When she and her colleagues [on the Council of Economic Advisers] began work, she acknowledged, they did not realize "how quickly and strongly the financial crisis would affect the economy." They "failed to anticipate just how violent the recession would be."Yes, we've noticed that every damned thing that happens is declared "unexpected."
Even now, Romer said, mystery persists. "To this day, economists don't fully understand why firms cut production as much as they did or why they cut labor so much more than they normally would." Her defense was that "almost all analysts were surprised by the violent reaction."
That miscalculation, in turn...What miscalculation?
... led to her miscalculation that the stimulus package would be enough to keep the unemployment rate from exceeding 8 percent. Without the policy, she had predicted, unemployment would soar to 9.5 percent. The plan passed, and unemployment went to 10 percent.Unexpectedly and mystifyingly, it was quite a surprise.
No wonder most Americans think the effort failed. But Romer argued, a bit too defensively, against the majority perception. "As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the act is broadly on track," she declared.The act is broadly on track is a helpful thing to believe if you want to experience every bit of bad news as a surprise.
Further, she argued, "I will never regret trying to put analysis and quantitative estimates behind our policy recommendations."What?! I guess Romer, writing her speech, didn't predict the embarrassing ways those words would could be read. Surprise! Among the negative interpretations available for those words are: 1. They started with the policy preferences, then rustled up the numbers to support it, and 2. They had to choose what to put first, policy choices or professional analysis, and they chose policy choices.
But the problem is not that Romer did a quantitative analysis; the problem is that the quantitative analysis was wrong.Well, if you did the quantitative analysis in order to support the policy preference you put first, then it's not... surprising that that your quantitative analysis was second-rate.