by Mike Kimel
Rules to Write By
Cross posted at the Presimetrics blog.
Things to keep in mind, especially when posting here or writing me letters:
1. I don’t cite authority as proof, and I ask that you have the courtesy to not do the same to me. Its bad enough when you cite Paul Krugman. After all, you could be quoting him incorrectly, or out of context. Additionally, Krugman, like the rest of us, could simply be wrong. Its even worse when you cite someone who is paid to have a specific opinion. Cut out the middle man and make the argument yourself.
2. Get your data from a reputable source. In general, that means whatever government agency generates the data though there are exceptions. A think tank which pushes a specific point of view is not one of those exceptions. When it comes to international data, either get it from the government agencies in countries you are looking at, or the World Bank, IMF, UN, CIA, Statistical Abstract of the US or Penn World Tables.
3. If you want to compare economic growth across time periods, adjust for inflation or the size of the economy or both.
4. If you want to compare economic growth across countries, adjust for inflation as well currency differences.
5. If you want to compare growth rates of anything, be consistent with your starting and ending points.
6. If you want to compare any two samples, be consistent in how you assign points between the samples.
7. Do not argue by assertion.
8. Economics is not complicated. If you require assumptions you cannot explain or which do not pass the giggle test when stated in plain English to the average person in order to show a given effect, that effect does not exist.
9. Do not try to impress me with big words. Especially when they are statistical terms.
10. If you haven’t tried applying data to your model, your model is probably worthless.
11. If most or all of the observations in your sample are a special case to your model, your model is worthless.
13. Use as much data as is available, or follow a consistent rule for how much data to use and how to deal with it. Do not cherry pick.
14. No magic lags. Be consistent in your use of lags. If your analysis says that Reagan is responsible for growth during the Clinton administration, he better be responsible for growth during the Bush 1 administration too. And if Reagan is responsible for events that happened four to twelve years after he left office, explain why he isn’t responsible for events that happened 13 years after he left office. Also, explain why some predecessor of Reagan’s isn’t responsible for growth during Reagan’s administration.
15. In economics, time moves in a single direction. For some reason a lot of people write to tell me about how growth during the Kennedy administration only picked up after the so-called Kennedy tax cuts. But those tax cuts occurred in 1964, and Kennedy was assassinated in 1963. And growth was very rapid during the Kennedy administration. (I.e., quite a bit faster than under Reagan.) I also get a lot of people informing me that growth sucked under FDR until WW2 began. But… if you consider growth during FDR’s term only through ’38 or only through ’40, it is still faster than under any other President.
16. Correlation does not imply causality. Sadly, it is impossible to prove causation in the real world when you’re talking about economics. However, if X leads to Y using a variety of different types of data, looked at a variety of different ways, it is certainly strongly suggestive.
17. Lack of correlation does imply lack of causality. If you cannot show that economic growth or tax revenues are negatively correlated with tax rates, then please don’t argue that lower tax rates lead to faster economic growth.
18. Before you insist that paying taxes cannot possibly help the economy, either explain why building roads, funding basic research and fighting epidemics harms the economy or explain why there will be a more optimal provision of such services should the government ceases providing them.
19. Regardless of what you want to believe, real economic growth during the Reagan administration was slower than real growth during the FDR, JFK, LBJ and Clinton administrations. Two of these administrations raised marginal tax rates and one cut them. What these administrations had in common was a vision for expanding the role of government.
20. In the U.S., monetary policy is conducted by the Fed, not by the President. Inflation is caused by printing too much money. Do not attribute the inflation of the 1970s to Carter (or Nixon, for that matter). Do not attribute the end of that inflation to Reagan. One can reasonably state that the Fed reacted badly to something the President did and that caused inflation. One cannot reasonably state that the President caused inflation.
21. If your example of a libertarian paradise is a city state whose government owns much of the productive capacity of that city state, drop it and come up with something that actually does look like a libertarian paradise. That is to say, a place with a very small, very non-intrusive government that does little more than setting and enforcing a very limited number of rules. I can come up with several I am sure you can come up with several too.
22. If you believe Hong Kong has a flat tax, I suggest you inform the Hong Kong Inland Revenue Department that they are in error. Bonus points if you tell them you found out about their mistake from a friend.
23. Please do not tell me I do not understand the private sector. Yes, I was an adjunct professor for five years, but that does not make me an academic by trade. When I was an adjunct, my primary profession was as a consultant, working for myself. I also have never worked directly (i.e., not as a consultant) for any government. That is to say, I have been in the private sector my entire professional career. And yes, I still have a day job with a Fortune 500 company. This is the second Fortune 500 company for which I have worked. I have also worked for a (then) Big 6 Accounting firm.
24. Please do not tell me I do not understand the entrepreneurial mentality. My wife and I own a small business we started from scratch. My wife is a serial entrepreneur. My sister is a serial entrepreneur. Two of my three closest friends are serial entrepreneurs. I also note that tax considerations have never been a big driver for myself, for my wife, for my sister, or for my buddies when starting a business.
25. Social Security is more than a retirement fund – it is also an insurance fund.
26. If someone (whether the government or the private sector) offers you a financial incentive to shoot your own foot, it is still your own #$%@ fault if you pull the trigger.
28. Ignore the catch-up effect at your peril.
29. Have a clue about your data sets. The BEA did not estimate GDP before to 1929. The BLS did not estimate unemployment before to 1948. Estimates for those series prior to those dates were produced decades after the fact by others, using more limited information, and sometimes an agenda. So if you use Lebergott’s unemployment statistics for the 1930s, don’t be surprised if you’re asked why we should trust figures that classified a few million people working for the WPA and the CCC as unemployed. If you tell me about economic growth in 1870, tell me where the data you are using originates and why I should consider it to be credible.
30. I used to write posts looking at the effect of the tax burden on economic growth, and people would write to tell me I should use marginal tax rates. Lately I’ve been focusing on the effect of marginal tax rates on growth, and people write to tell me I should use tax burdens. (In two cases, a person who had the first complaint also had the second complaint.) I cannot repeat every single thing I’ve ever written in every post every time I write a new post. Before you decide to berate me for ignoring your favorite hobby horse or tell me that results would be different if I used A instead of B, look through the archives at Presimetrics or Angry Bear to see if I really haven’t covered that material already.
I’ll be putting this list of rules somewhere permanent on the Presimetrics website, and expanding it as things come to me. Feel free to suggest other things people should keep in mind.