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1. I don’t see a link to your TNR piece, so I’ll just comment on the paragraphs you quote here.

   I agree with your first claim — that any economist who claims some cause-and-effect relation with absolute certainty is behaving irresponsibly. But, of course, the same is true about any natural or social scientist. In any but the most carefully controlled laboratory situations, there’s always the potential for unforeseen or disruptive factors influencing the outcome and, consequently, falsifying our predictions.

   And so, in both paragraphs, you seem to be working with a false dichotomy: either we have absolutely certain knowledge about the consequences of a proposed action or we are absolutely ignorant — `we don’t even know at the most basic level’; `we don’t even know the rules’. We’re actually somewhere between: We have some examples of past stimulus policies that appear to have worked (the New Deal) and some others that appear to have not (Japan) and some economic theories that explain the differences and more (Neo-Keynesianism), but we don’t know for sure how similar our situation is to the previous cases and how accurate the new economic theories are.

   What we need to do, then, is to test our economic theories. But why think that we can’t test them by implementing them in public policy? You appeal to a version of the precautionary principle here — roughly, we should take the least risky course of action. But how can we possibly identify the least risky course of action until we’ve developed the economic theories that accurately predict the outcomes of the courses of action open to us? Doing nothing and riding out the recession is extraordinarily risky, stimulus is risky (though I think less risky than doing nothing), and the options in the middle wander off into the fog and crags that you yourself have pointed out.

   — Dan Hicks · Aug 19, 12:33 PM · #

2. An examination of the economic history of the 1930s most assuredly does not reveal stimulus policies that worked. Most economically sophisticated contemporary defenders of the New Deal (e.g., Paul Krugman) explain that (i) many components of the New Deal (Social Security, the SEC, etc.) were good ideas in their own right and (ii) the Roosevelt administration’s failure to produce significant improvements in GDP or employment between 1933 and 1940 was attributable to the inadequacy and “timidity” of its fiscal stimulus.

   — y81 · Aug 19, 01:35 PM · #

3. We are walking into a casino and putting $800 billion dollars down on a single bet in a game where we don’t even know the rules.

   No, we aren’t. The entire economy is put down on the table, already at risk, with or without the stimulus. Sometimes the most dangerous, boldest bet is the status quo. Maybe that’s not the case with climate change (though I kind of think it is), but it’s definitely the case when we’re at risk of financial panics and depression.

   — Consumatopia · Aug 19, 01:45 PM · #

4. Dan,

   Sorry, I added the link.

   That post links to a longer piece in City Journal in which I try to go into the question of what it means to have reliable knowledge in social science, the role of experimentation, and so forth in some more detail.

   That article is in turn a modified excerpt from a book I have coming out next year devoted to this question and its implications.

   — Jim Manzi · Aug 19, 01:49 PM · #

5. Consumatopia,

   This isn’t an argument against stimulus. In fact, I argued in favor of some portions of it at the time, and continue to support those policies. It is an argument that we should be taking these actions with full awareness of how little we really know about their impacts.

   We are like primitive tribesmen trying to use herbs to treat an infection. We do our best, but it would be a mistake to imagine that we have antibiotics that have been proven to work in clinical trials, and this awareness should rationally affect our actions.

   — Jim Manzi · Aug 19, 01:54 PM · #

6. I’ve been interested in this question. From my understanding:

   1) Two countries have tried relatively substantial fiscal stimulus: Japan in the 90s and the US now. Neither country saw the growth we expected.

   2) The new Keynsians predicted that the European countries who skipped stimulus would risk a double dip recession. Instead, those countries seem to be doing better than the stimulus countries.

   I agree, none of that is scientific-quality evidence. But shouldn’t it give stimulus backers a little concern?

   — J Mann · Aug 19, 02:13 PM · #

7. “2) The new Keynsians predicted that the European countries who skipped stimulus would risk a double dip recession.”

   So…wait. I thought European socialism was a bad thing?

   Mike

   — MBunge · Aug 19, 02:46 PM · #

8. Jim —

   Thanks for the link; that’s an interesting piece. If you haven’t already, you should read some of philosopher of science Nancy Cartwright’s work, especially her recent papers on RCTs (what you call RFTs) and public policy. I’m sympathetic with much of your argument there, but I think it actually works to undermine, not support, at least the first of the `lessons’ you present near the end. If any generalization or model of humans and the societies we live in is going to be flawed and unreliable to some extent, our common sense or intuitions are flawed and unreliable in particular. So why prefer intuitive to counterintuitive policies, all other things being equal? You might argue, as a conservative-leaning libertarian (IIRC, that’s the right way to characterize your views, but please let me know if that’s wrong), that we should prefer the intuitive status quo to counterintuitive novelty, but of course a progressive would think exactly the opposite and we’re off into a debate that’s most certainly not value-neutral public policy.

   More generally, you seem to be claiming that, when making decisions under uncertainty (in policy public cases, x, y, z, and so on), we should be conservative in the sense of risk-adverse. You might even think this is rational, in the neo-classical economics sense of rational. But that argument doesn’t go through, which is why decision theory classically treats an agent’s degree of risk aversion as an exogenously given variable. I’d argue that this is one of many points at which ethical and political values enter into public policy, and hence taking a course of action isn’t rational in that very narrow economist’s sense.

   — Dan Hicks · Aug 19, 02:46 PM · #

9. “I thought European socialism was a bad thing?”

   Recession or no, stimulus or no, the more prosperous European countries (France, Germany etc.) have per capita GDPs about 25 percent lower than that of the United States. That difference will not be erased or even significantly altered even if they recover more quickly from the current recession.

   More generally, countries are not comic book characters, all good or all bad. It is entirely possible that, say, Germany might have both better fiscal policies than the U.S. and worse labor laws.

   — y81 · Aug 19, 02:51 PM · #

10. Mike – generally, the European countries have been moving towards free markets over the last 25 years, which is great for them.

    Certainly, the German decision to forego stimulus, standing alone, doesn’t constitute “socialism.”

    — J Mann · Aug 19, 03:45 PM · #

11. Dan,

    Thanks – and I’m very familiar with Cartwright’s work.

    You say a lot here, let me try just to wave at a couple of points.

    If any generalization or model of humans and the societies we live in is going to be flawed and unreliable to some extent, our common sense or intuitions are flawed and unreliable in particular. So why prefer intuitive to counterintuitive policies, all other things being equal?

    But not all methods are equally flawed. A gross over-simplification is as follows. Scientific methods can generate reliable, non-obvious and useful findings. (Leaving aside for the moment a rigorous definition of scientific). This method has at the foundation of the inferential edifice controlled experiments (rather than only observations), and combines this with a process to test predictive generalizations that extend beyond experiments. I argue that some parts of social science really are scientific, and we can rely on their conclusions. In addition to this kind of scientific knowledge, we have implicit knowledge embedded in the functioning of our current institutions (in the broad sense of the “rules of the game”) that have survived a Darwinian process of evolution. Therefore, in the absence of scientific knowledge we should have a refutable preference for the status quo, along with non-scientific approaches for reform and improvement, since we can’t always wait for scientific evidence before acting. As I said, this is a gross over-simplification, but hopefully gets at the gist of what underlies this post.

    As regards your comments that follow that quote, I agree that normative considerations can never be extracted from such decisions in a real society of people. And I don’t think I’m describing risk aversion, as much as I am emphasizing that we shouldn’t confuse risk with uncertainty.

    — Jim Manzi · Aug 19, 04:30 PM · #

12. “Certainly, the German decision to forego stimulus, standing alone, doesn’t constitute “socialism.””

    1. You might want to talk to some of the other members of the EU who are seeing their economic problems worsened by German policy decisions.

    2. How severe was the economic downturn in Germany? Did a German real estate bubble implode, producing near-Depression economic conditions in some parts of the country? Did the German banking system nearly collapse and require government intervention to save it? Did the largest automaker in Germany go bankrupt and need a government bailout?

    Mike

    — MBunge · Aug 19, 04:38 PM · #

13. What is the evidence that we are making an $800M single bet, and that an $800M stimulus is risky? Even if it does not adequately stimulate the economy, what harm does it cause? If the problem is the increased deficit, then once the stimulus is observed to work (or not work), the deficit should be addressed by increasing revenues, through taxes.

    — Hyman Rosen · Aug 19, 05:48 PM · #

14. Dr. Manzi you are the Last True Conservative…..(as long as you never mention vouchers again.)
    bravo.
    :)

    — matoko_chan · Aug 19, 05:59 PM · #

15. then once the stimulus is observed to work (or not work), the deficit should be addressed by increasing revenues, through taxes.

    Yeah, that’s the spirit!! Drill, baby, drill!!

    — The Reticulator · Aug 19, 11:16 PM · #

16. …In general, in the face of this kind of uncertainty, we ought to seek policy interventions that are as narrowly targeted as is consistent with addressing the problem; tested prior to implementation to whatever extent possible; hedged on multiple dimensions; and designed to be as reversible as is practicable.

    So what I want to know, Mr. Manzi, is if is you feel that attitude should have been taken towards the Bush tax cuts, invading and occupying Iraq, enhanced interrogation, financial deregulation, the Medicare prescription plan, etc. In short, should this attitude been applied to conservative/Republican policy initiatives as well?

    — amorphous · Aug 20, 03:49 AM · #

17. amorphous: So what I want to know, Mr. Manzi, is if is you feel that attitude should have been taken towards the Bush tax cuts, invading and occupying Iraq, enhanced interrogation, financial deregulation, the Medicare prescription plan, etc. In short, should this attitude been applied to conservative/Republican policy initiatives as well?

    And what I want to know is why you want to know that.

    — The Reticulator · Aug 20, 12:55 PM · #

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