After all, we've had this debate before. Sumner argues that forecasts don't prove much as the EMH is a fact and therefore the correct forecasts were probably luck. Then there was the debates back in June about Steve Keen on two questions:
1). Just how accurately did he predict the financial crisis
2). Assuming he was accurate what does it prove anyway?
http://diaryofarepublicanhater.blogspot.com/2013/06/noah-smith-vs-steven-keen-who-predicted.html
On the question of Ben Bernanke's successor, however, the question of forecasts is being resurrected. Right now, a lot of people are remarking that Janet Yellen sure has gotten a lot of forecasts right. She was already predicting trouble in 2005-contrasted with her arch rival for Fed Chairman, Larry Summers who was quite uninterested in such claims back in 2006 and 2007.
Last week, Matt Yglesias suggested that the White House had deliberately put out a trial balloon by suggesting that Summers was very close to being a shoo-in-which took Fed watchers by a good deal of surprise. No one had thought that Summers was very likely before this. The point was to see the reaction to gauge whether Summers is doable enough-the assumption here is that he is the WH's first choice.
Well reaction continues to come in and it's pretty brutal. If the WH wanted to gauge reaction it seems rough. True, as Ygelisas pointed out, it depends on just how rough it expected it to get. And the anti Summers sentiment is disproportionately on the Internet.
Today the Wall Street Journal chronicles Yellen's impressive accuracy over the years.
"With the exception of certain commentators who get paid ostensibly to act like inveterate morons, nobody has doubted Janet Yellen’s record of analytical prescience in the past decade."
1). Just how accurately did he predict the financial crisis
2). Assuming he was accurate what does it prove anyway?
http://diaryofarepublicanhater.blogspot.com/2013/06/noah-smith-vs-steven-keen-who-predicted.html
On the question of Ben Bernanke's successor, however, the question of forecasts is being resurrected. Right now, a lot of people are remarking that Janet Yellen sure has gotten a lot of forecasts right. She was already predicting trouble in 2005-contrasted with her arch rival for Fed Chairman, Larry Summers who was quite uninterested in such claims back in 2006 and 2007.
Last week, Matt Yglesias suggested that the White House had deliberately put out a trial balloon by suggesting that Summers was very close to being a shoo-in-which took Fed watchers by a good deal of surprise. No one had thought that Summers was very likely before this. The point was to see the reaction to gauge whether Summers is doable enough-the assumption here is that he is the WH's first choice.
Well reaction continues to come in and it's pretty brutal. If the WH wanted to gauge reaction it seems rough. True, as Ygelisas pointed out, it depends on just how rough it expected it to get. And the anti Summers sentiment is disproportionately on the Internet.
Today the Wall Street Journal chronicles Yellen's impressive accuracy over the years.
"With the exception of certain commentators who get paid ostensibly to act like inveterate morons, nobody has doubted Janet Yellen’s record of analytical prescience in the past decade."
"The examples presented by Bill McBride, and which date back more than eight years, along with the 2007 FOMC transcripts are enough to understand why. Not that Yellen can predict the twists and turns of the economy with perfect clarity — nobody can — but rather she has consistently shown a deep early understanding of the underlying pressures building in the economy and the scale of their potential consequences."
"This particular plank of support for a Yellen candidacy was reinforced by the Wall Street Journal’s analysis on Monday of FOMC forecasts since 2009. It turns out that she has also been successful, more than any other FOMC member, at predicting the short-term trajectories of the major economic indicators."
So it seems that this trial balloon hasn't quite gone the way the WH had hoped. Now, they're using the 'I' word to describe the Administration-insular.
"Over at FT Alphaville, Cardiff Garcia says the right things about the Yellen affair:
Politics really isn’t our thing, but more believable for now is simply that the White House didn’t do its homework, failed to anticipate the backlash, and is now clumsily trying to figure out how to handle it.The politics is unavoidable, of course. But we would just emphasise again that strictly on the merits, you hardly need to make an anti-Summers case to prefer Yellen.
"One does have the sense that economic policy discussion in the WH has grown dangerously insular; just about anyone outside, if asked, could have told them what a mess they’d make by floating the idea of choosing Summers over Yellen. But they seemed blissfully unaware of what was coming."
Everyone is getting lics in with the WH appearing to prefer Summers because he has able to charm Obama personally:
Bear in mind too, that Krugman is a good friend of Summers who thinks he's very qualified for the job-unlike others who are much less sure, like Sumner. I tended to agree with Yglesias that there's not so much difference between Summers and Yellen as many think. However, I admit that I've had some second thoughts. Krugman got it right originally. Even if we assume that they are both pretty evenly qualified, Yellen is the better choice for optics-feminism, also the fact that the Fed is a collaborative body and that's not exactly considered Summers skill set.
However, I do see the point of the anti-Summers people. After all, the defense that Summers' advocates give don't exactly make me reassured:
"Obviously there’s no guarantee that this would continue, but at the very least this serves to further disprove one very peculiar notion given by Ezra Klein’s sources last week for preferring Larry Summers to Yellen — specifically the notion that “the market” trusts Summers more, because (we guess?) he’ll be a tough manly man on inflation while she’s a homeless-hugging San Francisco hippie female person who will let the US economy revert back to the hellspun apocalyptic landscape of the 1970s, ushering in another era of frozen wastelands and broken homes and shattered dreams."
Krugman's main criteria for Fed Chairman is a committed dove. There is some reason to question Summers on this as the above suggests. We don't need a manly man on inflation. Much as I don't try to say this too often, Sumner could be right: maybe he would have been less dovish than Bernanke. I didn't think this at first, but he is the protegee of Bob Rubin who even now thinks money is too easy.
It's true that the WH came into this playing the whole board-the blogosphere is only one part, you also have the Wall Street guys who have the WH's ear and wealthy Democratic donors. Still, it's got to be disconcerting for the WH to see what's happening outside the blogosphere in the Democratic Senate.
Summers does have one impressive supporter:
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