Back Off Man, We’re Scientists
In an editorial in Monday’s New York Times, Adam S. Posen, an American economist, and a member of the Monetary Policy Committee of the Bank of England, provides an excellent illustration of an economist asserting that his policy preferences are literally scientific truth:
Scientific research tells us that high blood pressure and cholesterol are associated with a higher risk of heart disease and stroke, and that certain prescription medications reduce cholesterol and blood pressure. Yes, it is difficult to prove directly that taking these medicines prevents heart disease and stroke, and taking them is no guarantee of health. But still we should take them, and our doctors should prescribe them if they are indicated. This is the same situation we are in now, with our economy’s financial circulation at risk, and quantitative easing the indicated medicine. [Bold added]
Only, it’s not quite “the same situation” at all.
The problem is that medical science has conducted randomized clinical trials that show precisely this link between cholesterol-reducing drugs and reductions in strokes and morbidity. For example, a 1999 meta-analysis of more than a dozen randomized experiments testing the effect of statins (cholesterol-lowering drugs), showed that that “on average one stroke is prevented for every 143 patients treated with statins over a 4-year period.”
Note that the first sentence of the Lancet paper describing one of the early experiments to establish the effect of a cholesterol-reducing drug on mortality is: “Drug therapy for hypercholesterolaemia has remained controversial mainly because of insufficient clinical trial evidence for improved survival.” Precisely the lack of such experimental evidence engendered a debate; resolution required experiments that established definitively the effects of the interventions.
We have nothing like this for quantitative easing. Lacking experimental evidence doesn’t mean that therefore we should not undertake quantitative easing, but the editorial is an attempt to browbeat opposition by appeal to a purported, but unsubstantiated, scientific authority.
(Cross-posted to The Corner)
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I am no economist nor a scientist, but I also like making analogies so I will try one.
Antibiotics kill bacteria, but if used to often you have to increase the dose, then increase the strength of the antibiotic , then both increase dose and strength until eventually the malady you are trying to cure becomes resistant to the ‘fix’ and is now a order of magnatude worse problem than before.
But let’s print some more money, effortlessly creating wealth out of thin air, because more money is always better than less.
— doubled · Nov 22, 07:47 PM · #
off topic, but did you hear the NPR Planet Money story about Caesars Palace last week? it was very similar to the book you’re working on about experiments.
— gabriel · Nov 22, 08:07 PM · #
Jim, what do you think we’ve actually learned about economic policy in the last 150 years?
Mike
— MBunge · Nov 22, 08:46 PM · #
“Antibiotics kill bacteria, but if used to often you have to increase the dose”
That’s an argument for not using antibiotics when the patient is suffering a minor malady. When your patient is teetering on death’s door, no doctor worth his salt frets about the overuse of antibiotics.
Mike
— MBunge · Nov 22, 08:49 PM · #
Jim:
I agree, the analogy is poor. Here’s a different one, though, that I think is better: the patient’s blood pressure has dropped suddenly. We don’t really know why. We do have some strategies that work in a variety of circumstances to get the patient’s blood-pressure up, and we know from experience that very low blood-pressure can be dangerous, even fatal.
Aggressively treating the condition – the drop in blood-pressure – may not address the underlying malady. It may even result in other complications. But that’s not really a good reason not to treat that condition aggressively, because we do know that the existing condition is quite dangerous, whatever its cause.
The PR problem that the Fed has is that it is conducting unorthodox monetary policy on an ad-hoc basis. The author, basically, is trying to say: yes, we’re prescribing something out of the ordinary – something more than a healthy diet and regular exercise – but that’s because we have an extraordinary situation. And don’t worry: we know what we’re doing.
Well, maybe they don’t know what they’re doing with the degree of certainty that they think. But the circumstances really are extraordinary, and that also bears on the nature of their decisionmaking.
The maxim, “first do no harm” is problematic for the prescription of statins or any other prophylactic medicine that may have side effects. When you take these drugs, you’re not treating a disease; you’re improving your odds of not getting the disease in the first place. And if there are side-effects, taking the medicine may, in fact, have done harm rather than good. But we do it – prescribe prophylactic treatments of this sort – anyway.
The maxim is even more problematic for a situation, as with monetary policy, where you must do something. You’re not a bystander deciding whether or not to move an accident victim. You’re the person in charge of monetary policy, and you must have a policy. There is no policy of “do nothing.” And any policy you decide upon ought, in your view, to be the best policy for the totality of the circumstances.
And the maxim is really, really problematic when the existing harm is severe and reasonably expected to get worse.
It’s very psychologically comforting, if you’re a policy advocate, to be able to pretend to greater certainty than you legitimately have that your prescription for extraordinary circumstances is the right one. But by the same token, it’s very psychologically comforting to pretend that the degree of certainty is the main thing that matters in evaluating policy alternatives – because that provides an easy argument against change in chaotic or simply unfamiliar situations. Now, when circumstances are ordinary there’s a very good case for a strong bias against radical change. But the more extraordinary the circumstances, the less-justified such a bias is.
When the accident victim is safe and stable and the EMTs are on the way, there should be a pretty strong bias against moving the accident victim – do no harm. When the accident victim is about to be run over by a train, the bias should be strongly in favor of moving the accident victim, even if the move might well cause internal bleeding that will kill him.
— Noah Millman · Nov 22, 09:38 PM · #
Mike : ‘That’s an argument for not using antibiotics when the patient is suffering a minor malady. When your patient is teetering on death’s door, no doctor worth his salt frets about the overuse of antibiotics.’
I am not talking about a single presciption, but of societies use of antibiotics in total.
Like it wouldn’t hurt for ONE person to print their own money, but if everyone did, or government did for ‘everybody’ , then the analogy would apply (even if my analogy is admittedly somewhat poor).
— doubled · Nov 22, 10:33 PM · #
Jim: thanks for that post title. It was appreciated.
— Kieselguhr Kid · Nov 23, 12:40 AM · #
I am a scientist, as it happens, and just to correct doubled’s analogy – bacterial resistance to antibiotics comes from underuse, not overuse – a little methcillin in the hand-soap, and each time you wash your hands you wipe out all but the slightly-resistant bacteria who then recolonize your skin.
Carpet-bomb the area with all the beta-lactams, though, and you don’t leave any bacteria alive, resistant or not. If the area is recolonized it’ll be by endemic individuals whose population has no “recent history” of exposure to antibiotics – and thus, no endemic resistance. Antibiotic resistance comes from people not taking the whole bottle of pills, not because they do.
I dunno what lessons about monetary policy can be gleaned from this, but the health lessons are pretty clear – don’t buy antibiotic soap and take the entire prescription.
— Chet · Nov 28, 04:13 AM · #
We have a situation where the people prescribing the medicine (the ruling class) have a direct financial interest in sales of the medicine. (Growing the government = tightening the grip of their hegemony over our culture and economy).
— The Reticulator · Nov 28, 06:21 AM · #
Could you provide even a single example where this is true? What’s, say, Paul Krugman’s direct personal financial interest in “growing the government”?
— Chet · Nov 28, 10:41 PM · #
Krugman’s socio-economic group will lose status if it doesn’t get supported in the financial style to which it has become accustomed. Loss of status = loss of the ability to extract more money from hoi poloi.
— The Reticulator · Nov 29, 06:35 AM · #
Um, what? What “socio-economic group” are you talking about, and in what sense are they financially supported by a growing government? Please be specific, and not an idiot.
— Chet · Nov 30, 04:45 PM · #