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So @JohnHCochrane favorably compares the Hoover analysis of economic policies proposed by the Biden campaign with the "Economists against Trump" letter signed by more than 1,000 economists. As one of the economists who signed the letter, here are some thoughts on that. https://twitter.com/JohnHCochrane/status/1322668250535112704
John is impressed by the Hoover report, writing:
"This report shows you how to do serious, quantitative, applied, large-scale detailed and transparent incentive-based analysis."
I think we all agree that this kind of analysis is desirable.
"This report shows you how to do serious, quantitative, applied, large-scale detailed and transparent incentive-based analysis."
I think we all agree that this kind of analysis is desirable.
I don't agree, however, that the report satisfies these criteria. One example: while the report talks about tax rates, it does not mention budget constraints, deficits, or debt.
A serious analysis should include an intertemporal budget constraint, and also take a stand on what tax revenue is used for - "throwing money into the ocean" (as many models used to assume) has different growth implications than, say, investing in early-childhood education.
By the methodology of the Hoover report, a "Doepke Plan" of setting all tax rates to zero forever would be great for the economy, but clearly that conclusion would not make much sense without talking about debt and spending.
This matters for assessing the Trump vs. Biden tax policies. Most (non-MMT) economist would probably agree that, all else equal, lower taxes are good for incentives, but also that running up trillion-dollar deficits at the top of a boom is not a great idea.
Purely in terms of tax and spending policies, there are complicated tradeoffs here. Leaving out the budget constraint and potential effects of spending does not get us very far.
Now admittedly, the open letter is just that, and not a formal analysis of any plan. Much of the letter is about issues that go beyond economics, and certainly those other issues (health! democracy! truth!) were important reasons for me for signing.
John also disagrees with some of that - on the US underperforming other democracies in the response to the Covid-19 pandemic, he writes:
"Ah, dear party of science enthusiasts, just which democracies other than maybe New Zealand do you have in mind here?"
"Ah, dear party of science enthusiasts, just which democracies other than maybe New Zealand do you have in mind here?"
Given that you are asking - democracies that did better by at least an order of magnitude (in death/capita) also include South Korea, Taiwan, Australia, and Japan. The only EU countries with higher death rates than the US are Spain and Belgium.
And one thing we learn in economics is to care not about output but about welfare.
I find - both as an economist and as a human - the tragic consequences of the mismanagement of this pandemic impossible to overlook.
I find - both as an economist and as a human - the tragic consequences of the mismanagement of this pandemic impossible to overlook.
So while I certainly agree with John's general call for serious economic policy analysis, I am not impressed with the example provided here, and I stand enthusiastically by the "Economists against Trump" letter, which you can read here:
https://sites.google.com/site/econagainsttrump/
https://sites.google.com/site/econagainsttrump/
