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Home Publications Blogs Beat the Press Niall Ferguson and What Passes for Intellectual Argument at Harvard and the Wall Street Journal

Niall Ferguson and What Passes for Intellectual Argument at Harvard and the Wall Street Journal

Tuesday, 08 October 2013 11:46

I am not quite sure why, but apparently some people do take Niall Ferguson's pronouncements on economics seriously. I usually ignore his comments, since I can't imagine not having something better to do with my time. Nonetheless, I did note Paul Krugman and Brad DeLong beating up Ferguson for his failure to understand the Congressional Budget Office's projections for the long-term budget deficit.

But rather than having the decency to find some rock behind which to hide, Harvard Professor Niall Ferguson rose to the occasion and tried to rewrite what he had earlier said. In a new blog post he writes:

"Which is more important then:
1. The fact that, as far as the CBO knows today, the fiscal position in 2038 will almost certainly be worse, and maybe much worse, than it is now?
2. The fact that one of the CBO's projections is not quite as bad this year as it was last year, when it was abominable, as opposed to just terrible."

Well, there are all sorts or reasons why we should not be terribly worried about #1 (see my paper here for beginners), but for purposes at hand, #2 is exactly what Ferguson had argued in his original column where he highlighted the deterioration in the new CBO projections compared to the projections from 2012.

This one is not really debatable. Here's the key paragraph:

"A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year."

I was always taught that when you make a mistake the best thing is to own up to it and apologize. Apparently at Harvard and the WSJ the accepted practice is to deny the error and to criticize the people who corrected it.

Comments (9)Add Comment
Learned from the best
written by Jim, October 08, 2013 12:08
Hey, when you completely ignore what you don't know, you end up with a $3 million NYC apartment. Just ask Professor Rogoff:


Just following the script of how to get rich in America
written by david wessel, October 08, 2013 1:49
Well, the edit page did run a correction in print on Tuesday and on line here http://online.wsj.com/article/...84356.html
written by watermelonpunch, October 08, 2013 2:02
since I can't imagine not having something better to do with my time


Next please!
Book Sales
written by bakho, October 08, 2013 2:17
Ferguson wants to sell books.
Controversy sells books.
You don' t have to be right to sell books. Prominent and Controversial works best.
Of course, you could give your book away, but that will not make you wealthy.
written by Lrellok, October 08, 2013 2:45
I (generally) am happy to admit when i do not know something, and this one has me flumoxed. In Brad Delongs post on this subject, he gave the following equation for adjusting the treasury rate for inflation
"We want to adjust for inflation at 2%/year, and that gets us to 1.3% - 2% x 80% = -0.3% of GDP."

Why is that 80% there? I would think that the adjustment would be a straight subtraction. What function does the 80% represent?
Any help here appreciated.
Does Niall Ferguson Know the Difference Between Sunk Cost and Marginal Cost?
written by Last Mover, October 08, 2013 4:22

Economic predictions are nothing if not a construct of forward looking cost that can be avoided, a clear difference from incurred sunk costs that cannot be avoided.

Cost at the margin affects decisions because those (economic) costs can be avoided in different degrees by different decisions. A CBO projection provides a basis for costs that can be avoided, including incurrence of some costs to avoid other costs.

When a CBO projection is updated annually, it takes advantage of the latest and best information about forward looking costs and drops information about incurred sunk costs which are useless for making decisions.

Whether an updated projection is higher or lower than the last by a large degree is irrelevant to the accuracy of the projection, assuming both are performed on the same best-effort standard. The swings are driven by new information and elimination of old information.

To bash the CBO this year for last year's projection, for changing this year to "more realistic growth assumptions", is like bashing Dean Baker for predicting the housing bubble burst with increasingly accurate updated projections of a cumulative "abominable" outcome.

Oh wait, Nial Ferguson holds Dean Baker on a pedestal for going against the who-could-have-known crowd doesn't he. You know, the majority who bought into projections in the other direction that kept getting better and better instead of worse and worse ... based on the sunk cost of rising house prices already incurred instead of variables specified on economic causality like that used by Dean Baker.

It's not like Niall Ferguson refused to question predictions of house prices on the same standard he critizes CBO predictions. Not at all. He calls them as he sees them doesn't he, not as he wants them to be in a sunk cost sort of way that's already cast in stone.
of course
written by joe, October 09, 2013 10:23
Ferguson doesn't understand arithmetic or logic. In order for your bank acct to go up a dollar, someone else's must go down a dollar. Therefore, if the federal govt were to "Pay off its debt", the non-govt sector would have no net savings left. It's called stock-flow consistency. One person's defict is another's surplus... However, I see few signs that Dean really understands this either..
Ferguson, Rogoff, Shleifer, Mankiw, Feldstein, and on and on
written by Hugh Sansom, October 09, 2013 3:32
What is the world's leading for-profit university really good at? ... Profit! No surprise there. Ferguson may be wrong again and again, but he's good for pulling in dollars from the 0.1%, which is all Harvard really worries about when it harps on "Veritas".
DeLong's 80 percent math
written by Kevin O'Neill, October 09, 2013 8:04
Lrellok - the discussion is based on the idea that we want a stable debt to GDP ratio; neither increasing or decreasing. Currently the ratio is roughly 80%. The multiplication by 80% is an adjustment for the current debt to GDP level.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.