Monday, June 28, 2010

NYT Predicts Alternate Ireland Reality With 100% Certainty

With "'austerity" talk in the air, someone has sicked the economic attack dogs at the NYT.com on the story of the intensified downturn in the Irish economy:
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Oh yeah? How did the NYT's reporters "certainly" figure that out? I suppose they empirically and conclusively confirmed their theory by a process of comparative statics where they observed a control-Irish economy that enjoyed the recommended dose of fiscal stimulus economically outperforming the real-life, austerity-ridden Irish economy.

Wait, no they didn't, because that's impossible. There aren't two Irish economies to experiment on and empirically observe differing results. There is one Irish economy, and no alternative strategy or policy can be observed in isolation from any of the other market forces and government policies already in operation in the Irish economy.

As almost always, Mises said it best:
With regard to historical experience, however, we find ourselves in an entirely different situation. Here we lack the possibility not only of performing a controlled experiment in order to observe the individual determinants of a change, but also of discovering numerical constants. We can observe and experience historical change only as the result of the combined action of a countless number of individual causes that we are unable to distinguish according to their magnitudes. We never find fixed relationships that are open to numerical calculation. The long cherished assumption that a proportional relationship, which could be expressed in an equation, exists between prices and the quantity of money has proved fallacious; and as a result the doctrine that knowledge of human action can be formulated in quantitative terms has lost its only support.
NYT political hacks, keep trying.

7 comments:

  1. I'm still waiting for Hawkings to figure out those parallel universes, then we'll get econometrics down pat.

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  2. BobE,

    Maybe we can figure out the free will paradox by that time, as well.

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  3. I can't find a rational basis for free will, though I must admit, the illusion is quite compelling.

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  4. BobE,

    What I like about the debate is that the consequences of it seem rather... inconsequential. If we have free will, it doesn't change anything and if we don't, it doesn't change anything. Everyone will continue to believe/act as if they did have free will. It's one illusion/delusion we can't escape.

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  5. If there is free will, it means we're overcoming deterministic or, at best, random particle interactions. If so, we're superseding nature and physics at the margins. But why would there be any limits? It would seem, if there is free will, we are seriously underperforming relative to potential.

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  6. T,

    nice mises quote. But don't you agree that with a large money printing stimulus the Irish economy would have grown (in nominal terms). The real issue is, should they have printed stimulus or not. They should not have despite short term pain since money printing steals wealth from cash holders, distorts the economy and only delays economic contraction.

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  7. Tom,

    The Irish economy may have grown, in nominal terms, with some kind of bailout/subsidy (they can't print because they're on the Euro).

    I agree about the real issue as well as your conclusion that they should not have printed. The best course of action, politically, is to do nothing and let market fundamentals reassert themselves.

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