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Home Publications Blogs Beat the Press The NYT Gives Track Records on the Oil Spill, Why Not on the Housing Bubble?

The NYT Gives Track Records on the Oil Spill, Why Not on the Housing Bubble?

Thursday, 05 August 2010 04:16

In a discussion of the impact of the BP oil spill, the NYT qualified the estimates of the size of the spill from the National Ocean and Atmospheric Administration (NOAA) by telling readers that: "NOAA is the same agency that devised the early, now-discredited estimate that the well was leaking only 5,000 barrels a day, one reason some people distrust the new report."

This is useful information for readers, since the fact that the agency had previously been off by a factor of ten in its earlier estimate of the size of the spill might suggest something about its competence and/or its integrity. This is relevant to the credibility that should be assigned to new estimates from the agency.

In the same vein, it would be appropriate to report on the failure of individual economists or organizations, like Harvard's Joint Center on Housing, to notice the $8 trillion housing bubble, when discussing the current views on the housing market and the economy.

Comments (5)Add Comment
written by izzatzo, August 05, 2010 6:28
Calling the bubble is not like calling the size of the oil spill. Anyone could see the oil spewing and everyone knew it had to be stopped. Owning and selling house assets with rising prices was quite another matter for which a bubble was not obvious and indeed required experts to step in with a warning that the party could turn into a nightmare.

For the oil spill, there's one universal understanding of how it mechanically happened, but for the housing bubble there's at least ten competing explanations believed by the public that will linger forever.

That's why many who benefitted from the bubble are still benefitting in the wake of its bust and why Baker is still like a lone wolf economist among a few others who predicted the bubble, now trying to remind the public how we got here.

Credibility matters least when large numbers of unaccountable "experts" who wildly miss predictions from incompetence or willful ignorance, nevertheless retain sufficient power to maintain their occupational position. At worst they just move sideways into an obscure position or retire with full benefits.
The bubble was easy to see
written by Bill Turner, August 05, 2010 7:41
Izzatzo's argument does not make sense.

Every bubble serious bubble is, contrary to what others may suggest. Read Extraordinary Popular Delusions and the Madness of Crowds and you, too, will start seeing them. In the economy, anything that deviates from the long term trend line is either explained as a bubble or requires extraordinary explanation to dismiss it as the new trend. This did not happen with housing bubble.

Dean was hardly a lone wolf talking about the housing bubble. Even popular magazines like Atlantic Monthly talked of it.

The problem is not identifying bubbles, rather it is what to do about them when they occur. Certainly, it is unpopular to recommend deflating bubbles when they occur. Witness the ridicule Greenspan received when he spoke of the irrational exuberance in the stock market.

Dean is correct that economists that failed to warn of the bubble should be held up for condemnation, that their current pronouncements should be considered suspect.
Easy to see bubbles
written by AndrewDover, August 05, 2010 7:52
So is this a bubble or not ?

flawed from the start?
written by frankenduf, August 05, 2010 8:29
i utterly agree with this post- yesterday on macneil/lehrer, which i consider quality news, they completely missed this logic by instead questioning the estimate of how much has been cleaned up- to me, the empirical analysis of how much was cleaned up is more accurate than the judgement that that quantified amount is then @ 70% of all the oil that spilled- if the overall spill estimate is flawed, then the % that has been cleaned already may drop considerably (thereby damaging the PR effect, which is probably the bias behind the overall spill estimate)
As usual
written by Denise, August 06, 2010 1:34
The Western states where folks hate the government the most are the ones sucking on its teat.

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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.