In my previous post I argued that Krugman didn't do a very good job in his 2013 and all That post. It enabled Sumner to claim vindication that he really has come nowhere near having any right to.
Krugman's mangled message emboldens Sumner
http://diaryofarepublicanhater.blogspot.com/2015/06/krugman-gives-aid-and-comfort-to-scott.html
Jason Smith makes the important point that as Sumner is talking about what Keynesian models predict according to him that such models give lower multiplier effect to tax hikes than spending cuts.
http://informationtransfereconomics.blogspot.com/2015/06/always-look-at-data-keynesian-economics.html
Smith also has an invaluable post that shows that Sumner's whole claim that growth accelerated in 2013 is based on very narrow cherrypicking. He compares the 4th quarter GDP for 2012 vs. the same in 2013 and since the number goes up he declares categorical victory and that Keynesianism now has a stake driven through it's heart. Yes, these are the exact years he's used.
Talk about heavy weather over very noisy data.
http://diaryofarepublicanhater.blogspot.com/2014/02/scott-sumner-latest-strike-in-his-holy.html
Anyway the Smith post which shows what should be obvious-to focus just on Q4 to Q4 is wildly misleading:
"Scott Sumner has apparently chosen to die on the hill of budget sequestration. He claims that the lack of a recession is vindication of market monetarism. His calculation is flawed, as I've mentioned before. And his new defense, same as the old defense, is this:
Krugman's mangled message emboldens Sumner
http://diaryofarepublicanhater.blogspot.com/2015/06/krugman-gives-aid-and-comfort-to-scott.html
Jason Smith makes the important point that as Sumner is talking about what Keynesian models predict according to him that such models give lower multiplier effect to tax hikes than spending cuts.
http://informationtransfereconomics.blogspot.com/2015/06/always-look-at-data-keynesian-economics.html
Smith also has an invaluable post that shows that Sumner's whole claim that growth accelerated in 2013 is based on very narrow cherrypicking. He compares the 4th quarter GDP for 2012 vs. the same in 2013 and since the number goes up he declares categorical victory and that Keynesianism now has a stake driven through it's heart. Yes, these are the exact years he's used.
Talk about heavy weather over very noisy data.
http://diaryofarepublicanhater.blogspot.com/2014/02/scott-sumner-latest-strike-in-his-holy.html
Anyway the Smith post which shows what should be obvious-to focus just on Q4 to Q4 is wildly misleading:
"Scott Sumner has apparently chosen to die on the hill of budget sequestration. He claims that the lack of a recession is vindication of market monetarism. His calculation is flawed, as I've mentioned before. And his new defense, same as the old defense, is this:
Economists generally agree that when you have a shock that occurs at the beginning of a calendar year, you should look at growth over the course of the year (say Q4 to Q4), not the average GDP in 2013 compared with the average GDP in 2012.
"So Sumner wants to get into it, huh? Well anyone who looks at data generally agrees that choosing only two points (regardless of whether they are Q4-Q4 or Q1-Q1) to measure your effect vastly increases the influence of statistical fluctuations in the data, especially when looking at growth rates. Additionally, Q4 to Q4 measures from Q4 of 2012 to Q4 of 2013, including a full quarter of data from before the shock hit supposedly hit (at the beginning of CY 2013). But vague assertions of economists generally agreeing is good enough to outweigh a real econometric argument (the same one made by Mike Konczal, by the way)."
"But the biggest problem with Sumner's argument is that the biggest percentage cuts from the sequester came in FY 2014, not FY 2013 "
"Now FY 2014 is CY 2013 Q3 to 2014 Q3, which means that the big negative growth shock we saw in Q1 of CY 2014 could be attributed to the sequester."
"The additional kicker is that the cuts were only specified at a top line level. That means that affected government agencies had to figure out how to allocate the cuts (and get approval from their leadership) -- the result was that many of the cuts did not go into effect until the end of 2013 (Q3). Cuts also couldn't be made to contracts for work already delivered, so by the time the agencies figured out how to allocate the cuts, pretty much all of it had to be in the future relative to when the plan was agreed on"
http://informationtransfereconomics.blogspot.com/2015/01/scott-sumner-data-mangler.html
What's interesting is that Smith argues that the way the data behave also shows a flaw in the Market Monetarist model:
"The shock occurs not when the cuts were announced, but around the time they actually happened ("concrete steppes"). This invalidates an expectations view of NGDP. Under that model, the cuts should have had impact as soon as they were expected."
In this post, Smith also linked to an important post by Waldmann. I'm glad to see that I'm not the only one making the point:
What Waldmann shows is that "Models said growth would be slower than otherwise, but didn't forecast a recession."
http://angrybearblog.com/2015/01/2013-and-all-that-ii.html
Exactly. So why does Krugman seem to be conceding because there wasn't a recession?
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