Holy Crap! Robert Shiller strikes again
In Sunday's NY Times, Shiller continues his streak of surrealistically bad editorials. This one advocates a second tax rebate because the effects of the first one are "not going to mean the difference between prosperity and recession", and a "dreaded serious recession still seems very much a possibility"
How does he know?
Consider the Fair simulation model (fairmodel.econ.yale.edu/main2.htm), a free Web site that embodies much of Keynes’s theory and is offered by Professor Ray C. Fair of Yale. With the “U.S. Model” on this site, I increased transfers from government to households (“TRGH”) by $100 billion in the second quarter of 2008. The results showed a $59 billion increase in 2008 gross domestic product. That is less than half of 1 percent of G.D.P.
The simulation also showed that this year’s rebates would have further repercussions in 2009, bolstering G.D.P. by $36 billion that year. After 2009, the effects of this stimulus will just sputter out.All I can say is LOL! and WTF?? I too went to Fair's site this morning and found the following at the top of the page:
Latest Update: April 30, 2008: The US model has been updated through 2008:1. NO RECESSION PREDICTED---see Forecast Memo. The latest version of the multicountry model is the MCC model. See below.
People, I am not making this up. Plus in the FAQs about the model I found the following statement:
The United States model was developed by Ray Fair in 1974-1976, and it has been used since then for research, forecasting, policy analysis, and teaching. It has been available for use on personal computers since 1983 and was the first such model to be so.
Now I am not knocking Fair; he is upfront about what this thing is (i.e. a dinosaur). I am knocking Shiller for writing, and the editors of the Times for publishing, lazy crap like this.