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View Diary: The Three SS 'Alternatives': Economic Projections, Uncertainty, Probability (25 comments)

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  •  Well it is not quite BOE (2+ / 0-)
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    Zinman, Clem Yeobright

    (which took me a minute to figure out was 'back of envelope')

    If you examine the first Table in the post you see that all three projections settle out on 'ultimate' numbers about 10-13 years out for most of their economic and demographic variables. That is they don't even pretend to predict future decades economic performance but instead project a kind of carrying capacity of the economy in a Three Bears kind of way-Low Cost being Too Hot, High Cost Too Cold and Intermediate Cost some sort of bastard Golilocks/Baby Bear Just Right Porridge.

    Which raises a couple of questions. If the uncertainty is such that you can only project variation between top and bottom performance some 15 years out, exactly what is the justification for using 75 year numbers as your policy touchstone? If we know anything it is that there will be ups and downs in  economic performance in decades 3-7 from now and fundamental technological change, to assume we are confident not only about the upper and lower bounds (Low Cost and High Cost) but that we are confident enough that performance will always revert to the mean (Intermediate Cost) that we should handcuff ourselves to projections of the latter in formulating near term policy is frankly somewhere between daft and witchcraft, the very existence of 'ultimate' numbers just over a decade out being a kind of confession of impotence.

    Worse it builds in a further impotence argument, this one of the possibility of changing the future via targeted policy. That is Intermediate Cost builds in some sort of bastard NAIRU that there actually are natural limits, limits which we will reach one way or another in the next 15 years and be helpless to change.

    Well not much room for the Magic of Capitalist Entrepreneurship and Good Old American Know-how there. If we don't like perma-Intermediate then the answer is not to just surrender and send the Poors and Olds to the Catfood aisle but maybe to launch a Newer Deal in pursuit of a Greater Society.

    Which isn't to deny categorically that there are not real upper and lower bounds that may or may not correspond to Low Cost and High Cost, but almost by definition outcomes closer to Low Cost than Imtermediate Cost are POSSIBLE. Hence the stochastic and other tests in the Reports. We don't have to target the stars, just maybe an outcome in the 85-95 range.

    socialsecuritydefender.blogspot.com - SocSec.Defender at gmail.com - founder DK Social Security Defenders group - (hmm is there a theme emerging here?)

    by Bruce Webb on Wed Mar 27, 2013 at 08:47:47 PM PDT

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