ESRI IS FULL OF SHIT: OFFICIAL
Jul 21st, 2010 by Conor McCabe
Jesus man, the ESRI. What the hell has happened to them?
A couple of weeks ago they came out and said “We don’t know what we are talking about.”
And today, Paul Krugman has come out and said, “Ye don’t know what ye are talking about.”
I’ve criticised Krugman in the past for taking at face value the pronouncements of Irish economists. Good to see that he’s actually reading them now and realising what we’ve known for years - i.e. that they are for the fairies.
Krugman’s post is short enough so I’ve cut and pasted it below.
Leprechauns And Confidence FairiesThere’s a new report out from Ireland’s Economic and Social Research Institute (pdf) calling for even more austerity, arguing that this will lead to faster economic growth. And the report looks authoritative: it’s full of charts and tables, and frequently refers to an underlying quantitative model.
What the careless reader might miss, however, is the fact that the policy conclusions are not, in fact, derived from the analysis — they come out of thin air. The authors simply assert that more austerity now would lead to a lower risk premium and hence higher growth, based on no evidence I can see. They don’t even offer any quantitative assessment of the extent to which more austerity while the economy is still depressed would reduce future debt burdens. In short, it’s a pure appeal to the confidence fairy.
One more thing: a key element in the ESRI analysis is the assumption that the financial crisis has permanently lowered Ireland’s growth track. That may be so — but if it is, a large part of the reason is the effect of a prolonged slump on investment and structural unemployment (the long-term unemployed tend to stay that way even after recovery). Now, some of us would argue that these effects suggest that government should do all they can to avoid prolonging the slump even further, that austerity may be self-defeating. But such concerns don’t even get mentioned.
The state of economic discourse these days, on both sides of the Atlantic, is deeply depressing — in at least two senses.
Just looking through the staff at the ESRI… Very talented and very well educated, they can’t be all wrong, can they?
Maybe we’re interpreting the papers with the hope that solutions will arise from the ash. It’s possible that no clear solution to this problem will arise at any time.
Personally I would never wholly bail-out an entire industry, I think it would be better to assess all the institutions and then act accordingly. Bail out the people only suffering extensively because of the credit crunch phenomena, and let the insolvent ones be dealt with by the creditors.
The government supported the property sector and then gave it as soft a landing as possible. It may look like the developers are doing badly but they’re much better off than any of the 400,000 unemployed.
“Just looking through the staff at the ESRI… Very talented and very well educated, they can’t be all wrong, can they?”
Huh? Are you telling me that they don’t need to produce reports based on facts and analysis because, what, they have doctorates on their CVs?
I’m completely baffled by your point. the ESRI itself said that it was wrong. Maybe it should have checked its list of members and gone “hey, look at these CVs. maybe we’re right after all.”
I think ‘diisgradedminister’ has hit one an interesting point. Particularly in the context of this post. Why are so many highly educated people completely failing to engage with the kinds of alternative analysis that Krugman, and others (Michael Taft, Michael Burke, TASC), are putting out. Why are people still calling for austerity, when after 18 months of austerity it appears to have had SFA impact and is clearly compounding pre-existing problems and, Michael Burke’s term, risks sending us into the abyss. Surely as professional social scientists they are obliged to question their analysis if it appears to be consistently erroneous? The only conclusion that I can come to is that the ESRI is primarily an ideological support for the Irish state and its policies, and no more so over the past 18 months.
I sort of had one of those Marshall McLuhan in Annie Hall moments yesterday in reverse. Listening to Morning Ireland while driving a friend into the Mater to wait at a overcrowded, understaffed clinic, I was getting more and more furious at John Fitzgerald calmly prescribing more austerity and cautioning against any temptation to relax the rein on public spending. It ended with a nauseating complicit middle-class moment between himself and Aine Lawlor talking about emigration, with JF hoping that the situation improved soon because his three daughters were all abroad at the moment - as if their circumstances, well educated, well connected, was somehow commensurate with all those young men laid off in the building industry and forced abroad: himself and Aine giggled assuredly because, sure, weren’t the Irish homing birds….Thank you very much Dr. Fitzgerald.
And then, at lunch time, he was behind me in the queue at a fancy Grand Canal Dock coffee shop: what would you have said, dear reader?
I would, in the spirit of Annie Hall hope that I had Paul Krugman handy to pull out from behind the decorative plant, so I could get him to ask Fitzgerald why the policy recommendations are based on no evidence that he can find. Or I would ask him why, as a bunch of state-funded economists he didn’t mention the study that they did that showed the consequences of this level of cuts on the economy.
Of course, Aine Lawlor had more than enough opportunity to ask these perfectly reasonable questions as the interview was long, and Fitzgerald was allowed to carry on uninterrupted for ages.
I found that bit of the interview very hard to take, myself. It was a gross insult, and I, without any internet to hand simply texted Conor an angry text. Didn’t help none.
I’d have set fire to his beard.
You could’ve stitched him a loaf SoS - but given the disparity in heights (I’m assuming he’s around the same height as his father) - you’d probably have done your back in and ended up back in the Mater
BTW WTF happened to Bohs the other night ??? Footballing austerity ?
Krugman is so dogmatic he rarely even glances at opposing arguments that don’t fit his Keynesian worldview, so this is a rare gem.
In the long run, Krugman is dead.
I think you need to read the piece again, Tim. Krugman’s main criticism is not so much of what the ESRI said, but the fact that they did not provide any evidence-based analysis to back it up. If it is Keynesian to ask for analysis based on facts, then Aristotle was a Keynesian.
It is interesting, no? How such a call for analysis based on facts rather than opinion and heresay, is seen as ideological rather than methodological?
It is a gem alright. He has a nice way of sticking the knife.
Aside from the fact it’s hypocritical - Krugman makes assertions all the time - it’s wrong: the ESRI don’t “assert” what he says they do, they repeatedly use the words “we estimate”. Now I didn’t read the whole thing, merely the Conclusion, but economics is not a hard science (no matter how many Keynesians think it is) and is based on recommendations, of the kind the ESRI have presented. I’m not saying they’re right, by the way, just that they’re not guilty of what Krugman is accusing them of. Although they do criticise the bank bailout.
“Now I didn’t read the whole thing, merely the Conclusion”
Yeah you really need to read what Krugman is actually saying, Tim, especially this part:
“What the careless reader might miss, however, is the fact that the policy conclusions are not, in fact, derived from the analysis — they come out of thin air.”
ESRI analysis: Ireland has no money. Recommendation: Stop spending it.
The analysis largely consists the construction of two growth models which are necessarily hypothetical.
Krugman has predicted doom and gloom for Ireland in the form of long term recession, but Ireland has been pulling out of it since the start of this year.
Again, you’re not dealing with Krugman’s point. now, you don’t have to, but if you want to be taken seriously, you need to deal with the actual points he makes, not the assumptions you’re carrying.
As for your two line summary of the ESRI’s report. Again, it’s not what they say, it’s not the arguments they are making - I mean, you’re not really trying here, are you Tim? As you said, it’s not like economics is a hard topic, and, by the same token, actually reading what you want to talk about is not THAT difficult.
You should try it sometime. you might find people taking you a bit more seriously.
That’s of course if you WANT to be taken serious. That’s an assumption on my part. Maybe you want people to giggle at your inability to read what you are commentating on, and your inability to understand the bits you read.
Well I’m not hailing Paul Krugman as the “official” adjudicator on the ESRI, so I don’t think I’m the one in danger of not being taken seriously -
Krugman’s point, Conor, is that the conclusion is not derived from the analysis; It is. (in the sense that reasons are given for future projections made). One doesn’t need evidence to back up the statement that spending less reduces the deficit - unless one believes in “aggregate demand”.
It isn’t the same conclusion he would recommend. He doesn’t mention that his policy recommendations are no more or less pulled from thin air as those he decries.
My point is this, and I have to repeat it because you’ve read a LOT into my comments: He accuses the authors of making assertions; they aren’t. At least no more than Krugman does.
The thing is, he has said that Ireland’s “austerity” would plunge us into ever greater recession. It hasn’t.
“One doesn’t need evidence to back up the statement that spending less reduces the deficit”
Haha! you don’t need evidence! Oh fuck me. Is this how you live your life? In an evidence-free bubble of assumptions?
Well thanks for the laugh anyway.
There is a very interesting footnote in the ESRI’s report, though, to an article written by John fitzgerald in 2001. The 2010 report suggests that he criticised the government’s fiscal policy in 2001. He did, but not in the way the ESRI is suggesting today. There is no mention of deflating a property bubble in 2001 - rather Fitzgerald states that government fiscal policy will lead to wage inflation, and that THIS is what will undermine the country’s finances.
no mention of any property bubble. no mention of any bank credit worries. Just the threat to the economy posed by wages. That’s all.
now, of course, they’re claiming they saw it all back in 2001. What. bullshit.
Oh, I see you’ve just added that last sentence. Feeling confrontational?
Actually, if you look closely, I was quite clear that I don’t think the ESRI are any more or less right than Krugman, they’re both clutching at straws where evidence is concerned.
But, economics is not a hard science. Which is ironic because the one statement that is actually factual, namely that if you spend less money it decreases the amount you have to borrow, seemed to cause you some slight amusement.
Oh, you’ve removed it again. In that case:
“they’re claiming they saw it all back in 2001. What. bullshit.”
I think we are in complete agreement on that.
Yep. It certainly has. Especially as you’ve now merged spending less to reduce the deficit with spending less to decrease the amount you have to borrow. you’ve moved from not reading other people, to not reading yourself. and that is amusing to me.
BTW WTF happened to Bohs the other night ??? Footballing austerity ?
Oh, God…..and to pile the misery on, Rovers get one past the Israelis tonight to line up a lucrative tie with Juve. LoI football has been premised for most of this decade on the sort of financial ‘thinking’ that makes the banks look like, er, banks, but the dream is over at Dalymount: back to part-time from next season - or next week….like much else in this country, it will be like the 80s all over again.
it will be like the 80s all over again
Only with no Jackie Jameson this time