Elizabeth Warren is the odds-on favorite to be Obama’s new regulator for credit targeted at households.
She’s certainly well-known in this area, but it isn’t clear to clear-thinkers that Elizabeth Warren is a clear-thinker.
Here’s Megan McArdle on the subject:
the deeper problem is that some of her evidence doesn't really support her thesis, and can be made to appear to support her thesis only by making some very weird choices about what metrics to use.
…
The authors have an odd tendency to ignore what the respondents themselves say.
…
Their methodology is quite explicitly designed to capture every case where medical bills, or medical loss of income, coexist with some other causal factor--but the medical issues are then always designated as causal in their discussion … this is simply not correct.
…
You're supposed to use controls and good operationalizations to eliminate those problems. That's why we use regression in the first place. But she doesn't use it that way, in fact she goes out of her way to avoid using it;
When you strip out the statistical obfuscation, you end up with a couple simple correlations between year and another variable that can best be described as "we don't know what this is".
…
There are a bunch of other fiddling red flags, like the fact that there's no difference in the percentage of "medical" and "non-medical" bankruptcies where the family lacks insurance at the time of bankruptcy. They see this as evidence of underinsurance. I see this as frankly unbelievable, and at the very least, in need of much better explanation than they offer.
…
Does this persistent tendency to choose odd metrics that inflate the case for some left wing cause matter? If Warren worked at a think tank, you'd say, "Ah, well, that's the genre." On the other hand, you'd also tend to regard her stuff with a rather beady eye. It's unlikely to have been splashed across the headline of every newspaper in the United States. Her work gets so much attention because it comes from a Harvard professor. And this isn't Harvard caliber material--not even Harvard undergraduate.
…
But it also matters because a large part of Warren's prominence comes from the fact that she's an academic. If she came from . . . well, the sort of think tank that publishes this sort of advocacy science . . . she would have considerably less glamor, and power.
And perhaps it matters most of all because this woman is now under consideration to head a powerful new agency. If this is how she evaluates data, then isn't that going to hamper her in making good policy? If we're going to have a consumer financial protection agency, I want one that has a keen eye to the empirical evidence on consumer welfare--not one that makes progressives most happy by reinforcing their prior beliefs.
Wait, there’s more:
… Using their own numbers, it is evident that they have overlooked the most important contributor to the purported household budget crunch -- taxes.
The authors present no explanation for why they present only the tax data in their two examples as percentages instead of dollars. Nor do they ever present the actual dollar value for taxes anywhere in the book. So to conduct an "apples to apples" comparison of all expenses, I converted the tax obligations in the example from percentages to actual dollars.
Although income only rose 75%, and expenditures for the mortgage, car and health insurance rose by even less than that, the tax bill increased by $13,086 -- a whopping 140% increase. The percentage of family income dedicated to health insurance, mortgage and automobiles actually declined between the two periods.
Does it matter if we have a regulator who can use data consistently? A lot of commenters seem angry that I would suggest it might. As for me, I don't know which is worse: the notion that Elizabeth Warren understood what she was doing, or the notion that she didn't.
Ah … the joys of analyzing the economic conclusions drawn from people who can’t actually do the economics.
But … if they could actually do the economics … they wouldn’t be in line to be a regulator, would they?
Technorati Tags:
elizabeth,
warren
