At Econbrowser, Dr. Menzie Chinn provides a succinct summary of my critique of CEA’s “Economic Impact of the Stimulus” report when he writes, “…these implied increments to growth rates do not jibe with the inferences drawn by Dr. Campbell — that the impact on GDP is much smaller than CEA asserts when using forecasts from the other agencies and firms.” (italics mine).
My critique was that the CEA’s method for estimating the economic impact of the American Recovery and Reinvestment Act (ARRA) cannot be used to make a meaningful inference about the economic impact of ARRA quantitatively (or qualitatively).
The CEA admits, as does Dr. Chinn, that numerous other events and actions were taking place that could explain the difference between the forecast and actual data. The economic analysis undertaken by the CEA either needed to use econometric tools to separate out and isolate the ARRA effect in the difference between the forecast and actual or they needed to run an impulse response of ARRA on their VAR model (a counterfactual analysis). That is, if they were going to use a VAR approach to study the impact of ARRA they needed to establish the baseline and then introduce ARRA to that same VAR model. For example, Christine Romer and David Romer used such an approach in their paper “The Macroeconomic Effects Of Tax Changes: Estimates Based On A New Measure Of Fiscal Shocks”.
My point is simple and hardly “difficult to understand”: the Administration approach did not, in fact, estimate the impact of ARRA.
The CEA just subtracted actual quarterly results for 2009 from the forecasted quarterly results. That’s a bad analytical move for at least two reasons: (1) Any number of things could explain the difference between a forecast and actual results. It is the job of the economist to separate out these effects in a statistically meaningful way. (2) The fact that using different forecasts provides different quantitative results shows that this methodology is inadequate for estimating the impact of ARRA.
Dr. Chinn’s criticism of picking forecasts before the stimulus was enacted is moot since I am not trying to show the impact of ARRA but rather the inadequacy of simply producing a forecast and subtracting the difference. However, the choice of forecast was intentional. If the forecast was not made before the stimulus bill passed, then the forecast would have included the impact of the stimulus and thus could not be used as a “counterfactual” of what would have happened without the stimulus.
First, hackers leaked e-mails and other documents from some of the world’s leading climate scientists detailing how they refused to share data, plotted to keep dissenting scientists from getting published in leading journals and discarded original data.
Next, United Nations Intergovernmental Panel on Climate Change (IPCC) admitted the Himalayan glaciers won’t disappear by 2035 and that claim was based on speculation. Now, according to the UK’s Times Online, head of the IPCC Dr Rajendra Pachauri, “admitted that there may have been other errors in the same section of the report, and said that he was considering whether to take action against those responsible.”
Andrew Revkin of the New York Times has more (bold added):
“The sections on the risks of extinction from warming in the report and the panel’s summaries are, at the very least, confusing.
In the Summary for Policy Makers of the report on climate impacts, there are different summations of extinction risk within a few pages. On page 6, the summary states: Approximately 20 to 30 percent of plant and animal species assessed so far are likely to be at increased risk of extinction if increases in global average temperature exceed 1.5 to 2.5°C. * N [4.4, T4.1]
In a chart on page 16, at a point marking a 2°C warming from the global average temperature through the 1980s and 1990s, a label reads: Up to 30 percent of species at increasing risk of extinction.
In the Summary for Policy Makers of the final Synthesis Report drawing on the entire 2007 assessment, the extinction risk is summarized in yet another way (the italics are from the report): There is medium confidence that approximately 20 to 30 percent of species assessed so far are likely to be at increased risk of extinction if increases in global average warming exceed 1.5 to 2.5°C (relative to 1980 to 1999).
I asked a half dozen I.P.C.C. scientists about this during a side session at the Copenhagen climate talks and, in particular, asked them to decipher for me the meaning of the nested qualifiers in that final statement. Among other things, how much would extinction risk rise? Basically, they acknowledged there was inconsistency and flawed writing.”
Remember, this is the report that won the IPCC the Nobel Prize in 2007 with Al Gore and the same report the EPA heavily relied on to suggest there was a scientific consensus on global warming. The EPA used this to make its endangerment finding that says greenhouse gases are dangerous pollutants and thus must be regulated. This report could have large implications for our economy. And it’s turning out that it has more errors than Bill Buckner.