by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
Because it’s hardly just Raleigh. Other places — Charlotte, Miami, on down to Ocean City, Maryland — like the big, shiny numbers and are “not as concerned about the validity of those numbers.”
Earlier this week, the Wall Street Journal published a similar example. Robert J. Caprara’s “Confessions of a Computer Modeler” included the following telling anecdote, which is as applicable to economic impact studies as it is to computer models “predicting climate doom”:
My first job was as a consultant to the Environmental Protection Agency. I was hired to build a model to assess the impact of its Construction Grants Program, a nationwide effort in the 1970s and 1980s to upgrade sewer-treatment plants.
The computer model was huge—it analyzed every river, sewer treatment plant and drinking-water intake (the places in rivers where municipalities draw their water) in the country. I’ll spare you the details, but the model showed huge gains from the program as water quality improved dramatically. By the late 1980s, however, any gains from upgrading sewer treatments would be offset by the additional pollution load coming from people who moved from on-site septic tanks to public sewers, which dump the waste into rivers. Basically the model said we had hit the point of diminishing returns.
When I presented the results to the EPA official in charge, he said that I should go back and “sharpen my pencil.” I did. I reviewed assumptions, tweaked coefficients and recalibrated data. But when I reran everything the numbers didn’t change much. At our next meeting he told me to run the numbers again.
After three iterations I finally blurted out, “What number are you looking for?” He didn’t miss a beat: He told me that he needed to show $2 billion of benefits to get the program renewed. I finally turned enough knobs to get the answer he wanted, and everyone was happy.
Caprara’s confession reminded me of this excerpt from Noam Scheiber’s book The Escape Artists: How Obama’s Team Fumbled the Recovery:
Energy was a particular obsession of the president-elect’s, and therefore a particular source of frustration. Week after week, [White House economic adviser Christina] Romer would march in with an estimate of the jobs all the investments in clean energy would produce; week after week, Obama would send her back to check the numbers. “I don’t get it,” he’d say. “We make these large-scale investments in infrastructure. What do you mean, there are no jobs?” But the numbers rarely budged.
P.S. Yes, that Christina Romer, who is co-author of this graph. The information in red was added to flesh out what a colossal failure the stimulus was. Of course, this administration was “not as concerned about the validity” of that prediction, either (click the image for a larger version):
P.S. It’s 2014 and not only have we not even sniffed the predicted return to 5 percent unemployment, but we have “accepted” the “new normal” of unemployment of 6.7 percent — as elegant an example of moving the goalposts as you could find.