... Read More
Law & the Courts

Obstruction Confusions

In his Lawfare critique of one of my several columns about the purported obstruction case against President Trump, Gabriel Schoenfeld loses me — as I suspect he will lose others — when he says of himself, “I do not think I am Trump-deranged.” Gabe graciously expresses fondness for me, and the feeling is ... Read More