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"For the GDP equation, normally we would say lagged GDP and the GDP growth rate are complete determinants of GDP (i.e. current GDP = lagged GDP × (1 + the GDP growth rate). Mr. Zycher is not estimating an identity only because he linearizes this relationship."


No kidding. I wonder what the R2 is on that equation - 0.9999?

With a coefficient of 0.97 and a t-stat of 38 on lagged GDP I'd start thinking about nonstationarity issues.

I find this kind of forecasting a mug's game in the first place - there are too many other unobserved variables that are almost certainly correlated with the error term here. Politicians should be arguing from principle - this is the time for us to decide whether or not subsidizing anything makes sense. Let economists research the positive issues - a political campaign is the time for largely normative debates. If anything stating, "My plan will create a million jobs.", is a distraction that opens you up to endless debates about how good your regressions are. Fine for a seminar, not for a political campaign.

Clearly a spurious regression. What a great example of the latter for us all to use in our classes.

Avon... great handle.

"Dear colleague: You regressed an accounting identity. Anyway, that identity is false."
As my father used to say:"Get your degree. Then you'll be allowed to say anything." When did thet meet?

So if a thousand working age immigrants cause GDP to increase by $26.84 billion and (according to the employment equation) 394.12 jobs are created per billion GDP increase, bringing in 1,000 working age workers will create 10,578 jobs.
That's more than 10 jobs created per new worker! Sign me up!

His stream-of-consciousness argument about electricity prices is hilarious. He starts with the EIA estimates of costs of different generation sources, realizes that with those numbers the GEA mix is cheaper than what it replaces according, declares that "it is likely to be the case that the new estimate has been shaped by political pressures within the Obama administration" and therefore dismisses them, and then shops around for a prediction more in keeping with his desired conclusion. He picks a 2009 study that predicted that feed-in tariffs would significantly increase in the next few years, when in fact we know 5 years later that they decreased quite sharply. Quite apart from the fact that to get the savings of that 2009 doomsday report we would have to unbuild all the renewable power at no cost and re-commission the coal plants also without cost. He takes the dollar increase prediction from the right-wing think-tank predicting a high increase in prices from green energy, divides it by the predicted total bill from Environmental Defence, which predicts a small increase, to calculate a percentage increase.

As this post noted, it seems quite clear that Zycher has taken a list of single-variable regressions and strung them together, including the correlation between energy production and employment. So it seems that a large generation surplus would be just what the doctor ordered to create jobs! "An increase in primary energy production of 1000 cubic meters-equivalent is predicted to increase employment by about 1381 jobs."

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