Alan Blinder, who is a professor of economics at Princeton and a former vice chairman of the Federal Reserve, is a co-author of the Blinder-Zandi paper discussed in the earlier posts here and here. I wrote to him, "Do you have any financial or consulting relationship with Moody's or with Economy.com? Did they pay you for your work on that paper? I realize you have no obligation to answer this question but I am curious. I don't think your views on this question would be affected by any payment, of course, but the paper seems a bit oddly formatted relative to a typical academic paper, and I am trying to understand it. I suppose it would help Moody's to have someone of your stature ratify their model."
He wrote back, "None whatsoever. But it was formatted by Moody's desktop publishing system--at their expense."
Two other points about Professor Blinder worth mentioning. First, he was the co-author of the Baumol and Blinder textbook that Martin Feldstein used to teach introductory economics to thousands of Harvard students (including me) in the early 1990s. Second, he is senior adviser at Promontory Financial Group, which works for some financial institutions.
More on the Blinder-Zandi paper from Economic Policies for the 21st Century and from a former research assistant to Professor Blinder, Arnold Kling, who writes, "every result in the paper would have been found by simulating the model three years ago. There is no new evidence being brought to bear. What Blinder and Zandi are reporting is the Keynesian theory that was built into the model....the paper has not been published in a peer-reviewed journal. The theoretical and statistical properties of the model probably would not be considered acceptable in modern practice."
More Kling:
I do not think we will ever know what would have happened to the economy without the fiscal stimulus and the large monetary interventions. My guess is that the overwhelming majority of economists would agree that we will never know the answers to those questions. However, in the competition for public attention, Blinder and Zandi have two advantages. First, they support a narrative in which government experts did the right thing, which is comforting to government experts and all who believe in them. Second, at a tactical level, their use of an esoteric computer model along with those two decimals of precision, they intimidate journalists and other laymen.
I know that they think this is for a good cause. They really believe that the stimulus and TARP were good policies that got a bad rap. But in my view that does not justify this unseemly exercise in propaganda dressed up as research.
