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Home Publications Blogs Beat the Press Noam Scheiber's NYT Book Review Asks Us to Imagine That Someone Using Data Had Warned of the Housing Bubble

Noam Scheiber's NYT Book Review Asks Us to Imagine That Someone Using Data Had Warned of the Housing Bubble

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Tuesday, 06 November 2012 16:08

It's best to ignore personal slights in Washington and elsewhere, but this one goes beyond my personal feelings. In a review of Nate Silver's new book, Noam Scheiber notes the effectiveness with which Silver uses data to analyze a wide range of policy issues and then tells us:

"it’s not hard to imagine Silver and his ilk one day letting the air out of an inflating housing bubble."

Yeah, right. It shouldn't be too hard to imagine since that is what some of us were trying to do from 2002 onward. The remarkable story here is that we were ignored at the time and are apparently still ignored even after the fact by people who have the credentials to write in the NYT.

There is an interesting sociology of knowledge story here. How is that history can be completely rewritten? The problem was not that people were not making the case that we had an unsustainable housing bubble. The problem was that people with authority chose to ignore the people making the case that there was a bubble. And even now they can claim that the people warning about the bubble did not exist.

This works out well for the bubble deniers since it makes it easier to claim the "who could have known?" defense. But it is not true, and it is outrageous that Scheiber could ignorantly write something like this and the NYT book editor could allow it into print.

Comments (21)Add Comment
Innumerate Ideology Trumps Data Every Time
written by Last Mover, November 06, 2012 5:21
Scheiber seems to be arrogantly dismissive of data on the housing bubble the same way others in history ignored data on mass murder:

'When one person dies it's a tragedy, when a million die it's a statistic.'
nate silver is aware of Dean Baker's existence
written by Jennifer Reft, November 06, 2012 7:37
I am halfway through "The Signal and the Noise"--he specifically states you were one of the (few) people who recognized the bubble. In fact he quite specifically states that to say "nobody saw the housing bubble" is false.
...
written by emma, November 06, 2012 8:29
I agree with this. I listen to the FFT guy at http://www.forecastfortomorrow.com who called the stockmarket crash, the swearing in of obama last time, and says obama will get in this time, but he forecasts are very accurate.

I think The hurricane, obama getting back in and economic crisis is really a triple whammy for us all. Oh dear!!
Is our reviewers reading?
written by David, November 07, 2012 1:00
nate silver is aware of Dean Baker's existence
written by Jennifer Reft, November 06, 2012 8:37
I am halfway through "The Signal and the Noise"--he specifically states you were one of the (few) people who recognized the bubble. In fact he quite specifically states that to say "nobody saw the housing bubble" is false.


It's pretty sad when the NYT Book Review allows a review from someone who gave a cursory read of the book being reviewed. Journalism is dead or dying.
...
written by bobs, November 07, 2012 3:14
@David: Wait, are you telling me that to review a book in the NYT you think one should actually read the book?

Anyway, I am enjoying George Will's Romney landslide. Once again the great man of journalism nailed it!
...
written by liberal, November 07, 2012 6:43
Jennifer Reft is right. I think that Dean was the second listed, after Shiller.

Though if we're going to hand out accolades, let it be known that a Georgist predicted the bubble about 18 years in advance.
Predicting the bubble ...
written by David S., November 07, 2012 7:25
Dean,

I am always impressed by your analyses, so I hope you can answer a question: wouldn't a fair criticism of anyone who claimed to anticipate or predict the housing bubble be that the individual had often predicted bubbles or other calamities as well, but which did not occur. Alternatively stated, is there a valid Cassandra argument, such as the one which criticizes an economist for predicting nine of the past five recessions.

The response to this potentially hypothetical criticism may be -- and likely is -- particular to the individual who made the prediction.

Silver Acknowledged Dean Baker's warnings
written by AlanInAZ, November 07, 2012 7:53
This is what Mate Silver actually wrote about the housing bubble -

"What is remarkable about the housing bubble is the number of people who did see it coming—and who said so well in advance. Robert Shiller, the Yale economist, had noted its beginnings as early as 2000 in his book Irrational Exuberance.14 Dean Baker, a caustic economist at the Center for Economic and Policy Research, had written about the bubble in August 2002."

Silver, Nate . The Signal and the Noise: Why So Many Predictions Fail-but Some Don't (Kindle Locations 390-394). Penguin Group. Kindle Edition
Mr. Dean "Call Me Cassandra" Baker
written by dick c, November 07, 2012 9:02
Someone should arrange a meeting for Dean with Noam to see if he if Noam is actually able to see him. This could be scientific proof of an overlapping alternate universe.
The other big story of the decade
written by Peter Richardson, November 07, 2012 11:20
A similar "who could have known?" pattern surrounded the other major blown story of the decade: the run-up to the invasion of Iraq. Plenty of experts and smart journalists exposed the mendacity behind that campaign, but the corporate media went along with the fictions. I still savor Hans Blix's comment when told that the U.S. government tapped his telephone during that time: "I wish they had listened!"
...
written by Fed Up, November 07, 2012 11:24
P. 10 of 51 here:

http://mpra.ub.uni-muenchen.de/15892/1/MPRA_paper_15892.pdf

"No One Saw This Coming":
Understanding Financial Crisis Through
Accounting Models

Mish should be added to the list. I remember the Mish and Eric Janszan debates.

I believe the list has been expanded.

The real key is that there was/is a consumer debt bubble that kept manifesting itself in various asset bubbles. I don't really see Dean Baker focusing on the consumer debt bubble part, which gov't debt is now replacing.
...
written by Fed Up, November 07, 2012 11:29
Dean Baker probably won't like this, but the solution to too much debt is not more gov't debt and not more private debt. Too much debt is a medium of exchange problem.

P.S. Could you PLEASE get rid of the 240 seconds between posts "thing"?
just curious?
written by bailey, November 07, 2012 11:54
Was PK a bubble denier or a bubble ignorer?
Krugman saw the bubble in 2005
written by Richard Genz, November 07, 2012 12:28
Paul Krugman, May 2005: http://www.nytimes.com/2005/05...ugman.html

"Nobody thought the economy could rely forever on home buying and refinancing. But the hope was that by the time the housing boom petered out, it would no longer be needed.

But although the housing boom has lasted longer than anyone could have imagined, the economy would still be in big trouble if it came to an end. That is, if the hectic pace of home construction were to cool, and consumers were to stop borrowing against their houses, the economy would slow down sharply. If housing prices actually started falling, we'd be looking at a very nasty scene, in which both construction and consumer spending would plunge, pushing the economy right back into recession.

That's why it's so ominous to see signs that America's housing market, like the stock market at the end of the last decade, is approaching the final, feverish stages of a speculative bubble."
And then there's the Medical Bubble. Like the property bubble, it's very profitable for some.
written by Rachel, November 07, 2012 2:29

And the ADA solution for the Med Bubble is just CDC: colonoscopies and denial of care.

The main problem with health care isn't too much care, however. It's that prices are too high. One important reason: we have too few MDs, even with all the importation. Very bad policy, but it is profitable for the children of the privledged.

In the meantime the "little people" suffer from fewer jobs and shrinking paychecks, as well as worse health.
NATE SILVER ALSO IGNORED
written by Richard Thompson, November 07, 2012 6:04
In listening to the pundits discuss the election this a.m. ,I noticed that they ignored Nate Silver. They were all full of the "who could have known" narrative while Silver predicted the outcome with precision. I think a number of pundits actually read his blog and then take credit for his analysis themselves but only after they have hyped the "neck and neck" story as a way of keeping the publics attention.
PK, A whole lot of "ifs" for May,;05, don't you think?
written by bailey, November 08, 2012 2:07
Sorry, but that's a whole lot of "ifs" for a guy of PKs stature to chime in with when the end game was playing out. By 05/05 it wasn't a matter of "if" or "when", it was a matter of "how long would it take for the markets to react". How many people might have questioned AG's exuberance on housing had PK used his NYT pulpit in early '04 to warn us of the enormity of the growing problem.
...
written by liberal, November 08, 2012 7:23
David S. wrote,
Alternatively stated, is there a valid Cassandra argument, such as the one which criticizes an economist for predicting nine of the past five recessions.


Of course it's possible that that would apply to certain individuals, but as an empirical issue it's not a good analogy.

Recessions are hard to predict because the underlying dynamics make conclusions hard. Measuring bubbles, on the other hand, is relatively easy, because one can look at fundamentals.

E.g., Dean was able to call the dot com bubble because P/E ratios had grown enormously, and the argument that "this time it's different" couldn't fly. Similarly, the housing bubble could be called because of fundamentals---prices were simply too high to be sustained.
...
written by liberal, November 08, 2012 7:27
Rachel wrote,
The main problem with health care isn't too much care, however.


No, it really is a problem of too much care. There's huge regional variations in amount of care delivered, with no corresponding variation in outcomes.
Liberal is right
written by Ethan, November 08, 2012 3:34
I still like to refer to the New Yorker article "Cost Conundrum" of June 1, 2009. It points out (among other things) that one of Medicare's highest cost per patient is in McAllen, Texas, a mostly blue collar town where medicare spends $3,000 per covered person per year more than the average local employee earns. Texas incidentally has limits on pain and suffering damages in medical mal-practice cases.
The article is still available here: http://www.newyorker.com/repor...ct_gawande
...
written by Robert, November 09, 2012 9:38
They didn't ignore, they actively buried. Big difference. Still burying as you note.

It is important to actively bury the truth, because the liability is still hanging in the air, and it's a lot easier to suck money out of the public if they can solidify this hoocouldaknowd theme. Decades from now obscure academics will write comprehensive histories of the crisis, and THOSE will be ignored.

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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.

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