The January 2008 CBO white paper Options for Responding to Shortterm Economic Weakness was written by five economists and attempted to examine the effects of different kinds of government stimulus measures (chiefly, tax cuts vs spending in terms of GDP impact). Unlike the current Moody's model being bandied around by stimulus supporters (and most highly touted by Dr. Mark Zandi), the CBO report does not attempt to place a direct dollar multiplier figure on different types of stimulus, instead measuring them in terms of Large, Medium, and Small impact . Nonetheless, the similarity of the categories used with those of the Moody's model allows for a rough comparison. So let's take a look at how different stimulus strategies shake out in the two sets of analyses. The CBO rates the cost-effectiveness of various stimulus strategies thus [in no particular order between the items in each category]: Large impact Lump Sum Tax Rebates Tax Withholding Holiday Extending or Expanding ...

I was looking for this when I was writing the past two posts on the economy as a complex nonlinear system, and couldn't find it. It's worth thinking about when we are getting ready to trust our entire economy to a Keynesian philosophy that predates modern quantiative modeling techniques and a Moody economic model of stimulus bang for the buck that appears to be fundamentally linear. From New Scientist last November: Now that disaster has struck again, some financial risk modellers - the "quants" who have wielded so much influence over modern banking - are saying they know where the gaps in their knowledge are and are promising to fill them (see "How the risk models failed the world's banks"). Should we trust them? Their track record does not inspire confidence. Statistical models have proved almost useless at predicting the killer risks for individual banks, and worse than useless when it comes to risks to the financial system as a whole. The models en...

Warning, warning, danger, danger: severe geek alert. First, let's take a short piece from one of my favorite philosophers that I love to read (often if only to disagree with his conclusions while admiring his writing), Daniel Dennett. This is an excerpt from Consciousness Explained : My explanation of consciousness is far from complete. One might even say that it was just a beginning, but it is a beginning, because it breaks the spell of the enchanted circle of ideas that made explaining consciousness seem impossible. I haven’t replaced a metaphorical theory, the Cartesian Theater, with a nonmetaphorical ("literal, scientific") theory. All I have done, really, is to replace one family of metaphors and images with another , trading in the Theater, the Witness, the Central Meaner, the Figment, for Software, Virtual Machines, Multiple Drafts, a Pandemonium of Homunculi. It’s just a war of metaphors, you say — but metaphors are not “just” metaphors; metaphors are the tools o...