Megan McArdle on the CBO

She writes,

Now imagine a world with open CBO models. Every bill would still have a score, yes — that’s mandated by law — but then every score would have a dozen think-tanks slinging mud at the assumptions, and proclaiming that their iteration of the CBO model was producing the true results.

She says this as if it would be a bad thing. My own view is that there should not be a definitive CBO score. The CBO does not own Truth. The most important truth about policy is that there is no Truth. Economic theories are contestable. Treating one model as Truth biases policy makers toward intervention, because they are over-confident in the results.

I make this point in a forthcoming essay. Not sure when the essay will appear.

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10 Responses to Megan McArdle on the CBO

  1. collin says:

    The most important truth about policy is that there is no Truth.

    And the CBO analyst know this more than anybody. Well all businesses do something similar to the CBO and it does a road map to changes. And we don’t know all the changes. For instance the CBO was within 3% of the number of insured citizens in the US by 2016 but missed how many signed up for Obamacare by millions because the employer insurance model did not continue collapse. (Given this was written in 2009, that was reasonable point.) Were they reasonably right?

    • Matthew Young says:

      My thinking also.
      The CBO gives you the first and worst fractional approximation going forward, but it is less worse than its previous prediction. So it always tells bankers how much more complicated of a fractional approximation we need to make a refined prediction. It is the official Congressional best guess and better than no guess..

  2. Lord says:

    It does make life difficult for the BSers.

  3. Tom DeMeo says:

    Congress is a decision making body. There is no policy truth, but any legislation establishes a point of view. You can acknowledge other points of view, but when you do decide something, by definition, you’ve picked just one . I’m really not interested in Congress voting for something while at the same time proceeding to explain to us that it can’t even express a coherent perspective on what it is attempting to do.

  4. Handle says:

    McArdle’s argument here was quite strange. It’s essential that the political process be bound by results emanating from some black box inscrutible to the public but which we are all supposed to trust as authoritative and objectively accurate without question, because otherwise people might be able to argue effectively with the actual analysis instead of shooting into a fog, and that will let partisan hacks make all kinds of absurd arguments (that they couldn’t / wouldn’t otherwise make?) and the public / politicians will just use confirmation bias to pick the ones they like and so dismiss the CBO’s estimates.

    The implications of the logic of that argument are not exactly compatible with the ideal of transparent government and deliberative democracy.

    • MichaelG says:

      In other pieces, I think her point is that whatever you model choose, it should be consistently applied. Not a different set of assumptions that favor each piece of legislation.

      The problem with making all the assumptions public is that then people argue over the assumptions and want them changed.

      Personally, I think the models just amount to rationalizations used to justify legislation. No one really knows how these things will turn out. Still, any model that forces them to even think about their spending is probably worth having.

      • Handle says:

        1. Why only use one model when there is no ‘true’ model? The CBO could give the results of 5 or 50 different models, applied consistently to the data. Weather services do this, for example, when forecasting storms. It gives people a better idea of the underlying uncertaintly in the predictions.

        2. How can anyone verify consistent application without being able to see all the “code” for the model, all the data inputs, and all the judgment calls made? There are always lots of opportunities for people to put thumbs on the scale in any complicated estimate or analysis, and putting those moves behind a curtain will only encourage more of that due to less risk of accountability.

        3. Congress seems pretty crafty at discovering gimmicks to circumvent the spirit of the mandates of any binding spending rules. I’m guessing the only way to make them take spending estimates or caps slightly more seriously is to write laws that self-repeal if spending in fact exceeds some definite amount. That puts a cost on BS regarding promises that certain undesirable possibilities (like runwaway spending, or an explosion in frivilous litigation) don’t need to be worried about because they won’t happen.

  5. Seth says:

    I’m glad the CBO doesn’t score new business ideas.

  6. Lord says:

    But there are infinitely many more wrong and worse than wrong predictions, but while truth may be elusive, it is not utterly impossible, or nothing would work, no planning would be possible, all economic calculation would be fruitless, but all would be chaotic.

  7. mike shupp says:

    I dunno … suppose we think of rival CBO-style cost estimating institutions as similar to rival political polling organizations. How many pollsters are there out there? Gallop, Nate Silver, Harris, Quinnipiac. … a couple dozen biggies, let’s say, so maybe we’d see CBO estimates from two dozen places.

    We can probably imagine how well this work. We can imagine how independent and politics-free these estimates will be. We’ve got a handle on how close the estimates will be to each other. We’ll know going in that some of these CBO-estimate shops are going to have tie-ins to the Democratic Party, some to Fox News, some to Trump backers like Breibart, and we’re absolutely certain that they will publish only the most objective results. Right? And we know how much careful attention and nuanced discussion those estimates will receive from the concerned citizens in urban slums and decaying Midwestern farming towns and gated retirement communities and so forth.

    Let’s imagine the future with a little realism.

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