Friday, July 30, 2010

Quote Of The Day

Caption: The Bothell Park chicken. According to some economic experts, we should have killed it and eaten it, so we won't starve. Instead, we foolishly ate cheeseburgers.

Image credit: Cujo359

Dean Baker, on the bit of fluff masquerading as a report on the results of the Troubled Assets Rehabilitation Program (TARP), which was issued by Princeton University Professor Alan Blinder and Mark Zandi, the chief economist at Moody’s Analytics:

While the analysis of the stimulus is pretty standard and very much in keeping with other estimates, this is not the case with the analysis of the financial sector policies. The problem with the study is the implicit counterfactual. It effectively assumes that if we did not do the TARP and related policies, that we would have done nothing even as the financial sector melted down.

This is comparable to doing an analysis of the benefits of eating chicken where the counterfactual is that people eat nothing. Needless to say, we would find very large benefits to eating chicken in such a study.

New Economic Study: If People Don’t Eat Chicken, They Will Starve to Death

Fans of logic will recognize what Baker has identified as a variety of the rhetorical fallacy false dichotomy, which implies that there are only two possibilities for a particular situation.

I think that journalists and pundits need to take a refresher course in logic every few years. This thing shouldn't have lasted five minutes' examination by the press. You don't need to be an economist to recognize the basic problem with these conclusions. Plenty of other remedies were proposed at the time.

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