Category: Economics
From Nick Rowe
“Cyclically-adjusted deficit” is not a macroeconomic concept
It shouldn’t be, anyway.
Tyler Cowen says: “These cyclically adjusted measures are useful information and should not be discarded, but I don’t wish to use them as the sole or main or dominant source of information about the stance of fiscal policy.”
I’m going to make a stronger claim. One I have made before.
Consider two countries. Both countries are identical, except:
Country A has an activist government, which likes to be seen as “doing something” when there’s a recession. It rushes around passing new laws increasing government spending and cutting taxes whenever there’s a recession.
Country B has a lazy government, which likes the idea of “fire-and-forget” fiscal policy. It passes a law before the recession, which ensures that government spending automatically rises and taxes automatically fall whenever there’s a recession. Then it goes back to sleep.
Both countries have exactly the same levels of government spending and taxes during a recession (and during a boom too).
A recession hits both countries. The accountants measure the “cyclically-adjusted deficits” (“structural deficits”) in both countries. They ask “under existing tax laws and spending laws, what would the deficit be if there were no recession?” They conclude that country A has a big cyclically-adjusted deficit, and country B has none.
But there is no macroeconomic difference between the two countries.
You cannot say that country A had a good “countercyclical fiscal policy”, and country B didn’t. They had exactly the same fiscal policy. They just implemented it in different ways.
A second example. Country C has a strong system of automatic stabilisers, including a steeply progressive tax system, but increases tax rates in a recession. Country D has a flat tax system, but fails to cut taxes in a recession. They end up with exactly the same taxes in a recession. C has imposed “austerity”, and created a ‘cyclically-adjusted surplus”, and D has not. But there is no macroeconomic difference between the two countries’ fiscal policies. C has sinned by commission; D has sinned by omission.
“Cyclically-adjusted deficit” is a political/legal concept. It is not a macroeconomic concept.
(There might be some important macroeconomic differences between those two ways of implementing fiscal policy: maybe automatic stabilisers work more quickly than activist policies; maybe automatic stabilisers give more certainty about the future and help stabilise expectations better. But you won’t see those differences captured in the cyclically-adjusted deficit number.)
Update: what should replace it? Maybe deficit/GDPgap? Or percentage deviation from a cross-country regression of deficit on GDPgap? Crude, but simple. Still vulnerable to Tyler’s objection that the gap between actual and “potential” GDP is a judgement call. But better than “cyclically-adjusted deficit”, which makes the same judgement call about potential GDP, and then adds a lot of legal/political noise.
The link is here.
A Bet is a Tax on Bullshit
Nate Silver, whose models give Obama a high probability of winning reelection, has offered one of his critics a bet. “Putting your money where your mouth is,” is a time-honored principle of integrity in my view but the NYTimes Public Editor is very upset. Margaret Sullivan, however, never offers an argument against betting instead treating it as unseemly.
[Betting is] inappropriate for a Times journalist, which is how Mr. Silver is seen by the public even though he’s not a regular staff member.
“I wouldn’t want to see it become newsroom practice,” said the associate managing editor for standards, Philip B. Corbett. He described Mr. Silver’s status as a blogger — something like a columnist — as a mitigating factor…
…When he came to work at The Times, Mr. Silver gained a lot more visibility and the credibility associated with a prominent institution. But he lost something, too: the right to act like a free agent with responsibilities to nobody’s standards but his own.
The closest to an argument against betting is this:
…whatever the motivation behind it, the wager offer is a bad idea – giving ammunition to the critics who want to paint Mr. Silver as a partisan who is trying to sway the outcome.
My best parse of the argument is that by betting Silver has given himself an interest in the election and this hurts his credibility. Nothing, however, could be further from the truth.
A properly structured bet is the most credible guarantor of rigorous disinterest. In order to prove his point, Silver is not required to take the Obama side of the bet! At the odds implied by his model (currently between 3 and 4 to 1) Silver should be willing to take either side of a modest bet. Indeed, we could hold a coin toss, heads Silver takes the Obama side, tails he takes Romney.
In fact, the NYTimes should require that Silver, and other pundits, bet their beliefs. Furthermore, to remove any possibility of manipulation, the NYTimes should escrow a portion of Silver’s salary in a blind trust bet. In other words, the NYTimes should bet a portion of Silver’s salary, at the odds implied by Silver’s model, randomly choosing which side of the bet to take, only revealing to Silver the bet and its outcome after the election is over. A blind trust bet creates incentives for Silver to be disinterested in the outcome but very interested in the accuracy of the forecast.
Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge.
Measuring Baumol and Bowen Effects in Public Research Universities
That is a new paper by Robert E. Martin and R. Carter Hill:
We estimate three models of cost per student using data from Carnegie I and II public research universities. There are 841 usable observations covering the period from 1987 to 2008. We find that staffing ratios are individually and collectively significant in each model. Further, we find evidence that shared governance lowers cost and that the optimal staffing ratio is approximately three tenure track faculty members for every one full time administrator. Costs are higher if the ratio is higher or lower than three to one. As of 2008 the number of full time administrators is almost double the number of tenure track faculty. Using the differential method and the coefficients estimated in the three models, we deconstruct the real cost changes per student between 1987 and 2008 into Baumol and Bowen effects. This analysis reveals that for every $1 in Baumol cost effects there are over $2 in Bowen cost effects. Taken together, these results suggest two thirds of the real cost changes between 1987 and 2008 are due to weak shared governance and serious agency problems among administrators and boards.
For the pointer I thank Michael Tamada (who does not necessarily endorse the argument).
Markets in everything the culture that is Chicago
At Mayor Rahm Emanuel’s request, Walgreen Co. has agreed to provide $25 gift cards to parents who pick up their students’ report cards and participate in parent-teacher conferences during report card pickup days.
Here is more, courtesy of Peter Metrinko.
Forgiveness, Tit for Tat, and the Coase Theorem
Forgiveness reduces the price of transgression; or, demand curves slope down. As discussed by the WSJ:
…research shows forgiveness has a dark side. At first it may help the person who has been hurt to let go of anger, resentment and desire for revenge. But forgiving also may encourage the transgressor to do it again.
Jim McNulty, a psychology professor at Florida State University…found that the day after forgiving a partner, people were 6.5 times more likely to report that the partner had again done something negative, compared with when there was no forgiveness.
… “The potential cost of forgiveness is that it doesn’t hold the partner accountable for the behavior,” Dr. McNulty says.
If you find yourself forgiving your partner a lot then something is wrong but forgiving is not always the wrong strategy. What should you do? Tit for tat looks good in the cooperative equilibrium but can go badly wrong with error and mistake. That’s one reason why it’s good to forgive error and even the occasional transgression if you think you can get back on track.
In another study, people who forgave nice partners remained happy with their marriages, while people who forgave not-so-nice partners became less happy.
Tit for tat seems draconian, however, because you really shouldn’t model a marriage as a prisoner’s dilemma.
My own approach is to think of the Coase theorem. Assume that you can’t redistribute happiness or wealth within the marriage. If your spouse is unhappy you will be unhappy and if your spouse is happy you are likely to be happy; happy wife, happy life. If you can’t redistribute happiness the play to make is to maximize total happiness. Maximizing total happiness means accepting apparent reductions in happiness when those result in even larger increases in happiness for your spouse. If you maximize the total, however, there will be more to go around and the reductions will usually be temporary.
Cyclically adjusted measures of the stance of fiscal policy
These cyclically adjusted measures are useful information and should not be discarded, but I don’t wish to use them as the sole or main or dominant source of information about the stance of fiscal policy. Here are a few reasons why:
1. The cyclically adjusted measure relies on a measure of potential output. That is not a big problem when potential output is clear, but in a lot of today’s cases the very debate is over the size of the output gap.
Let’s take the current UK. If the output problems all resulted from supply and productivity failures (not the case, just a hypothetical), the numbers would indicate that the current fiscal policy stance is quite expansionary with high budget deficits.
Alternatively, if you take a more Keynesian view, the potential output gap is much larger and, cyclically adjusted, the stance of fiscal policy looks much more contractionary by the cyclically adjusted measure.
Very often the key question is something like the following: how much are the current UK problems demand-side and how much supply-side? I see economists addressing this question by invoking cyclically-adjusted measures of the stance of fiscal policy.
This is has a significant element of circularity. If you assumed a big output gap to begin with, the demand-side crunch is measured as very large. If you assumed a very small output gap to begin with, the measure gives you a very small demand-side crunch in this case.
Maybe you have seven other reasons for believing it was a large demand-side crunch, but that doesn’t make this a good measure. Your results depend very much on the assumption — about potential output and thus demand — which you put into it.
Furthermore this point is far from transparent yet I don’t exactly see proponents of the cyclically adjusted measure tripping over themselves to remind us of it.
(As an aside, the IMF, before this issue became so politicized, expressed precisely this reservation about cyclically adjusted measures and in fact did not appear to favor them as a general approach, while admitting they do provide some interesting information.)
2. There is a big difference between two cases: “the government drove an AD collapse by massive net spending cuts” and “big problems happened and government didn’t fill the gap nearly enough.” These cases have different economic and political causes, may involve different remedies, and very likely will yield different multipliers, both for initial effects and when it comes to potential remedies. I want my metrics for the stance of fiscal policy, and my commentators on fiscal policy, to disaggregate them, rather than to blur them together. Cyclically adjusted measures blur them together. There simply is not one big multiplier for “austerity” as a general concept.
3.The cyclically adjusted measures are an abstraction, and furthermore an abstraction based on estimating a modal quantity, namely potential output.
To give an analogy, I get uneasy when I read sentences such as “inequality caused X.” “Inequality” didn’t cause anything. Inequality is a statistical residue of some other actual processes. It is better to say what caused X (say “the rage and poverty of inner city residents”) and, if relevant, connect this to inequality as well. Except that the cyclically adjusted deficit is an even more problematic causal concept than “inequality” because it relies on measurement of a modal, namely potential output.
The word “austerity” is a political concept and it does not belong in rigorous economics. Let’s just say what happened. Note the simple causal language in my point #2.
4. The mainstream literature on fiscal policy, starting at least with Blinder and Solow (1973), slots “G” and “Gdot” into the model as the measure of fiscal policy. Paul Krugman pieces do this too, as do hundreds of other economists. Models are there to give us some discipline, so let’s use that discipline. Why is it that so few of these classic models used the cyclically adjusted deficit measure to express the stance of fiscal policy? Because many of those economists know that, in the causal sense, that is a whacky measure and best used with caution. It simply is not “the standard measure of the stance of fiscal policy.”
5. These days there is a sudden near-moratorium on citing open economy models of fiscal policy in smallish open economies with floating exchange rates (it may not matter nearly as much as you think for AD). This should be incorporated into the discussion more, yet oddly it suffers from relative neglect. Note also that a) the UK hasn’t the whole time been at the zero bound, and b) you still can depreciate your currency at the zero bound.
6. Let me sum up where we (at least many of us) agree. British policy should have been much more countercyclical than it was and indeed I have thought this from the beginning. But I still see many commentators, writing on British fiscal policy, giving us an exaggerated sense of its potency, an exaggerated sense of the causes of the British downturn in the AD/fiscal policy direction, and cloaking all of this under non-transparent terminology, while keeping the various important qualifications rather silent.
I have further points to make about UK austerity in particular, and the Wren-Lewis blog post, but I’ll save those up for another day. On some details of the UK economy, Matt’s simple treatment makes a lot of sense and he is also (correctly) a major proponent of the relevance of AD analysis.
Texting while Driving
Take this story with a grain of salt but it’s useful to keep complexities in mind when regulating:
The Insurance Institute for Highway Safety says that 3 of every 4 states that have enacted a ban on texting while driving have seen crashes actually go up rather than down.
It’s hard to pin down exactly why this is the case, but experts believe it is a result of people trying to avoid getting caught in states with stiff penalties. Folks trying to keep their phones out of view will often hold the phone much lower, below the wheel perhaps, in order to keep it out of view. That means the driver’s eyes are looking down and away from the road.
Very appropriate hat tip: Offsetting Behavior.
Price gouging and the elasticity of supply
Jeff writes:
…in fact it is quite typical for the consumer surplus maximizing solution to be a rationing system with a price below market clearing. I devoted a series of posts to this point last year. The basic idea is that the efficiency gains you get from separating the high-values from the low-values can be more than offset by the high prices necessary to achieve that and the corresponding loss of consumer surplus.
Why would we only care about consumers’ surplus and not also the surplus that goes to producers? We normally we care about producer’s surplus because that’s what gives producers an incentive to produce in the first place. But remember that a natural disaster has occurred. It wasn’t expected. Production already happened. Whatever we decide to do when that unexpected event occurs will have no effect on production decisions. We get a freebie chance to maximize consumer’s surplus without negative incentive effects on producers.
This is a very clever post and it provides much to think about. But I don’t accept the main premise that supply is inelastic. Last night most stores were closed! At higher prices more of them might have opened, and in fact in most places it was logistically possible to have a store open in Fairfax. There might also be effects from mechanisms such as “should I leave these flashlights out for sale, or take the extra home to the family?” Furthermore the periodic demand for batteries, flashlights, bottled water, etc. around here has become (sadly) a regular event, where longer-run “option ready” supply arguably is linked to precedents from previous experience.
Visualization data for world development
From Damian Clarke:
I am a PhD student in economics at the University of Oxford, and a fan of your blog. Much of my work focuses on the microeconomics of development (principally fertility and education), however I am also working on the use of open data in economic development – quite an exciting area. I write you with regards to this open data work. Recently I have written a module for Stata which allows anyone to automatically import any of the over 5000 indicators maintained by the World Bank, and produces both a geographic and time series representation of the data (I provide a png attachment of this graph here if you are interested in seeing it)…
Whilst this program may be useful for researchers, I think its prinicipal benefit is in pedagogy – perhaps even users of MRUniversity would be interested in visualising for example fertility, GDP, current account balances, etc in a simple command. The syntax really is very easy: “worldstat Africa, stat(GDP)”.
I provide at the end of this email a brief description, and more details are available on my site: https://sites.google.com/site/damiancclarke/computation#TOC-worldstat
…worldstat is a module which allows for the current state of world development to be visualised in a computationally simple way. worldstat presents both the geographic and temporal variation in a wide range of statistics which represent the state of national development. While worldstat includes a number of “in-built” statistics such as GDP, maternal mortality and years of schooling, it is extremely flexible, and can (thanks to the World Bank’s module wbopendata) easily incorporate over 5,000 other indicators housed in World Bank Open Databases.
…it is automatically available from Stata’s command line by typing: “ssc install worldstat”
The Solow Model
The Solow Model is a workhorse model of economic growth. Many subsequent papers in growth theory and in business cycle theory build on this model. A model of growth helps us to structure our thinking. Why is it, for example, that China is growing faster than the United States despite having much poorer institutions such as the rule of law? Surprisingly, even a simple version of the Solow model offers some useful predictions and ways to interpret aspects of the the growth data. At MRUniversity this week we have four videos on the Solow model. These videos are a bit more technical than many of our previous videos and we think they will be useful in many other classes such as macroeconomics, especially if you are using a truly excellent textbook. The videos will also be useful for anyone who wants to read more of the literature on growth theory or the empirics of growth (such as can be found, for example, in Barro and Sala-i-Martin’s Economic Growth or David Weil’s textbook Economic Growth). Even if you don’t want to study the theory in more depth, we think these videos will be useful for understanding development and how economists use theory and data to understand the sources of growth (and its absence).
Why Milk?
Throughout evolutionary history, most adult homo sapiens could not drink milk. Even today, most adults cannot drink milk. Adults who cannot drink milk don’t seem to lose very much, particularly as they can still eat yogurt and cheese. And yet the gene that allowed some adults to drink milk spread incredibly rapidly suggesting massive advantages to milk drinkers. Why? No one knows for sure but it seems to coincide with civilization. Slate has more:
[A]round 10,000 B.C….a genetic mutation appeared, somewhere near modern-day Turkey, that jammed the lactase-production gene permanently in the “on” position. The original mutant was probably a male who passed the gene on to his children. People carrying the mutation could drink milk their entire lives. Genomic analyses have shown that within a few thousand years, at a rate that evolutionary biologists had thought impossibly rapid, this mutation spread throughout Eurasia, to Great Britain, Scandinavia, the Mediterranean, India and all points in between, stopping only at the Himalayas. Independently, other mutations for lactose tolerance arose in Africa and the Middle East, though not in the Americas, Australia, or the Far East.
In an evolutionary eye-blink, 80 percent of Europeans became milk-drinkers; in some populations, the proportion is close to 100 percent. (Though globally, lactose intolerance is the norm; around two-thirds of humans cannot drink milk in adulthood.) The speed of this transformation is one of the weirder mysteries in the story of human evolution, more so because it’s not clear why anybody needed the mutation to begin with.
…A “high selection differential” is something of a Darwinian euphemism. It means that those who couldn’t drink milk were apt to die before they could reproduce. At best they were having fewer, sicklier children. That kind of life-or-death selection differential seems necessary to explain the speed with which the mutation swept across Eurasia and spread even faster in Africa. The unfit must have been taking their lactose-intolerant genomes to the grave.
…The rise of civilization coincided with a strange twist in our evolutionary history. We became, in the coinage of one paleoanthropologist, “mampires” who feed on the fluids of other animals. Western civilization, which is twinned with agriculture, seems to have required milk to begin functioning. No one can say why.
Hat tip: John Chilton.
Would abolishing cash help cure AD problems?
Miles asks about this on Twitter. Earlier in the year, Matt wrote:
Stop for a moment and ask yourself why the interest rate can’t be reduced much below 1 percent. The trouble is cash. At any given time, relatively little paper currency circulates in the United States. Instead, most of the American money supply consists of bank accounts and other electronic stores of value. People prefer to keep money in bank accounts because it’s convenient and because you get interest on it. If the rates were driven below zero—in effect a tax on holding cash in the bank—people would just withdraw money and store it in shoeboxes instead. But what if you couldn’t withdraw cash? What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money? Well, then, we would have solved our depression problem. Too much unemployment? Lower interest rates below zero, Americans will start spending and investing again, the economic will grow, and unemployment will go back down to its “natural rate.”
Ryan Avent comments. A few points from me:
1. Even pure cash can be taxed, if we are willing to go the goofy route. A stochastic declaration of “counterfeit,” based on serial numbers and scans, is one way to go.
2. Technologically speaking, it is possible to run virtually all transactions without cash, or it will be quite soon. That said, for this to work as stated, you would need to run all transactions without cash or the option of cash. How many millions of Americans do not even have bank accounts much less smart phones? This is more likely to work in Singapore or Denmark, at least for the foreseeable future.
3. You could have currency or some currency equivalent continue to exist in the black market economy, with penalties for ordinary citizens caught holding currency. (Which would probably not be popular on Fox News, and furthermore in Tennessee imagine all that talk of Book of Revelation, “Mark of the Beast,” etc.) Even so, you still end up with a currency-bonds margin and most likely with lower nominal interest rates in that equilibrium; if the law taxes currency holdings there is less need for equilibrium to require a high nominal interest rate. I am not sure why this should be so desirable for monetary policy.
Furthermore, under some views, this proposal would in essence put monetary policy in the hands of the drug trade. Cracking down on drug lords, or easing up on them, would become major monetary policy instruments, at least if you take the Fama-Sumner view that currency has special potency over the price level.
4. I do not myself believe that currency per se has such extreme power over aggregate demand, at least not in such a credit-intensive economy as ours. That means this proposal doesn’t get at the heart of the AD problem, which is closely linked to credit creation. But if you disagree with me on this one, you end up back at #3.
5. What do we really know about money demand anyway? Cooley and Leroy (1981) is still worth reading. Under one plausible view, you get sustainable increases in velocity, aggregate demand and investment when people feel safer and wealthier, not when you tax them more. It’s fine to say “we don’t know,” but I get nervous when macro stabilization policy is relying so directly and so relentlessly on money demand effects.
6. I don’t see how this proposal could work unless it is applied globally, which seems implausible. If your dollars are being taxed some extra amount, just put them in a foreign bank to earn zero or do some kind of funny quasi-repurchase agreement, with a foreign bank, to avoid having formal ownership of the dollars on the days of the tax.
On net, it is an interesting idea, but I wouldn’t actually do it.
Addendum: Scott Sumner comments (I don’t myself think the monetary base is so special, and if pre-2008 wasn’t a problem, that is why).
Why are growth declines sharp and sudden?
…these econometric studies imply that the decline in growth rates should be gradual, since convergence to high incomes is gradual. Actual experience, however, rarely displays such a smooth adjustment. More commonly there is a sharp drop to a new, lower growth rate, as noted above. In Japan the drop was probably precipitated by the OPEC oil price increases, given Japan’s heavy dependence on imported energy, and by the concurrent worldwide stagflation, particularly in Japan’s major export markets. In Korea, enormous chaebol-initiated investment projects artificially supported growth for a time but also laid the foundations for the financial crisis that precipitated the sharp decline in growth.
This is one of the most neglected questions in macroeconomics and the theory of economic growth, and these days our understanding of the world, and our fiscal future, may well turn on this matter. We still don’t have a good sense of why growth fall-offs are so sharp and why they seem so hard to reverse.
In any case that excerpt is from Barry Eichengreen, Dwight H. Perkins, and Khanho Shin, From Miracle to Maturity: The Growth of the Korean Economy.
More generally, I loved reading this book, perhaps all the more because I had just returned from Korea when it arrived. It is clearly written and full of useful information on virtually every page. In my opinion every economist should study the Korean growth miracle, as a) it is in some ways mankind’s most impressive and least precedent-backed growth miracle, and b) it overturns or at least challenges many preconceptions about economic growth. It is perhaps the case where government policy has been most effective in spurring economic growth. This is now one of the go-to books on that topic.
Tuition by Major
A task force convened by Florida Governor Rick Scott has recommended changes in tuition subsidies according to job market demand:
Tuition would be lower for students pursuing degrees most needed for Florida’s job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.
The committee is recommending no tuition increases for them in the next three years.
But to pay for that, students in fields such as psychology, political science, anthropology, and performing arts could pay more because they have fewer job prospects in the state.
“The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them,” said Dale Brill, who chairs the task force. “But you better really want to do it, because you may have to pay more.”
The task force has the right idea but the right way to target subsidies is not to the job market per se (let alone Florida’s job market), wages already reflect job market needs. Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large. Overall, this likely means subsidizing the STEM fields more than anthropology which is why the taskforce has the right idea. If the task force wants to explain the idea, however, they should make it clear that the goal is to focus subsidies on those fields where education most benefits the taxpayer.
Defensible conclusions from observing UK fiscal policy
Here are a few which are at least what I call “defensible”:
1. The UK economy was hit with serious problems, and fiscal (and monetary) policy did not respond strongly enough to keep the nation on track. (NB: If you are citing measures of a cyclically adjusted gap in UK fiscal policy, you probably are citing evidence in support of this proposition.)
2. There has been a shift in the composition of government spending, which has led in turn to sectoral shift problems for former UK government employees.
3. UK government spending is underinvesting in that nation’s future, most of all in education but other public goods too.
You may or may not agree with these views, but again they are defensible. You can point to both evidence and theory in their favor, noting that the skeptics may have other reasons for dissenting (but still they should accept the first-order evidence and theory).
Here is the view which is not so defensible:
4. A negative shock to UK government spending led to a negative AD shock and that drove the recent poor performance of the UK economy.
People, that one just ain’t true. I’m receiving a lot of comments and emails, all citing evidence which supports versions of 1-3, but interpreted incorrectly as support for #4.
There is a big difference between #1 and #4 for their concrete implications. For instance if you believe in #4, it seems that problem would be relatively easily fixed by more AD. If you believe in #1, you have to think long and hard about what those initial shocks were, and then ascertain how much the resulting fallout from those shocks could be fixed by AD measures. These become murky waters very quickly. For instance a mix of collapsing London finance, disappearing North Sea oil, and mysterious British productivity puzzles (one possible set of options in these murky waters) probably can be fixed only a bit by a more expansionary fiscal policy.
I’m on board with the government spending/sectoral shocks to government employment point, though of course it is only one part of the problem. I would note that everyone criticizes sectoral shocks theories until they wish to use them. I also would suggest that this point is well explained by the conservative critique of entitlement spending, namely that it swallows up too many parts of the budget and the broader economy.
People are trying to use the UK fiscal policy evidence to argue for the “simple” view when instead they should be pushing the “murky” view. And the murky view implies the whole mess just isn’t that easy to fix, or for that matter diagnose.