Stop! Stop! You’re Both Wrong!
Far be it from me to tell both Nate Silver and Greg Mankiw that they’re both wrong. Mostly because they are Nate Silver and Greg Mankiw. But they are. They’re also both right, but that’s a less controversial position. Catch up on the debate here and here. Essentially, they are arguing over whether you can apply the Romers’ research (.pdf) on the benefits of/multipliers associated with exogenous tax cuts to endogenous tax cuts. Silver says you can’t because that isn’t what the research directly addresses. Mankiw says that saying you can’t just because the research doesn’t directly address endogenous cuts is fallacious reasoning.
Here’s the thing: experimental economics is a very young science. The most controversial part of any experimental economics paper is typically found in the application of the findings. Nate Silver is wrong to say that inherently you can not apply the findings on exogenous tax cuts to endogenous ones just because they are different. Who knows? Those findings may be applicable. At the same time, it is a legitimate critique of the paper to suggest that the findings of the paper must not be applied to broadly because some of the necessary assumptions of the paper won’t apply to situations other than those directly addressed. That is the most typical response to experimental economics papers that go to far in their conclusions. So Mankiw is also wrong.
In this case, given that the authors of the paper did not specifically apply their findings as broadly as Mankiw would like, I’d say that he has the burden of proof in this situation. And he has yet to meet it in his response. That said, he was right to say that it was a teachable moment in modern experimental economics in so far as how Nate Silver critiqued his critique. And now I’m done critiquing both of their critiques.
But I’m not done critiquing Mankiw as an embodiment of traditional economics. Greg Mankiw is brilliant. So was Ptolemy. Doesn’t mean Ptolemy was right all the time. I used Greg Mankiw’s text back when I was in Econ 120 (we don’t number our classes in the traditional way at Williams… cause we’re better than that) and it served me well. That said, like most traditional economics textbooks it rests on the assumption of individual rationality, an assumption as dated as believing the sun revolves around the Earth. Sure, you can make a Ptolemeic Solar System approximate what really happens in the sky, but at the end of the day, you will be wrong. Especially when you start applying those assumptions too broadly.
So, in conclusion; People: Irrational; Nate Silver: needs to be more open to the possibilities of economic research; Greg Mankiw: Brilliant, but dated; Earth: revolves around sun.
