Is there any consequence to being wrong?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

If your job is to make predictions about the future, and all of your predictions are wrong, then you should lose your job. But if you are a defense attorney, and you know your client is guilty, you still have a moral obligation to mount the most rigorous defense possible. Into which of these 2 categories do professional economists belong? Clearly, there is no agreement. Some think they are struggling to discover the truth. Others feel they have been hired to defend a point of view. Apparently Amity Shlaes belongs to the latter group:

In the fall of 2010, conservatives assembled an all-star team of the world’s wrongest people to issue a clarion call warning the Federal Reserve that its attempts to aid the economy risked terrible inflation. “The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment,” warned the signatories, who included, among others, Amity Shlaes, Bill Kistol, and Niall Ferguson. (The person who advised the German army not to bother to pack winter clothing for its 1941 invasion of Russia was, sadly, unavailable.)

Shlaes has a piece in National Review defending the letter. Shlaes is an especially interesting figure, a longtime advocate of supply-side economics who had a moment of special prominence with a well-timed 2009 book attacking the New Deal, which became the ballyhooed intellectual foundation for the Republican Party’s decision to reject Keynesian economics and issue unhinged warnings about debt and imminent hyperinflation.

…The inflationistas got the balance of risk totally wrong — unemployment, while falling, has remained above target, while inflation has stayed below it. Shlaes’s defense is not just factually wrong, it’s conceptually bizarre. Somebody has to worry about bear attacks, yes. But if you demand that all children be kept home from school for the year to protect them against bear mauling, it’s not enough to point out that bears exist. You need to somehow engage with the idea of a tradeoff.

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